The Blind Spot: How ESG Matters Can Affect Current Accounting and Financial Reporting

Following numerous questions raised by stakeholders ranging from investors to regulators, the FASB published “Intersection of Environmental, Social, and Governance Matters with Financial Accounting Standards” (known as the FASB ESG Paper) to highlight the connection between ESG matters and their direct or indirect effect on the financial statements. The paper illustrates how an entity may consider the effects of material ESG matters when applying existing accounting standards. The FASB staff noted that many current accounting standards require a company to consider “changes in its business and operating environment when those changes have a material direct or indirect effect on the financial statements and notes thereto.” Often, these considerations are related to aspects of accounting for which management judgment and estimation are required. Read more