This instrument is narrowly scoped and conceptually focused on disclosures about uncertainty already embedded in AASB 136 and AASB 137. The main conceptual points, drawn from the new illustrative examples, are:

• Key- assumption disclosure for impairment testing (AASB 136): The illustrative Example 10 (IE90-IE95) frames assumptions about future emission allowance costs and future emission regulations as potential “key assumptions” under AASB 136, namely assumptions to which a cash-generating unit’s (CGU) recoverable amount is most sensitive. The example shows how those assumptions should be described (IE94), how the approach to determining values should be explained (IE94(b)), and how sensitivity information should be presented (IE95). The example reiterates that cash-flow projections supporting value-in-use calculations are to be based on reasonable and supportable assumptions representing management’s best estimate of the range of future economic conditions (IE92), and that risks already reflected in the discount rate should not be double-counted in the cash-flow assumptions (IE93).

• Materiality of disclosure notwithstanding immaterial carrying amount impact (AASB 137): Example 2A demonstrates that information about obligations can be material even if the obligations’ present-value effect on the carrying amount of a provision is immaterial. The example sets out factors an entity considered when concluding that disclosure is material for plant decommissioning and site-restoration obligations: the size of expected costs, the risk of earlier-than-expected settlement, and external climate-related qualitative factors (Example 2A, Background and application). It then lists the disclosure elements that would be necessary to meet paragraph 85 of AASB 137: a brief description of the nature of obligations and timing of expected outflows, an indication of uncertainties about amount or timing, and, where necessary, major assumptions about future events such as future use of facilities (Example 2A, application text).

• Illustrative purpose, not rule change: The amending Standard explicitly incorporates examples and implementation guidance (Illustrative Examples and Implementation Guidance), not amendments to the substantive paragraphs of AASB 136 and AASB 137. The Preface and Objective identify the source (IASB November 2025 amendments) and the sections of AASB 136 (paragraphs 134(d)(i)-(ii) and 134(f)) and AASB 137 (paragraph 85) that the examples illustrate. This means the examples demonstrate how to apply existing paragraphs rather than creating new recognition, measurement, or disclosure obligations beyond those paragraphs.

• Timing and transitional mechanics: The Application section specifies the periods to which the examples apply (annual periods beginning on or after 1 July 2025 that end on or after 28 February 2026), and notes that earlier application is permitted. The AASB also explains typographical devices used in the amending Standard (Application), which is useful for drafting and interpretation but not part of the operative amendments.

Taken together, these concepts aim to guide preparers’ judgement on material assumptions and sensitivity disclosures in two areas where climate-related uncertainty commonly arises: valuation of assets subject to impairment testing and provisions for decommissioning/site restoration. The Standard demonstrates the types of narrative and quantitative disclosures that would be consistent with the identified paragraphs of AASB 136 and AASB 137.

The immediate and primary audience for these illustrative additions consists of entities that apply AASB 136 and AASB 137 in preparing financial statements in accordance with the Australian Accounting Standards framework, as applied through AASB 1057 Application of Australian Accounting Standards (Application). That group includes:

• Reporting entities preparing financial statements in Australia under the Corporations Act and the Australian Accounting Standards regime. The Application text ties the amendments to AASB 1057, which governs who must apply AASB standards.

• Chief financial officers, preparers, and finance teams responsible for impairment testing and provisioning. Example 10 (IE90-IE95) and Example 2A require management to identify key assumptions, document their approach to setting assumption values, and, in some circumstances, disclose sensitivity analyses and major assumptions. These are management functions.

• Audit committees, external auditors and valuation specialists. Auditors will test whether disclosures match the requirements of paragraphs 134(d)(i)-(ii) and 134(f) of AASB 136 and paragraph 85 of AASB 137, and whether the narrative and sensitivity information in the financial statements is consistent with the illustrative examples where applicable. Valuation experts and external advisers who assist with value-in-use calculations or provision estimates will be drawn into the documentation and disclosure process.

• Companies with high greenhouse gas emissions, manufacturers with plant decommissioning obligations, and companies operating in jurisdictions where regulatory change is reasonably possible. The examples are framed around emission allowance costs and decommissioning/site-restoration obligations, so entities in carbon-intensive sectors or with long-lived facilities face a higher incidence of the examples’ application.

• Regulators and users: While the AASB does not itself enforce compliance, regulators, including those who monitor financial reporting quality, and primary users of financial statements (investors, creditors), will be interested in whether the disclosures meet the expectations illustrated. The Preface notes that the remaining IASB examples for IFRS 7, IFRS 18, IAS 1 and IAS 8 are not included in AASB Standards and are made available via the AASB website, so preparers relying on those other IASB examples will need to access them separately.

The Standard’s application timing affects year-ends and reporting cycles. It applies to annual periods beginning on or after 1 July 2025 that end on or after 28 February 2026; therefore, entities with financial years that straddle those dates need to map the application to their reporting periods. Earlier application is permitted, so entities preparing to adopt earlier may choose to do so.

Finally, legal and compliance teams will be affected insofar as the examples alter expectations about disclosure sufficiency and documentation supporting management judgments. The amending Standard was made by the AASB under section 334 of the Corporations Act 2001 (Accounting Standard AASB 2026-1), which signals its incorporation into the Australian financial reporting framework under Australian law, and therefore the AASB’s guidance will be relevant to statutory reporting obligations.

The amending Standard itself does not create new statutory duties or rights; rather it provides illustrative guidance on how to meet existing disclosure obligations under AASB 136 and AASB 137. The key operative duties to which the examples relate are those embedded in the cited paragraphs of the primary Standards:

• Under AASB 136, entities are required to disclose information about the key assumptions used in determining recoverable amounts and to provide sensitivity information where a reasonably possible change in a key assumption could cause the carrying amount to exceed recoverable amount (see AASB 136 paragraphs 134(d)(i)-(ii) and 134(f), as illustrated by IE94-IE95). The example clarifies what a preparer might disclose in relation to future emission allowance costs, the approach used to determine values assigned to those assumptions, and the sensitivity information that follows if a reasonably possible change would cause an impairment (IE92-IE95).

• Under AASB 137, paragraph 85 requires disclosure for each class of provision. The newly added Example 2A demonstrates that an entity must consider materiality at the class level and may need to disclose information about obligations that, while immaterial in their present-value effect on the carrying amount of a provision, are material to users for other reasons (Example 2A). The example lists disclosure elements (nature and timing of expected outflows, uncertainties about amount/timing, and major assumptions) that would meet paragraph 85 for plant decommissioning and site-restoration obligations.

Rights: Preparers retain the right to exercise professional judgement in applying the Standards. The examples do not remove or constrain that discretion; rather, they describe reasonable approaches and specific disclosure items that would satisfy the referenced paragraphs. The Application section explicitly notes that the Standard uses typographical material to show amendments for readability but clarifies that such typographical material is not part of the amendments.

Documentation and justification: The examples implicitly impose an expectation that management should document its approach to selecting assumptions (IE94(b)) and perform sensitivity analyses where needed (IE95). That documentation will be material for audit evidence. For AASB 136 the example requires disclosure about whether assumptions are consistent with external information and, if not, why they differ (IE94(b)), which creates an expectation of comparing internal assumptions with external sources and documenting the rationale for any divergence.

Interaction with measurement: The examples emphasise that assumptions used in cash-flow projections should represent management’s best estimate and that risks already reflected in the discount rate should not be double-counted in assumptions (IE92-IE93). This is a guidance point on measurement practice, reinforcing existing requirements.

Legal authority and enforceability: The AASB made the Standard under section 334 of the Corporations Act 2001 (Accounting Standard AASB 2026-1). The Standard itself does not specify enforcement mechanisms or sanctions; compliance obligations arise through the underlying statutory and regulatory framework that requires entities to prepare financial statements in accordance with Australian Accounting Standards, as applied through AASB 1057 (Application).

In short, the key duties are those already present in AASB 136 and AASB 137; the amending Standard clarifies the form and content of disclosures expected in particular fact patterns, thereby tightening preparers’ disclosure practice through authoritative examples rather than through new substantive rules.

The amending Standard’s text does not set out penalties, sanctions, or enforcement procedures. It is an accounting standard made by the AASB under section 334 of the Corporations Act 2001 (Accounting Standard AASB 2026-1), and the application clause ties the amendments to the existing framework for applying Australian Accounting Standards (AASB 1057). The Standard itself focuses on illustrative guidance and does not include provisions on enforcement.

Consequently, the Standard’s practical enforceability derives from the existing mechanisms by which compliance with Australian Accounting Standards is enforced in practice. Those mechanisms are external to this instrument and are not described in the text. The Standard therefore leaves open the normal channels through which accounting standards are monitored for compliance: auditors, audit regulators, market regulators, and other oversight bodies that assess whether financial statements comply with applicable standards. The instrument’s Preface and Application sections make no express mention of enforcement bodies, sanctions, or penalties.

For practitioners, this means two points: first, the examples are part of the authoritative material an auditor and an audit regulator may use when assessing whether disclosures meet the relevant paragraphs of AASB 136 and AASB 137; second, the absence of internal penalty provisions in the Standard does not remove the consequence of failing to meet disclosure obligations under Australian Accounting Standards, because those obligations continue to be subject to the broader statutory and regulatory framework applicable to financial reporting in Australia.

Users and preparers should therefore treat the examples as authoritative guidance on the content and form of disclosures that would be consistent with the identified paragraphs of the primary Standards. Where an entity’s disclosures depart from the illustrative content, it should be prepared to justify the alternative approach with reference to the requirements of AASB 136 and AASB 137 and to maintain supporting documentation of management’s judgments and assumptions for audit and regulatory review.

Finally, the Standard provides that it commences as a legislative instrument on 27 February 2026 (Commencement). Its application to reporting periods is described in the Application section (annual periods beginning on or after 1 July 2025 that end on or after 28 February 2026), and earlier application is permitted. Any enforcement action related to non-compliance with disclosure requirements would therefore follow the normal legal and regulatory channels that apply to financial reporting under Australian law, not a new enforcement mechanism created by this amending Standard.

AASB 2026-1 sits within the Australian financial reporting framework and interacts with both domestic and international materials as described in the amending Standard. Key interactions described in the source text are:

• Corporations Act 2001: The AASB made AASB 2026-1 under section 334 of the Corporations Act 2001 (Accounting Standard AASB 2026-1). That is the statutory basis for AASB rule-making; the Standard’s legal footing in Australian law comes from that statutory power. The Application clause ties the amending Standard to AASB 1057 Application of Australian Accounting Standards, which governs how AASB standards apply to entities and financial statements in Australia.

• Existing AASB Standards: The amendments operate by adding illustrative guidance to AASB 136 and AASB 137; they do not amend the substantive recognition or measurement paragraphs of those Standards. The amending text explicitly identifies the AASB paragraphs that the examples illustrate: AASB 136 paragraphs 134(d)(i)-(ii) and 134(f) (referenced in Example 10), and AASB 137 paragraph 85 (referenced in Example 2A). That means the examples are interpretative material intended to clarify application of those existing paragraphs; compliance obligations continue to flow from the primary paragraphs.

• International Accounting Standards Board materials: The amendments directly incorporate illustrative examples issued by the IASB in November 2025 (Disclosures about Uncertainties in the Financial Statements, which amended illustrative examples for IFRS 7, IFRS 18, IAS 1, IAS 8, IAS 36 and IAS 37). The AASB has incorporated into Australian guidance the portions of those IASB materials that relate to IAS 36 and IAS 37 (Preface). The amending Standard notes that illustrative examples relating to IFRS 7, IFRS 18, IAS 1 and IAS 8 are not published with the corresponding AASB Standards and are instead available on the AASB website (Preface).

• Materiality and other accounting concepts: The examples emphasise the interaction between materiality and present-value measurement. Example 2A for AASB 137 demonstrates that an item can be immaterial in its effect on a provision’s carrying amount but still material to users of financial statements because of the size of future costs, the risk of earlier settlement, or external qualitative factors. This interacts with broader materiality principles embedded across Australian Accounting Standards and suggests close coordination between materiality assessments, disclosure policy, and provisions measurement.

• Climate-related and regulatory risk disclosure practices: The illustrative examples focus on emission allowance costs and transition risks (e.g., shifts in consumer demand and regulatory actions in a lower-carbon transition). While the Standard does not create statutory climate disclosure obligations outside accounting standards, it raises the bar for how entities should treat climate-related uncertainties that affect impairment testing and provisions. Preparers should consider how these illustrative expectations fit with any other statutory or regulatory disclosure regimes (for example, securities law or market disclosure obligations), although the amending Standard does not specify interactions with particular non-accounting statutes.

• No change to legal liabilities or contractual rights: The Standard clarifies accounting disclosure practice. It does not itself alter contractual rights, statutory liabilities, tax obligations, or environmental regulation. However, the guidance may change public disclosures, which could influence perceptions of legal or regulatory risk. Any effect on legal obligations or regulatory exposure would occur outside the Standard and is not addressed in the text.

In summary, AASB 2026-1 interacts with the existing Australian financial reporting architecture by adding illustrative guidance to two AASB Standards, relying on the AASB’s statutory power under the Corporations Act for its legal basis, and drawing on IASB materials. It does not create new legal duties beyond those already present in AASB 136 and AASB 137, but it does influence the interpretative expectation regulators, auditors and users may apply when assessing compliance with the disclosure paragraphs the examples illustrate.

The amending Standard documents a concise amendment history contained within the Preface and administrative sections. Relevant points from the source are:

• Source IASB action: The International Accounting Standards Board issued International Financial Reporting Standard Disclosures about Uncertainties in the Financial Statements (Amendments to Illustrative Examples on IFRS 7, IFRS 18, IAS 1, IAS 8, IAS 36 and IAS 37) in November 2025. The AASB’s amendments are a direct consequence of that IASB issuance (Preface, Standards amended by AASB 2026-1).

• AASB Standards amended: AASB 2026-1 amends AASB 136 Impairment of Assets (August 2015) and AASB 137 Provisions, Contingent Liabilities and Contingent Assets (August 2015) by adding illustrative examples: IE90-IE95 as Example 10 to the Illustrative Examples accompanying AASB 136, and Example 2A to the Implementation Guidance accompanying AASB 137 (Amendments to AASB 136; Amendments to AASB 137).

• Dates and commencement: The AASB made the Accounting Standard AASB 2026-1 on 28 January 2026 (Chair’s signature). For legal purposes the legislative instrument commences on 27 February 2026 (Commencement). The Application clause sets the applicable reporting periods as annual periods beginning on or after 1 July 2025 that end on or after 28 February 2026; earlier application is permitted.

• Copyright and publication: The Standard is copyrighted © Commonwealth of Australia 2026 and contains IFRS Foundation copyright material; reproduction rules and contact details are set out in the prefatory material.

• Scope of incorporation: Not all IASB illustrative examples from November 2025 were incorporated: the examples relating to IFRS 7, IFRS 18, IAS 1 and IAS 8 are not included in AASB Standards because the corresponding AASB illustrative materials have not been published; those examples are available on the AASB website’s IASB Support Materials page (Preface).

• Nature of amendment: The Standard uses typographical material to identify the amendments in the published text for clarity, but the Application clause clarifies that the typographical material is not part of the amendments and that ellipses are used to provide context (Application).

There are no further amendments, transitional provisions, or interpretative notes in the text beyond the illustrative examples and their stated application date. The document is therefore a narrowly targeted incorporation of IASB illustrative material into the Australian illustrative/implementation guidance for two specific Standards, with a clear date and limited scope.

The amending Standard’s text does not record any litigation history. It is an accounting standard that incorporates illustrative examples and the source material lists no judicial decisions, regulatory enforcement actions, or litigation references. The document therefore contains no case law or litigation precedent; it is a standards instrument and explanatory material rather than a record of disputes.

Practitioners should note that the absence of litigation history in this instrument does not mean that disclosures in similar fact patterns have never been the subject of dispute. However, any litigation or enforcement related to how an entity applied AASB 136 or AASB 137 in a particular case would arise under the broader legal and regulatory framework,auditing standards, securities law, Corporations Act provisions, and civil litigation,none of which are referenced as having been the subject of judicial interpretation within the amending Standard itself.

Because the examples expressly illustrate how to apply paragraphs 134(d)(i)-(ii) and 134(f) of AASB 136 and paragraph 85 of AASB 137, auditors and regulators may look to the illustrative examples when assessing whether an entity’s disclosures are adequate. If disputes arise in practice (for instance, between an entity and its auditor, or an entity and a regulator), those disputes would be resolved outside the instrument and the outcomes would be recorded in separate judicial or administrative records, which are not part of this Standard.

In short, the document contains no litigation history and no court or tribunal decisions are cited; users requiring precedent should consult other sources outside this amending Standard.

The examples added by AASB 2026-1 are helpful for interpretative clarity but contain several practical pitfalls and potential misreadings that preparers, auditors and directors should watch for:

• Treat the examples as illustrative, not prescriptive. The Preface and Objective make clear the Standard adds illustrative examples and implementation guidance. Illustrative examples are authoritative guidance but do not change the underlying normative paragraphs of AASB 136 and AASB 137. A common misstep is to assume the specific numerical or narrative form in an example is mandatory; instead, the example shows an approach that would satisfy the underlying paragraphs (IE94-IE95; Example 2A). Ensure disclosures remain tailored to the entity’s facts and circumstances and grounded in the applicable paragraphs.

• Materiality at the class level vs present-value immateriality. Example 2A emphasises that large future costs may be immaterial to a provision’s carrying amount because discounting pushes them far into the future, yet information about those obligations can still be material to users because of size, risk of early settlement, or external qualitative factors (Example 2A). Preparers should not equate present-value immateriality with the absence of a material disclosure obligation.

• Double-counting risk in value-in-use assumptions. The AASB example for AASB 136 restates that cash-flow assumptions should not reflect risks already captured in the discount rate (IE93). Preparers should carefully document whether regulatory or market risks are reflected in cash flow projections, the discount rate, or both, and avoid double-counting. Failure to document this reasoning can result in audit queries.

• Expectation of external comparators and explanations for divergence. IE94(b) expects entities to disclose whether their assumptions are consistent with external information and, if not, to explain how and why they differ. A common gotcha is making assumptions without contemporaneous comparison to external sources or without recording reasons for divergence. Preparers should maintain evidence of such comparisons.

• Timing and reporting-period mapping. The Application clause applies the standard to annual periods beginning on or after 1 July 2025 that end on or after 28 February 2026, while the legislative instrument commences on 27 February 2026. Entities with financial years that end before 28 February 2026 will need to map whether their annual period falls within the application scope; practice often requires checking whether an earlier-application election is needed to adopt the new examples for a given period. Mis-timing the adoption can lead to inconsistent disclosures across comparatives.

• Availability of other IASB examples: the AASB did not incorporate the IASB’s illustrative examples for IFRS 7, IFRS 18, IAS 1 and IAS 8 into AASB Standards; these are only on the AASB website (Preface). Entities might inadvertently rely on those unincorporated IASB examples as if they are part of AASB authoritative materials. Practitioners should confirm whether a particular IASB illustrative example is actually incorporated into the corresponding AASB Standard or merely published on the website.

• Over- or under-disclosure in sensitive areas. The AASB examples deal with climate-related uncertainties and decommissioning obligations, areas where market attention is high. If a preparer adopts the example’s disclosures mechanically without tailoring them, there is a risk of revealing commercially sensitive information or, conversely, providing insufficient clarity. The examples do not provide a one-size-fits-all template.

• Documentation burden and audit evidence. The expectation to disclose key assumptions, explain approaches, and perform sensitivity analyses implies a documentation burden for management. Entities that lack robust valuation and provisioning processes will struggle to produce audit-grade workpapers. This is an implementation risk flagged implicitly by the example requirements (IE92-IE95, Example 2A).

• No express enforcement regime in the text. The Standard does not state enforcement or penalty provisions; that does not insulate entities from regulatory scrutiny. Preparers should be mindful that the examples may influence regulator and auditor expectations even though the Standard itself is limited to illustrative guidance.

Being alert to these practical pitfalls will help entities avoid superficial compliance and align disclosures with the expectations illustrated by the new examples.

To implement the illustrative guidance added by AASB 2026-1 in a defensible and auditable manner, entities should adopt a structured compliance programme that covers identification, documentation, disclosure drafting, governance and audit support. The following concrete steps map to the example requirements in AASB 136 (IE90-IE95) and AASB 137 (Example 2A) and to the Application provisions:

1. Determine applicability and timing

   • Map your reporting period to the Application clause: the Standard applies to annual periods beginning on or after 1 July 2025 that end on or after 28 February 2026; earlier application is permitted. Decide whether to adopt earlier for comparatives.
   • Identify which CGUs and provision classes fall within the scope of the examples (CGUs with significant goodwill or sensitivity to emission allowance costs; classes of provision that include decommissioning/site-restoration obligations).

2. Identify key assumptions

   • For impairment testing (AASB 136): Identify whether assumptions about future emission allowance costs and future emission regulations are “key assumptions” to which the recoverable amount is highly sensitive (IE90-IE91). Document rationale for classifying an assumption as key.
   • For provisions (AASB 137): Evaluate whether information about decommissioning/site-restoration obligations is material even if their effect on the carrying amount of the provision is immaterial (Example 2A). Consider size of costs, risk of early settlement, and external climate-related qualitative factors in that assessment.

3. Prepare supporting analysis and documentation

   • For value-in-use calculations: maintain the cash-flow forecasts, the underlying assumptions, and evidence showing that these are reasonable and supportable representations of management’s best estimate (IE92). Document how discount rates reflect risks and ensure no double-counting (IE93).
   • For sensitivity analyses: where a reasonably possible change in a key assumption could cause impairment, prepare the sensitivity disclosure set out in IE95: (a) the amount by which recoverable exceeds carrying, (b) the values assigned to the assumption (e.g., future price of emission allowances), and (c) the amount of change required for recoverable to equal carrying (including consequential effects on other variables).

4. Compare assumptions to external information

   • Per IE94(b), compare assumptions to external sources (market prices, regulatory forecasts, industry reports). If assumptions differ materially from external information, document and disclose how and why they differ.

5. Draft disclosures consistent with the examples

   • For AASB 136: include identification of key assumptions, description of the approach used to determine values, and the sensitivity information where appropriate (IE94-IE95).
   • For AASB 137: disclose for each class of provision the brief description of nature and timing of expected outflows, an indication of uncertainties about amount or timing, and major assumptions where necessary to provide adequate information (Example 2A).

6. Governance and sign-off

   • Involve the board or audit committee in reviewing and approving assumptions and disclosures, given the heightened judgement involved. Ensure management sign-off and retain minutes or formal approvals to support audit evidence.

7. Audit readiness

   • Prepare clear workpapers tying disclosures to underlying analyses and calculations. Provide auditors with access to valuation models, external comparators, and sensitivity analyses. Anticipate audit queries on why certain items are or are not disclosed, particularly where present-value immateriality exists but disclosure may nonetheless be material.

8. Coordinate with other disclosure regimes

   • If the entity reports under other regimes (investor ESG disclosures, regulatory filings), coordinate language to ensure consistency and avoid contradictory public statements. The Standard does not alter legal obligations under other regimes, but disclosure alignment reduces legal and reputational risk.

9. Update policies and controls

   • Incorporate the examples’ expectations into accounting policies, impairment testing procedures, provisioning policies, and disclosure checklists. Train staff in the new disclosure expectations and in how to document the comparison to external information.

10. Monitor developments and website materials

    • Note that other IASB examples (IFRS 7, IFRS 18, IAS 1, IAS 8) are available on the AASB website but are not incorporated into AASB Standards; review those materials if relevant and document whether reliance on them is for contextual guidance only (Preface).

Following these steps will help ensure that disclosures are aligned with the illustrative expectations in IE90-IE95 and Example 2A and that the entity can support the judgements underlying those disclosures in audit and regulatory reviews.