Where a green promise shows up in the statements

A commitment is not a slogan once the accountants get it

Cobalt Ridge Mining announces that it will be net-zero by 2040 and, as part of the plan, will restore every site it operates — including two whose licences carry no restoration clause — and replace its diesel haul fleet with electric trucks by 2032. Students file this under "ESG" and move on. An accountant traces it into four places in the financial reporting, and the midterm asks for at least three.

1. A provision — the promise creates a constructive obligation

The two unlicensed sites had no legal restoration duty. The public commitment changes that under IFRS: it creates a valid expectation in the community and the regulator that Cobalt Ridge will act, which is a constructive obligation (L6.7). Run the IAS 37 tree: present obligation from a past event — yes, the public statement; outflow probable — yes; reliable estimate — engineering can cost it. Cobalt Ridge recognises a decommissioning provision for those sites at present value, capitalised into the site assets and accreted each year (L6.6). Note what does not create a provision: the net-zero target itself. A target to reduce emissions is a plan for future operating decisions, not an obligation to a third party arising from a past event; there is no provision for "the cost of getting to net-zero" on announcement. The provision appears only where the commitment creates a specific obligation the company cannot realistically avoid. (Under ASPE, with no constructive-obligation concept, the sites would produce no provision at all.)

2. An impairment indicator — the fleet

Cobalt Ridge's diesel trucks have a carrying amount based on a twelve-year life. The commitment to replace them by 2032 shortens their use; a rising carbon price raises their operating cost and lowers the cash flows they generate; a tightening emissions law may restrict them outright. Each of these is an impairment indicator from L3.3 — the replacement plan is internal (a change in the extent or manner of use), the carbon price and the law are external (adverse changes in the market and legal environment). The indicator does not itself produce a loss: it requires a test — recoverable amount as the higher of value in use and FVLCD against carrying amount — and a loss only if the test fails. At minimum the useful lives are revisited and depreciation accelerated. Climate risk reaches the balance sheet through the ordinary impairment machinery; there is no separate "climate write-down".

3. A scorecard KPI — how management steers it

The commitment needs a measure or it will not be managed. Cobalt Ridge adopts tonnes of CO₂e per thousand tonnes of ore mined — an emissions-intensity KPI — under the environmental perspective of its balanced scorecard, the fifth perspective in this course's version (Module 11). It sits there rather than under internal process because it measures an outcome for an external stakeholder, not the efficiency of a process.

4. A sustainability disclosure — IFRS S2

If Cobalt Ridge reports under IFRS S2 (or the Canadian CSDS 2, voluntary unless mandated — L6.3), the commitment is disclosed as a climate-related target: the target itself, the base year, the interim milestones, whether it is validated by a third party, and progress against it. S2 also requires disclosure of absolute gross Scope 1, 2 and 3 greenhouse-gas emissions, with Scope 3 given first-year transition relief because it is the hardest to measure. One dated note: the ISSB amended S2 in December 2025, effective 1 January 2027, to reduce the cost of specific GHG disclosures — permanently narrowing part of Scope 3 (Category 15, financed emissions) for financial-sector reporters and allowing jurisdiction-mandated measurement methods. For a miner like Cobalt Ridge the core requirement is unchanged; the point for the exam is that S2's Scope 3 requirement has never been "every category, always".

The pattern

One promise, four homes: a provision where it creates an obligation the company cannot avoid; an impairment indicator where it changes what an asset will earn; a KPI where management needs to steer it; a disclosure where the standard requires a target to be reported. Recognise versus disclose is the line that runs through all four.