Hi everyone,
New IFRS standards rarely come out in consecutive months, but that’s exactly what’s happening now! IFRS 19 was released in May, just a month after IFRS 18. IFRS 19 also seems likely to become the most early-adopted standard in history, although no one officially tracks that.
Other highlights in this edition include:
- Narrow-scope amendments to IFRS 9 and IFRS 7
- Climate-related accounting considerations
- Big 4 perspectives on IFRS 18
- Exposure draft on the ‘own use’ exception for PPAs
- … and more!
Let’s dive in.
Note: You’re currently reading an older issue from the archive, so all links have been removed.
IFRS 19: Reduced disclosures for non-public subsidiaries
IFRS 19, issued on 9 May, allows non-public subsidiaries to adopt IFRS Standards with reduced disclosures. Unlike the IFRS for SMEs, this standard is part of the core IFRS set. In essence, under IFRS 19, a subsidiary must comply with all IFRS requirements except for disclosures, which are reduced under IFRS 19. For more details, refer to the IASB’s Project Summary.
IFRS 19 is optional and will officially take effect in 2027. However, early adoption is permitted once endorsed in your local jurisdiction (don’t overlook this point!). Currently, the standard is available exclusively to premium IFRS subscribers but will be free to all registered users from 2025 as part of the consolidated IFRS accounting standards.
Narrow-scope amendments to IFRS 9 and IFRS 7
In response to feedback from the post-implementation review of the classification and measurement requirements for financial assets and liabilities, the IASB has issued narrow-scope amendments to IFRS 9 and IFRS 7. These amendments:
- Introduce an accounting policy choice to derecognise – before the settlement date – financial liabilities settled using an electronic payment system.
- Clarify the impact of ESG-linked features on financial asset classification.
These amendments, available to premium IFRS subscribers, are effective for annual periods starting on or after 1 January 2026, with early application permitted.
Learn more:
- EY’s publication
- KPMG’s publication series focusing on:
- Classification of financial assets with ESG features
- Settlements by an electronic payment system
Technical Publications
Climate-related accounting considerations
Climate-related accounting has been a hot topic for good reason, and EY’s latest publication – Accounting for Climate Change – stands out. It summarises climate-related accounting considerations organised by financial reporting area, including numerous extracts from published financial statements worldwide.
Additionally, the European Systemic Risk Board has published a report on how climate-related risks are reflected in IFRS financial statements from a financial stability perspective.
Impact analyses of IFRS 18
Following the publication of IFRS 18 in April, Big 4 firms have released technical publications:
- PWC’s Key treasury topics for corporate entities and Insights for financial services companies
- Deloitte’s iGAAP in Focus
- KPMG’s Presentation and disclosure in the financial statements
ESMA’s enforcement decisions on IFRS application
ESMA continues to promote transparency by providing extracts from its enforcement database, which demonstrate real-world IFRS application issues. The latest extract covers:
- Assessing significant influence
- Related party transactions
- Disclosures in the interim financial report
- Measurement of ECL
- Fair value disclosures
- APM/non-GAAP measures
Is cash still king?
As the saying goes, cash is a fact, but profit is an opinion. However, have some investors and analysts become overly reliant on cash flow metrics? In a recent article, The Footnotes Analyst team explains why cash flow might not provide the insights into performance that some investors expect and how cash flow can often be managed even more freely than profit. This piece is worth sharing with your colleagues in investor relations!
EIOPA report on the impact of IFRS 17 in the EU insurance sector
The European Insurance and Occupational Pensions Authority (EIOPA) has released a report examining the implementation of IFRS 17 in the EU. This report evaluates how insurance companies have adopted IFRS 17 and compares the calculation of insurance liabilities under IFRS 17 with the Solvency II framework.
Work in Progress at the IASB
Exposure Draft: Power purchase agreements (PPAs)
The IASB has issued the Exposure Draft Contracts for Renewable Electricity proposing amendments to IFRS 9 and IFRS 7. These contracts, commonly known as power purchase agreements (PPAs), involve businesses procuring electricity directly from renewable energy generators. With global efforts to combat climate change, entities are increasingly engaging in PPAs, which has led to challenges and queries about the ‘own use’ exception and hedge accounting.
Key proposals in this Exposure Draft include:
- Specifying the factors an entity must consider when applying the own-use exception in IFRS 9.2.4 to contracts for buying and taking delivery of renewable electricity, particularly when the electricity source is nature-dependent and the purchaser is exposed to substantial volume risk
- Allowing entities to use contracts for renewable electricity with specified characteristics as hedging instruments
- Adding specific disclosure requirements regarding PPAs
Learn more:
- IASB’s webcast
- EY’s publication
- KPMG’s publication
- Deloitte’s publication
Next milestone: The Exposure Draft is open for comment until 7 August 2024.
That’s all for this edition of Reporting Period. Your feedback is invaluable, so please feel free to reply directly to this email with your thoughts and comments.
Thank you for being a subscriber.
Best regards,
Marek