Hello,
A very happy New Year to you, my valued subscribers! In this inaugural 2024 edition of Reporting Period, we begin with an update on the latest IFRS amendments, effective for annual periods starting in 2024.
Other highlights in this issue include:
- EY’s comprehensive analysis of the latest Exposure Draft Financial Instruments with Characteristics of Equity.
- BDO’s examination of the financial reporting impacts of current economic volatility.
- IASB’s initiative to address accounting for power purchase agreements (PPAs).
- IASB’s finalisation of the extractive activities project.
- … and more.
Let’s dive in.
Note: You’re currently reading an older issue from the archive, so all links have been removed.
Effective Date Reminder
As we embark on the new year, remember these IFRS amendments applicable for annual periods starting on or after 1 January 2024:
- Classification of liabilities as current or non-current (amendments to IAS 1). Learn more in BDO’s publication.
- Lease liability in a sale and leaseback (amendments to IFRS 16). Learn more in KPMG’s publication (this link should take you directly to chapter 6 Forthcoming requirements).
- Disclosures of supplier finance arrangements (amendments to IAS 7 and IFRS 7). Learn more in PWC’s publication.
Technical Publications
Financial instruments with characteristics of equity
Recall from our previous issue the IASB’s release of the Exposure Draft proposing amendments to IAS 32, IFRS 7, and IAS 1. This month, EY presents a detailed publication analysing these changes.
Financial reporting in times of economic volatility
With evolving geo-political risks, soaring inflation and high interest rates globally, financial reporting will inevitably be impacted. The latest BDO’s publication offers invaluable insights into these challenges.
Work in Progress at the IASB
Power purchase agreements (PPAs)
Background: A PPA is a long-term contract where a business procures electricity directly from a renewable energy generator. In response to global efforts to combat climate change, entities are increasingly engaging in PPAs, which has led to challenges and queries regarding the application of the ‘own use’ exception set out in IFRS 9.2.4. The IASB aims to introduce targeted amendments to IFRS 9 concerning the application of this exception to PPAs, both physical and virtual.
This month’s discussion: The IASB tentatively decided to pursue narrow-scope standard-setting to amend IFRS 9.
Learn more on the project’s page.
Next milestone: Exposure Draft proposing amendments to IFRS 9 (expected in Q2 2024).
Extractive activities
The IASB has published a summary of its project on extractive activities which considered whether to amend or replace IFRS 6 Exploration for and Evaluation of Mineral Resources. The IASB decided not to develop new or amended recognition, measurement or disclosure requirements for exploration and evaluation expenditure or other aspects of accounting for extractive activities. This summary explains the reasons for the IASB taking on the project, the work done and the key decisions made, including the reasons for retaining IFRS 6.
Rate-regulated activities
Background: Rate regulation establishes the amount of compensation a company can charge for goods or services supplied to its customers. It also dictates when the company can include that compensation in the regulated rates it charges. Occasionally, timing discrepancies occur when the compensation for goods or services provided in one period is included in the rates charged in a different period. These timing differences mean that the amounts recognised in financial statements may not fully reflect the compensation entitled by the rate regulation for that period.
This project aims to mandate companies to reflect such timing differences by recognising regulatory assets, liabilities, income and expenses in their financial statements. For more information, refer to the snapshot providing an overview of the 2021 discussion paper.
This month’s discussion:
- Unit of account and offsetting.
- Presentation.
- Items affecting regulated rates on a cash basis.
Learn more on the project’s page.
Next milestone: New IFRS standard replacing IFRS 14 (expected in 2025).
Miscellany
Join the IFRS Interpretations Committee
The IFRS Foundation is seeking three individuals to join the IFRS Interpretations Committee. This is an excellent chance to contribute your technical knowledge to the IFRS development process. Interested applicants should apply by 28 February 2024.
This concludes the current issue of Reporting Period. I hope you found the content both informative and valuable. I welcome your feedback and thoughts – feel free to respond directly to this email.
Thank you for being a subscriber.
Best regards,
Marek