IFRS Accounting Standards

Targeted amendments for nature-dependent electricity contracts

The International Accounting Standards Board (IASB) has issued targeted amendments for contracts referencing nature-dependent electricity, often structured as power purchase agreements, to help companies better report their financial effects.

The scope of the amendments is limited to contracts referencing nature-dependent electricity. These are contracts where the amount of electricity generated varies because the source of generation depends on uncontrollable natural conditions, such as the weather.

The scope includes both contracts to buy or to sell nature-dependent electricity. 

The amendments are intended to address the challenges an entity may face in applying IFRS 9 Financial Instruments to contracts referencing nature-dependent electricity. The amendments to IFRS 9: 

• clarify the application of the ‘own-use’ exemption to contracts in scope; and
• permit hedge accounting if the contracts are used as hedging instruments. An entity may designate a variable volume of forecast electricity transactions as the hedged item if specified criteria are met.

The amendments also add additional disclosure requirements to IFRS 7 Financial Instruments: Disclosures and IFRS 19 Subsidiaries without Public Accountability: Disclosures for certain contracts referencing nature-dependent electricity.

The amendments are effective for reporting periods beginning on or after 1 January 2026, with early application permitted.

Consultation on targeted improvements to provisions 

The International Accounting Standards Board has published a consultation aimed at improving the requirements for recognising and measuring provisions on company balance sheets as investors seek greater transparency and comparability in information disclosed. 

The proposed amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets aim to clarify how companies assess when to record provisions and how they measure them, and would also require more information to be disclosed on measurement. Companies that have large long-term asset decommissioning obligations or are subject to levies and similar government-imposed charges are likely to be most affected by the proposals.

The consultation is open for comment until 12 March 2025.

Research to review and improve the statement of cash flows begins

The International Accounting Standards Board (IASB) has announced that it has started a research project to review and improve the requirements for the statement of cash flows and related matters in IFRS Accounting Standards. This is in response to feedback received during the IASB’s Third Agenda Consultation where investors identified improving the requirements of IAS 7 Statement of Cash Flows as a high priority. 

The initial research will take the form of meetings with stakeholders and review of existing studies to gather evidence on the nature and extent of perceived deficiencies in current reporting and the likely benefits of developing new financial reporting requirements.

Initial research outcomes and the next steps for this project are expected in the first quarter of 2025.

UK GAAP

The FRC issues draft amendments to FRS 101

The Financial Reporting Council (FRC) has issued FRED 86 Draft amendments to FRS 101 Reduced Disclosure Framework – 2024/25 cycle (FRED 86), which includes amendments relating to new IFRS Accounting Standards IFRS 18 Presentation and Disclosure in Financial Statements and IFRS 19 Subsidiaries without Public Accountability: Disclosures. 

Both IFRS 18 and IFRS 19 standards are effective for reporting periods beginning on or after 1 January 2027, although the UK Endorsement Board has not yet endorsed either for use in the UK. 

In relation to IFRS 18, FRED 86 proposes exemptions from:

• some disclosure requirements related to management-defined performance measures (for most qualifying entities); and
• disclosure requirements which, in some circumstances, require an entity to disclose a disaggregation of certain expenses classified by nature.

As the objectives of IFRS 19 and FRS 101 are similar (reduced disclosures for eligible/qualifying subsidiaries), the FRC has proposed amendments to FRS 101 that would prevent subsidiaries from applying both standards. 

The FRC has also published an explainer document outlining the key similarities and differences between FRS 101 and its IFRS counterpart.

FRED 86 is open for comment until 7 March 2025. 

Updated suite of factsheets for FRS 102

The Financial Reporting Council (FRC) has issued an updated suite of factsheets to help preparers assess the impact of Amendments to FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland and other FRSs – Periodic Review 2024 (Periodic Review 2024 amendments) on their financial statements. Most of the Periodic Review 2024 amendments are effective for accounting periods beginning on or after 1 January 2026.

Three new factsheets have been issued, focusing on the significant Periodic Review 2024 amendments to Section 20 Leases and Section 23 Revenue from Contracts with Customers as well as the initial application of the amendments.

In addition, the FRC has updated five factsheets and withdrawn two factsheets which related specifically to amendments to FRS 102 introduced by the Triennial Review 2017.

UK regulation for company accounts

Confirmed uplift to monetary size thresholds

The UK government has published new legislation to increase the monetary company size thresholds and remove obsolete or overlapping requirements in the Directors’ Report. These changes will be effective from 6 April 2025. 

The monetary thresholds for: 

• micro entities will increase to turnover of not more than £1m, from £632k, and total assets of not more than £500k, from £316k;
• small entities will increase to turnover of not more than £15m, from £10.2m, and total assets of not more than £7.5m, from £5.1m and
• medium-sized entities will increase to turnover of not more than £54m, from £36m, and total assets of not more than £27m, from £18m.

Existing employee number criteria remain unchanged.

Companies able to move down a size category as a result of the changes will be entitled to the accompanying reduction in reporting and audit requirements.

Further information on these changes can be found in the government’s explanatory memorandum.

Companies House: enhanced identity verification changes

Under the Economic Crime and Corporate Transparency Act 2023, a new identity verification process  will be phased in over the next couple of years, completing in 2026.

Mandatory identity verification will be introduced for company directors, persons with significant control and those filing documents on behalf of companies. The new processes are intended to deter the use of companies for illegal or misleading purposes.

As explored in more detail in Companies House reform: navigating identity verification changes, accountants in practice will play a central role in helping clients meet the new verification requirements. 

Annual Review of Corporate Governance Reporting

The Financial Reporting Council (FRC) has published its Annual Review of Corporate Governance Reporting 2024 to help companies prepare for the implementation of the revised UK Corporate Governance Code from January 2025.

The review continues to stress the importance of the Code’s ‘comply or explain’ approach, which allows companies to veer from provisions when circumstances permit provided they offer high-quality explanations for their alternative approach. 

The FRC believes there is still room for improvement in the quality of these explanations and has urged investors and advisers to support companies that provide credible explanations that demonstrate good governance.

Sustainability reporting

Guide to identify sustainability-related risks and opportunities

The IFRS Foundation has published a new comprehensive guide to help companies with identifying and disclosing material information about sustainability-related risks and opportunities that could reasonably be expected to affect their cash flows, their access to finance or cost of capital over the short, medium or long term.

The guide sets out a process closely aligned with the four-step process illustrated in IFRS Practice Statement 2: Making Materiality Judgements. Companies already applying IFRS Accounting Standards will be familiar with the process and so will be well placed in applying it to sustainability-related risks and opportunities.

The guide also sets out considerations about connectivity between sustainability-related financial disclosures and a company’s financial statements. Additionally, to facilitate the information needs of a broader set of stakeholders it includes considerations for those applying the International Sustainability Standards Board’s (ISSB) Standards alongside the European Sustainability Reporting Standards or Global Reporting Initiative Standards.

Guide on voluntary application of ISSB Standards

The IFRS Foundation has published Voluntarily applying ISSB Standards – a guide for preparers to support companies wanting to voluntarily apply ISSB Standards in order to provide investors with decision-useful and globally comparable information on sustainability-related risks and opportunities.

As more jurisdictions adopt the ISSB Standards, the guide is a useful tool for companies wanting to get ahead of potential mandatory reporting requirements and is one of several publications designed to support the implementation of ISSB Standards.

Other

The future of digital reporting discussion paper – ICAEW response

ICAEW has issued a response to the Financial Reporting Council’s (FRC) Discussion Paper: Opportunities for the future of digital reporting, identifying the need for more widespread understanding of taxonomies and tagging rules and has recommended the FRC publishes educational materials aimed at non-specialists.

ICAEW has emphasised the importance of understanding how digital reporting fits into the overall landscape for reporting in the UK to help ensure that the benefits of any new requirements will outweigh the costs for preparers.

ICAEW has identified the need for more widespread understanding of taxonomies and tagging rules and has recommended the FRC publish educational materials aimed at non-specialists. This would help preparers and users understand the need for, and uses and benefits of, high-quality machine-readable information. ICAEW supports the use of the IFRS Foundation taxonomy, supplemented by ‘top-ups’ for UK-specific requirements, to achieve interoperability of taxonomies. 

Guidance on the going concern basis of accounting – ICAEW response

ICAEW has responded to the FRC’s draft updated Guidance on the Going Concern Basis of Accounting and Related Reporting, including Solvency and Liquidity Risk.

ICAEW views the guide as a valuable resource for companies, as well as their advisers and auditors, but has suggested the FRC considers adding an appendix for Code companies to set out the context of the guide within their wider reporting requirements. 

A more detailed list of considerations to help guide all companies on the level of analysis and amount of information that should be disclosed would also be a welcome addition.