Background

In 2022, the IASB concluded its post-implementation review of the classification and measurement requirements of IFRS 9 Financial Instruments. In general, the IASB found that preparers can apply the requirements consistently. However, the IASB identified some requirements that would benefit from clarification to improve their understandability.

The IASB believed that two of the matters should be addressed quickly and other matters, although of a lower priority, would also benefit from being addressed together with these issues. The IASB came to the conclusion that it would be most efficient for stakeholders if the IASB issued all amendments at the same time. The amendments issued today finalise the proposals in the March 2023 exposure draft.

Changes

The amendments in Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 and IFRS 7) are:

• Derecognition of a financial liability settled through electronic transfer: The amendments to the application guidance of IFRS 9 permit an entity to deem a financial liability (or part of it) that will be settled in cash using an electronic payment system to be discharged before the settlement date if specified criteria are met. An entity that elects to apply the derecognition option would be required to apply it to all settlements made through the same electronic payment system.
• Classification of financial assets:
  
  • Contractual terms that are consistent with a basic lending arrangement. The amendments to the application guidance of IFRS 9 provide guidance on how an entity can assess whether contractual cash flows of a financial asset are consistent with a basic lending arrangement. To illustrate the changes to the application guidance, the amendments add examples of financial assets that have, or do not have, contractual cash flows that are solely payments of principal and interest on the principal amount outstanding.
  • Assets with non-recourse features. The amendments enhance the description of the term ‘non-recourse’. Under the amendments, a financial asset has non-recourse features if an entity’s ultimate right to receive cash flows is contractually limited to the cash flows generated by specified assets.
  • Contractually linked instruments. The amendments clarify the characteristics of contractually linked instruments that distinguish them from other transactions. The amendments also note that not all transactions with multiple debt instruments meet the criteria of transactions with multiple contractually linked instruments and provide an example. In addition, the amendments clarify that the reference to instruments in the underlying pool can include financial instruments that are not within the scope of the classification requirements.
• Disclosures:
  • Investments in equity instruments designated at fair value through other comprehensive income. The requirements in IFRS 7 are amended for disclosures that an entity provides in respect of these investments. In particular, an entity would be required to disclose the fair value gain or loss presented in other comprehensive income during the period, showing separately the fair value gain or loss that relates to investments derecognised in the period and the fair value gain or loss that relates to investments held at the end of the period.
  • Contractual terms that could change the timing or amount of contractual cash flows. The amendments require the disclosure of contractual terms that could change the timing or amount of contractual cash flows on the occurrence (or non-occurrence) of a contingent event that does not relate directly to changes in a basic lending risks and costs. The requirements apply to each class of financial asset measured at amortised cost or fair value through other comprehensive income and each class of financial liability measured at amortised cost.

The amendments also include amendments to IFRS 19 Subsidiaries without Public Accountability: Disclosures, which limit the disclosure requirements for qualifying subsidiaries.

Effective date and transition

The amendments are effective for annual reporting periods beginning on or after 1 January 2026. Earlier application of either all the amendments at the same time or only the amendments to the classification of financial assets is permitted.

An entity is required to apply the amendments retrospectively. An entity is not required to restate prior periods to reflect the application of the amendments, but may do so if, and only if, it is possible to do so without the use of hindsight.

Dissenting opinion

One Board member disagrees with the effective date of the amendments to IFRS 9 relating to the date of initial recognition or derecognition of financial assets or financial liabilities and, therefore, dissented from the issuance of the amendments.

Additional information

Please click for:

• IASB press release (link to IFRS Foundation website)
• Our UK Accounting Plus project page on Classification and measurement of financial instruments
• Our Need to know newsletter explaining the amendments

The guide is a tailored version of Sustainability Reporting—The Guide To Preparation to help SMEs determine, collect and communicate sustainability-related information. The guide is based on the requirements of the ISSB standards because the ACCA expects that many of the sustainability-related information requests to SMEs are based on those standards.

The guide sets out the following eight stages of sustainability reporting for SMEs:

1. Allocating responsibility for sustainability reporting
2. Establishing the reporting landscape
3. Determining the material sustainability-related information to be reported
4. Determining the data requirements
5. Collecting the data
6. Reporting on the collected data
7. Implementing reporting
8. Verifying what is reported, and continual improvement

Please click to access the guide and 13 short explainer videos on the ACCA website.

The podcast high­lights some of the projects that were discussed during the meeting, including:

• Feedback related to exposure draft for financial instruments with characteristics of equity.
• De­vel­op­ments in the post-im­ple­men­ta­tion review of IFRS 9 impairment project

The podcast can be accessed here on the IFRS Foun­da­tion website.

The publication follows the first and second exposure drafts released in November 2022 and September 2023 respectively. Exposure draft 1 focused on the overarching framework for NPO financial reporting. Exposure draft 2 focused on some of the key accounting transactions that are relevant for NPO financial reporting.

The third and final exposure draft aims to address issues such as fund accounting, classification of expenses (including support costs and fundraising costs) and donor reporting formats. It can be accessed through this subsite on the IFR4NPO website. Comments are requested by 16 September 2024.

Below is an analysis of all changes made to the work plan since our last analysis on 29 April 2024.

Stan­dard-set­ting projects

• Business Combinations — Disclosures, Goodwill and Impairment — Exposure draft feedback is now expected in Q4 2024 (previously H2 2024).
• Subsidiaries without Public Accountability: Disclosures — This project has been removed from the work plan since the IASB issued IFRS 19 on 9 May 2024.
• Financial Instruments with Characteristics of Equity — The next step in this project is now a decision on the project direction (expected in July 2024).

Main­te­nance projects

• Amendments to the Classification and Measurement of Financial Instruments —This project will see final amendments to be published on 30 May 2024.
• Cli­mate-re­lated and Other Un­cer­tain­ties in the Financial State­ments— An exposure draft expected to be published in July 2024 (previously Q3 2024).
• Power purchase agreements — An exposure draft of proposed amendments was published on 8 May 2024. The project is now in the feedback stage which is expected to start in Q3 2024.
• Updating the Subsidiaries without Public Accountability: Disclosures Standard — An exposure draft is now expected in July 2024 (previously Q3 2024).
• Use of a Hyperinflationary Presentation Currency by a Non-hyperinflationary Entity (IAS 21) — An exposure draft is now expected in July 2024 (previously Q3 2024).

Research projects

• In­tan­gi­ble Assets— Review of research is now expected in Q4 2024 (previously H2 2024).
• Post-im­ple­men­ta­tion Review of IFRS 9 — Impairment— A feedback statement is now expected in July 2024 (pre­vi­ously Q3 2024).

Other projects

• IFRS Accounting Taxonomy Update — Primary Financial State­ments— A proposed taxonomy update was published on 23 May 2024. The project is now in the feedback stage which is expected to start in the H2 2024.

The above is a faithful com­par­i­son of the IASB and ISSB work plan at 29 April 2024 and 28 May 2024. For access to the current work plan at any time, please click here.

The IFRS Foundation also introduced its Regulatory Implementation Programme, providing tools, educational materials, and capacity-building initiatives.

Jurisdictions representing over half the global economy by GDP have announced significant steps towards adopting the ISSB Standards, marking a pivotal moment in the push for global comparability in corporate sustainability disclosures. Over 20 jurisdictions, including major economies like the European Union and China, are either adopting or aligning their standards with the ISSB’s. The European Union has incorporated ISSB standards through its Corporate Sustainability Reporting Directive, while China’s Ministry of Finance recently issued an exposure draft for its sustainability disclosure standards based on ISSB guidelines. In addition, the African Development Bank signed an agreement with the IFRS Foundation to improve sustainability-related disclosure practices across Africa.

For more information, see the press release on the IFRS Foundation’s website.

The two sessions will focus on different stakeholder groups:

• On 7 June 2024 (10-13 CEST), the joint webinar will introduce IFRS 18 for corporates and support them in its implementation. 
• On 11 June 2024 (9-12 CEST), the joint webinar will introduce IFRS 18 for financial institutions, insurance companies and conglomerates and support them in its implementation. 

The audience will be able to contribute to the discussion through Q&A sessions. Both events are public and will be held online. Recordings will be available on EFRAG’s website.

Please click for more information and registration on the EFRAG website.

The European national enforcers of financial information monitor and review financial statements published by issuers with securities traded on a regulated European market and who prepare their financial statements in accordance with International Financial Reporting Standards (IFRS) and consider whether they comply with IFRS and other applicable reporting requirements, including relevant national law.

ESMA has developed a confidential database of enforcement decisions taken by individual European enforcers as a source of information to foster appropriate application of IFRS.

The publication of enforcement decisions is designed to inform market participants about which accounting treatments European national enforcers may consider as complying with IFRS, i.e. whether the treatments are considered as being within the accepted range of those permitted by IFRS. ESMA considers the publication of the decisions, together with the rationale behind them, will contribute to a consistent application of IFRS in the European Union.

Topics covered in the latest batch of extracts, covering the period from December 2021 to December 2023, include:

In addition, the compilation also includes for the first time three enforcement decisions regarding ESMA's APM guidelines.

Click for access to the full report and a list of all decisions published so far (links to ESMA website).

For the way forward on the green transition, the communiqué underlines the benefits of enhancing the availability, comparability and credibility of robust and science-based, transition-related information. This includes greater consistency and transparency of transition plans both in the financial sector and the real economy, and forward-looking metrics that can provide information on credible transition pathways for both the public and private sectors.

In this context, the communiqué notes the ISSB standards, but also underlines the importance of interoperability:

We welcome the International Sustainability Standards Board (ISSB) standards for reporting on sustainability and for climate-related disclosures and underline the importance of working towards globally interoperable sustainability disclosure frameworks.

Please click for the full communiqué on the European Council website.

The agenda items for discussion include:

• Technical assessment of IFRS S1 and IFRS S2
  • Assessment approach
  • Work plan for technical assessment of IFRS S1 and IFRS S2
  • Project plan and target timeline

The meeting agenda and papers and details of how to register are available on the Financial Reporting Council (FRC) website.