The European Financial Reporting Advisory Group (EFRAG) has finalized its due process on the Contracts Referencing Nature-dependent Electricity – Amendments to IFRS 9 and IFRS 7 and submitted its Endorsement Advice Letter to the European Commission.
Background
Published by the International Accounting Standards Board (IASB) on 18 December 2024, the Amendments aim to enhance the financial reporting of physical and virtual nature-dependent electricity contracts. These updates include:
- Narrow-scope adjustments to the own-use assessment, hedge accounting, and disclosure requirements.
Application Timeline
- The Amendments are effective for annual periods starting on or after 1 January 2026.
- Earlier application is permitted.
- Own-use amendments are to be applied retrospectively, while hedge accounting amendments are applied prospectively.
EFRAG’s Endorsement
EFRAG has concluded that the Amendments meet the technical endorsement criteria of the IAS Regulation and align with the European public good. EFRAG has therefore recommended their adoption for use in the European Union and European Economic Area.
Next Steps
The Endorsement Advice and supporting documentation are available on EFRAG’s website. The Amendments represent a significant step in reflecting the financial impact of nature-dependent contracts more accurately.
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