[Global Financial Insights] IASB Proposes an Update on Disclosure Requirements of Contracts for Renewable Electricity and More

Global Financial Insights is a weekly feature for the Accounts and Audit Module subscribers of Taxmann.com. It provides you with the latest updates on financial reporting and auditing practices from across the globe. Here is this week’s financial update.

1. IASB proposes an update on disclosure requirements of contracts for renewable electricity

The International Accounting Standard Board (IASB) has published an update to reflect the proposed disclosure requirements for renewable electricity contracts. Earlier in May 2024, the IASB published an exposure draft with proposed amendments to ensure that financial statements faithfully reflect renewable electricity contracts’ effects on a company. These proposed amendments relate to IFRS 9, Financial Instruments, and IFRS 7, Financial Instruments: Disclosures. Considering the stakeholder’s feedback, IASB aims to finalize the changes in the aforementioned standard by the end of 2024. The proposed changes to the “IFRS Accounting Taxonomy” to reflect the proposed disclosure requirements in contracts for renewable electricity are discussed below:

• Contracts for renewable electricity proposes to amend IFRS 7 to require an entity to disclose information that enables users of financial statements to understand how contracts for renewable electricity with specific characteristics affect the entity’s financial performance and the amount, timing, and uncertainty of its future cash flows.
• The proposed disclosure requirements require disclosures of the volume of electricity, either expected to be sold or purchased over the remaining duration of the contracts or purchased for the reporting period.
• The element type “Monetary per Energy” in XBRL specifications denotes the price per energy unit. The IASB proposes to introduce this element type to the IFRS Accounting Taxonomy to reflect the proposed disclosure requirement related to the average market price per unit of electricity purchased in the markets in which the entity purchased electricity.
• An entity may disclose the fair value of contracts for renewable electricity, accompanied by the information on the fair value required by paragraphs 93(g)–(h) of IFRS 13, Fair Value Measurement.

In addition to the update above there are various other changes proposed by IASB which can be assessed at the International Financial Reporting Standard (IFRS) official website. Furthermore, it is important to note that the proposed update mentioned above might change in response to stakeholder feedback.

The IASB is inviting its stakeholder to provide their feedback on the proposed update latest by 14th October 2024.

Source: IFRS Foundation

2. FRC publishes amendments to FRS 101 Reduced Disclosure Framework

The Financial Reporting Council (FRC) carries out an annual review of FRS 101, Reduced Disclosure Framework to provide additional disclosure exemptions. On 9th August 2024 FRC issued an amendment to FRS 101 following the 2023/24 annual review cycle.

The changes include a disclosure exemption from presenting certain comparative information about right-of-use assets, and to accommodate a conditional exemption, for qualifying entities in respect of certain disclosures about supplier finance arrangements required by IAS 7, Statement of Cash Flows.

Furthermore, the amendments are also made in para A2.9B of Appendix II “Note on Legal Requirements” for consistency with IAS, Presentation of Financial Statements. Under this para, a text has been inserted that states that

“liability is classified as current when the entity does not have the right at the end of the reporting period to defer settlement of the liability for at least twelve months after the reporting period “.

Source: Financial Reporting Council

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