IFRS is in a relatively steady-state space in 2026 with only two amendments – both to IFRS 9 – Financial instruments and IFRS 7 – Financial instruments: disclosures – becoming effective for periods commencing on or after 1 January 2026. These amendments are relatively narrow in scope.
Amendments to the classification and measurement of financial instruments
IFRS 9 has been amended in the following two ways (with amendments following through to the disclosure requirements in IFRS 7).
Financial assets: application of classification rules to financial assets with contingent features
IFRS 9 requires an entity to classify a financial asset to one of three measurement models. These are amortised cost, fair value through other comprehensive income or fair value through profit or loss, depending on the entity’s business model for holding the financial asset and the cash flows that result from that financial asset (the solely payment of principal and interest (SPPI) test).
The application guidance has been updated to give more guidance on how to assess financial assets with contingent features (such as may exist in financial assets with ESG – environmental, social and governance - features) and to add additional examples.
Derecognition of financial liabilities using an electronic payment system
The second amendment introduces two changes:
- It clarifies that a financial liability is derecognised on the settlement date, which is the date on which the liability is extinguished.
- It introduces a new requirement to permit an entity to deem a financial liability that is settled using an electronic payment system to be discharged before the settlement date if specified criteria are met.
Applying the amendment, an entity would be permitted to derecognise a financial liability if and only if the entity has initiated the payment instruction and:
- the entity has no practical ability to withdraw, stop or cancel the payment instruction
- the entity has no practical ability to access the cash to be used for settlement as a result of the payment instruction
- the settlement risk associated with the electronic payment system is insignificant.
The aim of the amendment is to make it clear when an entity can automate the derecognition of a liability at the point of payment instruction, which may be earlier than the settlement date.
Entities should review their point of derecognition and ensure that it meets the requirements of the amendment. For many entities, this will not have any practical impact.
Contracts referencing nature-dependent electricity
This amendment will impact on entities with electricity contracts linked to renewable energy such as wind energy and solar energy etc (nature-dependent electricity).
The amendment seeks to make it easier for entities to account for these contracts in the following ways:
- ‘Own-use’ exemption: IFRS 9 allows entities to scope out certain contracts that would otherwise meet the definition of a financial instrument where they are held for the purpose of the receipt or delivery of a non-financial instrument. The amendment introduces guidance on how to interpret the own-use requirements for contracts to buy nature-dependent electricity.
- Hedge accounting: IFRS 9 has been amended to allow the hedged item to be a variable amount of electricity purchased or sold as the nominal amount (where normally a hedged item would be for a fixed nominal amount).
These amendments can only be used for contracts referencing nature-dependent electricity and cannot be used by analogy. IFRS 7 is also updated to add required disclosures for the above.
Changes to come in 2027 – IFRS 18
The next big change to IFRS will happen from periods commencing on or after 1 January 2027 with the introduction of IFRS 18 – Presentation and disclosure in financial statements. This is a replacement to IAS 1 – Presentation of financial statements and as such is a big change to the requirements in IFRS. It particularly impacts on the statement of profit or loss and introduces the following changes.
- To require presentation of two new defined subtotals in the statement of profit or loss: operating profit and profit before financing and income taxes. These subtotals will create a consistent structure for the statement of profit or loss, thereby improving comparability among companies.
- To require disclosure of management-defined performance measures: subtotals of income and expenses not specified by IFRS Accounting Standards that are used in public communications to communicate management’s view of an aspect of a company’s financial performance. To promote transparency, a company will be required to provide a reconciliation between these measures and totals or subtotals specified by IFRS Accounting Standards.
- To enhance the requirements for aggregation and disaggregation to help a company to provide useful information. These requirements include general principles for aggregation and disaggregation and specific requirements for disaggregation of ‘other’ balances, presentation of operating expenses in the statement of profit or loss and disclosure of specified operating expenses by nature included in each function line item.
- To require limited changes to the statement of cash flows to improve comparability by specifying a consistent starting point for the indirect method of reporting cash flows from operating activities and eliminating options for the classification of interest and dividend cash flows.
The introduction of IFRS 18 will involve work by finance teams to review the structure of their financial statements – and in particular, the statement of profit or loss – to ensure that it meets the new requirements of the standard.