Contracts Referencing Nature-dependent Electricity
Background
In June 2023 the IFRS Interpretations Committee discussed a submission relating to the application of certain requirements of IFRS 9 Financial Instruments (IFRS 9) to contracts for renewable energy. Consequently, the International Accounting Standards Board (IASB) added a narrow-scope standard setting project to its workplan called ‘Power Purchase Agreements’.
In May 2024 the IASB published its Exposure Draft: Contracts for Renewable Electricity (ED). The UKEB’s Final Comment Letter on the ED was submitted in August 2024. Further details on the UKEB’s influencing project on this ED can be found on the project webpage.
On 18 December 2024 the IASB published Amendments to IFRS 9 and IFRS 7 – Contracts Referencing Nature-dependent Electricity.
Main requirements in the Amendments
- The Amendments extend the “own-use” exception as set out in paragraph 2.4 of IFRS 9 to certain contracts to purchase nature-dependent electricity.
- The Amendments allow an entity to apply cash flow hedge accounting to hedging relationships in which the hedged item is a variable amount of forecast electricity transactions, and the hedging instrument is a contract referencing nature-dependent electricity.
- Entities are required to disclose information about their contracts referencing nature-dependent electricity.
UKEB outreach
The UKEB outreach plan includes discussions with UKEB advisory groups and public consultation on the UKEB’s Draft Endorsement Assessment Criteria.
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UKEB Draft Endorsement Criteria Assessment
On 10 March 2025 the UKEB published its Draft Endorsement Criteria Assessment of the Amendments to IFRS 9 and IFRS 7 – Contracts Referencing Nature-dependent Electricity. The public consultation period closes on 9 June 2025.
The relevant documents are available at the end of this page:
- Draft Endorsement Criteria Assessment and Invitation to Comment
UKEB meetings
Meeting(s) related to the endorsement of the Amendments are as follows:
- 30 January 2025: Board technical discussion (Agenda paper 5)
- 12 December 2024: Project Initiation Plan
- 28 November 2024: IASB General Update
- 17 October 2024: IASB General Update
- 19 September 2024: IASB General Update