Our semi-annual outlook helps preparers in the US keep track of changes in IFRS Accounting Standards and assess their relevance.
From the IFRS Institute � June 05, 2025
Authors:ÌýValerie Boissou andÌýPaulina Kumah
Although there are currently no major changes to IFRS Accounting Standards to implement, in 2025 some companies may need to apply amendments to IAS 21 related to foreign exchange translations; and in 2026 some will need to adopt narrow-scope changes to various accounting standards introduced as part of the annual improvements. However, all companies need to get ready to apply the new standard on presentation and disclosure � IFRS 18 � which becomes effective in 2027 and will require comparatives for 2026.
Our semi-annual outlook is a quick aid to help preparers in the US keep track of coming changes to IFRS Accounting Standards and assess the relevance to their financial statements.
The following summaries highlight new authoritative guidance issued by the International Accounting Standards Board (IASB), provide a high-level comparison to US GAAP, and identify resources for further reading. The content is organized by effective dates1:
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This article does not provide the details of the latest cycle of annual improvements, which introduce small changes to Amendments to IFRS 1 � First-time Adoption of International Financial Reporting Standards, Amendments to IFRS 7 � Financial Instruments: Disclosures, Amendments to IFRS 9 � Financial Instruments, Amendments to IFRS 10 � Consolidated Financial Statements, Amendments to IAS 7 � Statement of Cash Flows. Further, it does not cover the IFRS for SMEs® Accounting Standard.
As a reminder, to be in compliance with IFRS Accounting Standards, companies also need to timely implement all IFRS Interpretations Committee Agenda Decisions. Read the ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø IFRS Perspectives article for a summary of 2024 Agenda Decisions.
Lastly, in On the radar, we highlight what should be included in IFRS 20, the new standard on rate regulated activities expected to be released later this year. See also the for other IASB® projects that are currently in progress.
Amendments to existing standards | |
New IFRS Accounting Standards requirements | Comparison to US GAAP |
Lack of Exchangeability (Amendment to IAS 21, The Effects of Changes in Foreign Exchange Rates)Ìýapplies when one currency cannot be exchanged into another. This may occur, for example, because of government-imposed controls on capital imports and exports, or a limitation on the volume of foreign currency transactions undertaken at an official exchange rate. The amendments clarify when a currency is considered exchangeable into another currency, and how an entity estimates a spot rate for currencies that lack exchangeability. The amendments introduce new disclosures to help financial statement users assess the effect of using an estimated exchange rate. | When a lack of exchangeability is not temporary, Topic 830 (foreign currency matters) explicitly requires an entity to consider the propriety of consolidation, combination, or equity method of accounting for foreign operations with significant non-exchangeable currencies, unlike IFRS Accounting Standards. Further, there is no concept of estimating exchange rates under US GAAP; however, the lack of exchangeability must be disclosed. |
ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø resources:
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Amendments to existing standards | |
New IFRS Accounting Standards requirements | Comparison to US GAAP |
Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures)Ìýclarify financial assets and financial liabilities are derecognized at settlement date except for regular way purchases or sales of financial assets and financial liabilities meeting conditions for a new exception. The new exception permits companies to elect to derecognize certain financial liabilities settled via electronic payment systems earlier than the settlement date.Ìý The amendments also provide guidelines to assess the contractual cash flow characteristics of financial assets, which apply to all contingent cash flows, including those arising from environmental, social, and governance (ESG)-linked features. Further, the amendments introduce new disclosure requirements and update others. | Under Topic 405, financial liabilities are considered extinguished once the debtor has settled the debt or is legally released from being the primary obligor. There are no specific considerations to assess the timing of debt extinguishment when payments are made via electronic payment systems. US GAAP also does not address the timing of the recognition of financial asset settlements. Further, the classification of financial assets under US GAAP is primarily based on management’s intent for holding the assets. Any contingent cash flows, including those arising from ESG-linked features are evaluated for potential bifurcation as embedded derivatives. |
| Nature-dependent Electricity Contracts (Amendments to IFRS 9 and IFRS 7) address the application of ‘own use� and hedge accounting requirements for agreements that meet specified criteria. If a nature-dependent electricity contract (also known as a Power Purchase Agreement or PPA) qualifies for the ‘own use� exemption, it is accounted for as an executory contract rather than as a derivative. In contrast, if a PPA does not qualify for the ‘own use� exemption, it is accounted for as a derivative to which hedge accounting considerations may apply. The amendments apply to contracts that reference electricity generated from nature-dependent sources and for which cash flows vary based on the amount of electricity generated by a reference production facility. New disclosures have also been introduced. | Like IFRS Accounting Standards, under US GAAP, PPAs that meet the definition of a derivative are eligible for the normal purchase normal sale (NPNS) scope exception from being accounted for as a derivative under Topic 815. Like IFRS Accounting Standards, if the NPNS scope exception is elected for an eligible PPA, it is accounted for as an executory contract. To the extent a PPA is accounted for as a derivative, the requirements and the mechanics of applying hedge accounting differ from IFRS Accounting Standards. |
ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø resources: | |
IFRS 18, Presentation and Disclosure in Financial Statements | |
New IFRS Accounting Standards requirements | Comparison to US GAAP |
IFRS 18 replaces IAS 1, which sets out presentation and base disclosure requirements for financial statements. The changes, which mostly affect the income statement, include the requirement to classify income and expenses into three new categories â€� operating, investing and financing â€� and present subtotals for operating profit or loss and profit or loss before financing and income taxes. Further, operating expenses are presented directly on the face of the income statement â€� classified either by nature (e.g. employee compensation) or function (e.g. cost of sales) or by using a mixed presentation. Expenses presented by function require more detailed disclosures about their nature. IFRS 18 also provides enhanced guidance for aggregation and disaggregation of information in the financial statements, introduces new disclosure requirements for management-defined performance measures (MPMs)* and eliminates classification options for interest and dividends in the statement of cash flows. *Non-GAAP measures that meet the definition of MPMs will be subject to the disclosure requirements. | US GAAP generally has no requirements to classify income and expenses by specific category, or present subtotals for profit or loss. SEC regulations prescribe expense classification requirements for certain specialized industries. Non-GAAP measures are generally prohibited from inclusion in financial statements. Therefore, presentation and disclosure differences are expected to continue to arise in practice when IFRS 18 comes into effect. Starting 2027, the FASB will require2 income statement expensesÌýbe disaggregated into certain natural expense categories in the financial statement notes. The new US GAAP disclosures are similar in spirit to certain IFRS 18 disaggregation requirements but may be more cumbersome and will apply only to public business entities. |
ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø resources:
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IFRS 19,ÌýSubsidiaries without Public Accountability: Disclosures | |
New IFRS Accounting Standards requirements | Comparison to US GAAP |
IFRS 19 is a voluntary standard that applies to entities without public accountability, but whose parents prepare consolidated financial statements under IFRS Accounting Standards. For in-scope companies, IFRS 19 simplifies disclosures on various topics, including leases, exchange rates, income taxes, and statement of cash flows. If elected, IFRS 19 is expected to reduce the cost of preparing in-scope financial statements while maintaining the usefulness of those financial statements for stakeholders. | Under US GAAP, private companies can elect to apply Private Company Alternatives, aimed at reducing complexity and costs in financial reporting for in-scope companies. This includes the option to amortize goodwill over a set period, the ability to combine similar intangible assets, a simplified approach to evaluating variable interest entities, a simplified approach to lease accounting, and alternative methods for estimating fair value in certain cases. There is no specific alternative focused solely on reducing disclosures; however, certain US GAAP disclosure requirements only apply to public entities. The entities eligible to elect Private Company Alternatives under US GAAP compared to IFRS 19, as well as the results of applying each, may differ. |
| ÀÖÓ㣨Leyu£©ÌåÓý¹ÙÍø resources: Article: Reducing disclosures for subsidiaries | |
Rate-regulated activities
The IASB is expected to issue its new accounting standard for rate-regulated activities in the second half of 2025. The standard aims to improve the reporting of financial performance for entities � such as utilities � subject to rate regulation. The model will address the accounting for regulatory assets and regulatory liabilities that arise when part of the total allowed compensation for goods or services supplied in a period is included in determining the regulated rates for goods or services supplied in a different period.
The IASB anticipates that the changes will provide users with clearer information about the financial effects of rate regulation and the entity’s expected future cash flows. The standard is also expected to include detailed disclosure requirements to better understand the nature and financial impact of these regulatory arrangements. The standard will replace IFRS 14 and is expected to be effective for annual reporting periods beginning on or after January 1, 2029, with earlier application permitted.
1 Effective dates are for annual periods beginning on or after the stated date. Early adoption is permitted unless otherwise stated.
2ÌýASU 2024-03, Disaggregation of Income Statement Expenses, is effective prospectively for annual periods beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption and retrospective application are permitted.
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