IASB issues Contracts Referencing Nature-dependent Electricity - Amendments to IFRS 9 and IFRS 7

The International Accounting Standards Board (IASB) has issued Contracts Referencing Nature-dependent Electricity - Amendments to IFRS 9 and IFRS 7.
Nature-dependent electricity contracts help companies to secure their electricity supply from sources such as wind and solar power. The amount of electricity generated under these contracts can vary based on uncontrollable factors such as weather conditions. Current requirements of IFRS 9 Financial Instruments may not adequately capture how these contracts affect a company’s performance. Therefore, the IASB has made targeted amendments to IFRS 9 and IFRS 7 Financial Instruments: Disclosures.
The amendments include the following:
  • Explanation of the meaning of ‘contracts referencing nature-dependent electricity’.
  • Clarification of the ‘own-use’ requirements in IFRS 9 with respect to contracts referencing nature-dependent electricity.
  • Amendments to the hedge accounting requirements:
The amendments permit an entity to designate as the hedged item a variable nominal volume of forecast electricity transactions that is aligned with the variable amount of nature-dependent electricity expected to be delivered by the generation facility as referenced in the hedging instrument. The amendments also include an illustrative example to demonstrate the application of the amended hedge accounting requirements to nature-dependent electricity contracts.
The amendments are effective for annual reporting periods beginning on or after 1 January 2026, with earlier application permitted.
The amendments may be accessed here.