Background

BC2.17A In December 2024, the IASB issued Contracts Referencing Nature-dependent Electricity, which amended IFRS 9 and IFRS 7 Financial Instruments: Disclosures. The amendments arose from a request submitted to the IFRS Interpretations Committee (Committee) asking how an entity would apply paragraph 2.4 of IFRS 9 (informally referred to as the ‘own-use’ exception) to contracts to buy and take delivery of electricity generated from nature-dependent sources. Stakeholders told the Committee that applying the requirements in IFRS 9 to these contracts sometimes provided less useful information to users of financial statements (investors). Stakeholders also said a timely solution was necessary because of an expected increase in the use of such contracts due to the increase in the demand for renewable electricity. Because the matter is widespread and has, or is expected to have, a material effect on those affected, the Committee referred the matter to the IASB.

BC2.17B The IASB decided to amend IFRS 9 to enable entities to include information in its financial statements that more faithfully represent contracts referencing nature-dependent electricity. The IASB also decided to amend IFRS 7 to include complementary disclosure requirements. With these amendments, the IASB aimed to balance the need for a timely solution with the importance of minimising the risk of unintended consequences any amendments could have on how an entity applies IFRS 9 to other contracts. It was, therefore, important to the IASB that an entity would not be permitted to apply the amendments by analogy to other contracts, items or transactions.

Costs and benefits