Latest Amendments to IFRS: Key Updates to IAS 21, IFRS 9, and IFRS 7

The International Accounting Standards Board (IASB) has introduced significant amendments to the International Financial Reporting Standards (IFRS), impacting financial reporting practices worldwide. These changes aim to enhance clarity, consistency, and transparency in financial statements, particularly concerning foreign currency transactions and financial instruments. This article provides an overview of the key amendments to IAS 21, IFRS 9, and IFRS 7, including their implications for businesses and financial professionals.

Lack of Exchangeability: Amendments to IAS 21 (Effective from January 1, 2025)

In August 2023, the IASB amended IAS 21, The Effects of Changes in Foreign Exchange Rates, to clarify how entities should handle foreign currency transactions when there is a long-term lack of exchangeability between currencies. The amendments provide enhanced guidance for financial statement preparers and introduce additional disclosure requirements to improve transparency for users.

Key Changes:

• Definition of Exchangeability: A new definition establishes criteria for assessing whether a currency is exchangeable, supported by detailed guidance in a newly introduced Appendix A
• Estimating the Spot Exchange Rate: Provides methodologies for determining a spot exchange rate when exchangeability is lacking
• Enhanced Disclosures: Entities must disclose the nature and financial impact of the lack of exchangeability, including details on the estimated spot exchange rate and the methodology used

These amendments are crucial for entities dealing with foreign currency transactions where currency exchangeability is a persistent issue. Companies will need to adjust monetary item valuations and provide additional transparency on how they determine exchange rates in such cases.

Classification and Measurement of Financial Instruments: Amendments to IFRS 9 and IFRS 7 (Effective from January 1, 2026)

Following a post-implementation review (PIR) of IFRS 9, the IASB identified areas requiring improvement, leading to amendments in both IFRS 9 and IFRS 7. These amendments primarily focus on refining guidance for financial instruments, enhancing derecognition criteria, and introducing new disclosure requirements.

Key Changes to IFRS 9:

• Electronic Payment Settlements: Clarifies when a financial liability can be derecognized if settled through electronic payments. Under the new guidance, a liability is considered settled before the transaction’s formal settlement date if: The payment cannot be withdrawn, stopped, or cancelled The entity no longer has access to the cash Settlement risk is insignificant
• Classification of Financial Assets: Expands guidance on assessing whether contractual cash flows of a financial asset are consistent with a basic lending arrangement.
• Non-Recourse Features: Provides a clearer definition of non-recourse financial assets, where an entity’s right to receive cash flows is contractually limited to the cash flows generated by specific assets.
• Contractually Linked Instruments: Clarifies the assessment criteria for identifying contractually linked financial instruments, ensuring entities accurately classify transactions containing multiple debt instruments.

Key Changes to IFRS 7:

• Enhanced Disclosures for Equity Investments at Fair Value through other comprehensive income: Requires entities to separately disclose the fair value gain or loss presented in other comprehensive income during the period, showing separately the fair value gain or loss that relates to investments derecognised in the period and the fair value gain or loss that relates to investments held at the end of the period.
• Disclosures on Contractual Cash Flow Changes: Entities must now provide additional disclosures when financial instruments contain contractual terms that could alter cash flows based on contingent events unrelated to basic lending risk.

Commercial Significance of These Amendments

The amendments to IAS 21 are particularly relevant for businesses operating in markets with long-term foreign currency exchangeability issues. Affected entities must reassess their monetary item valuations and enhance disclosures on exchange rate estimation methodologies.

The updates to IFRS 9 primarily serve to clarify existing requirements rather than introduce new ones. However, they may lead to adjustments in financial reporting where current practices deviate from the clarified guidance. Entities using electronic payment systems to settle liabilities will benefit from the revised derecognition criteria, potentially improving cash flow management.

Meanwhile, the amendments to IFRS 7 introduce new disclosure requirements that enhance transparency in financial statements. Organizations must ensure they have robust data collection and reporting mechanisms to comply with these new standards.

Effective Date and Transition Considerations

• The amendments to IAS 21 take effect from January 1, 2025, with early adoption permitted
• The amendments to IFRS 9 and IFRS 7 are effective from January 1, 2026; entities can choose to apply all amendments at once or selectively adopt certain changes earlier
• While retrospective application is required, restating prior periods is not mandatory unless the entity can demonstrate that hindsight was not used

Conclusion

These amendments mark an essential step toward improving financial reporting consistency and transparency. Organizations impacted by these changes must proactively assess their financial reporting policies and prepare for the increased disclosure requirements. As financial reporting standards continue to evolve, staying informed and adapting to these regulatory updates is critical for maintaining compliance and ensuring high-quality financial reporting.

References

Grant Thornton. (2025). Navigating the changes to International Financial Reporting Standards. Grant Thornton.