IASB publish Exposure Draft for Renewable Electricity Contracts

Today, the IASB have published the Exposure Draft ED/2024/3 Renewable Electricity Contracts. The ED proposes amendments to IFRS 9 and IFRS 7, affecting the accounting for contracts for renewable electricity (issue also known as “power purchase agreements”).

This exposure draft aims at clarifying and amending selected requirements in IFRS 9, which appeared to be challenging in accounting for certain physical or virtual power purchase agreements. This is crucial for contracts with unique characteristics leading to purchasing the amount of electricity produced even if that amount does not fully match the buyer’s needs at the time of production, especially in case of long-term contracts.

In particular, the IASB’s proposals address

• how the own-use exemption in IFRS 9.2.4 would apply,
• how hedge accounting can be applied if those contracts are use as hedging instruments,
• additional disclosures, intended to better reflect the effects of those contracts on the entity’s financial performance and future cash-flows.

The Exposure Draft is open for comments until 7 August 2024.

For more details see today’s IASB News.