A new IFRS accounting standard issued by the IASB aims to simplify financial reporting for eligible subsidiary companies. The new standard, IFRS 19, Subsidiaries Without Public Accountability: Disclosures, permits eligible subsidiaries to use IFRS accounting standards with reduced disclosures.
Subsidiaries using the IFRS for SMEs accounting standard or national accounting standards for their own financial statements often keep two sets of accounting records because the requirements in these standards differ from those in IFRS accounting standards, according to a news release.
IFRS 19, the release said, will resolve these challenges by:
- Enabling subsidiaries to keep only one set of accounting records ― to meet the needs of both their parent company and the users of their financial statements; and
- Reducing disclosure requirements ― IFRS 19 permits reduced disclosures better suited to the needs of the users of their financial statements.
Subsidiaries are eligible to apply the standard if they do not have public accountability and their parent company applies IFRS accounting standards in its consolidated financial statements, the release said.
IFRS 19 is available to download for those with an IFRS Digital Subscription.
IASB addresses ‘accounting challenges’ arising from energy contracts
Challenging market characteristics are creating problems for companies with long-term renewable electricity contracts, another IASB news release said. In response, the board proposed targeted changes to “more faithfully” reflect the effect these contracts have on companies.
The exposure draft released from the IASB proposes narrow-scope amendments to IFRS 9, Financial Instruments, and IFRS 7, Financial Instruments: Disclosures, to respond to the “rapidly growing global market” for these contracts, the release said.
“The contracts often require buyers to take and pay for whatever amount of electricity is produced, even if that amount does not match the buyer’s needs at the time of production,” the release said. “These distinct market characteristics have created accounting challenges in applying the current accounting requirements, especially for long-term contracts.”
According to the release, the board proposes to:
- Address how “own-use” requirements would apply;
- Permit hedge accounting if these contracts are used as hedging instruments; and
- Add disclosure requirements to enable investors to understand the effects of these contracts on a company’s financial performance and future cash flows.
To respond to these challenges urgently, the IASB has shortened the comment period to 90 days from the standard 120 days. The deadline to offer feedback on the amendments is 7 August.
The IASB plans to finalise changes by the end of 2024, the release said, and proposes making the new requirements available for companies to apply as soon as possible after they are finalised.
— To comment on this article or to suggest an idea for another article, contact Steph Brown at Stephanie.Brown@aicpa-cima.com.