IFRS Alerts

Executive summary

The International Accounting Standards Board (IASB) has issued amendments to IFRS 19 ‘Subsidiaries without Public Accountability: Disclosures’ to reflect the amendments made to other IFRS Accounting Standards between the period February 2021 to May 2024.

Background

IFRS 19’s objective is to create a reduced set of disclosures that certain in-scope entities can elect to apply instead of the disclosure requirements set out in other IFRS Accounting Standards. IFRS 19 will work alongside other IFRS Accounting Standards, with eligible subsidiaries applying the measurement, recognition and presentation requirements set out in other IFRS and the revised disclosures outlined in IFRS 19. The current IFRS 19 was issued in May 2024 based on disclosure requirements for other IFRS Accounting Standards or amendments issued before February 2021.

Due to the nature of IFRS 19, it is amended whenever there are any new or amended disclosure requirements in other IFRS Accounting Standards. There have been amendments to the following Standards between February 2021 and May 2024:

• IFRS 18 ‘Presentation and Disclosure in Financial Statements’
• Supplier Finance Arrangements (Amendments to IAS 7 ‘Statement of Cash Flows’ and IFRS 7 ‘Financial Instruments: Disclosures’)
• International Tax Reform—Pillar Two Model Rules (Amendments to IAS 12 ‘Income Taxes’)
• Lack of Exchangeability (Amendments to IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’) and
• Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9 ‘Financial Instruments’ and IFRS 7)

The revision to IFRS 19 aims to reflect the amendments to the disclosure requirements discussed in the above IFRS Accounting Standards.

The amendments

Amendments to IFRS 19

With the below amendments, IFRS 19 reflects the changes to IFRS Accounting Standards that take effect up to 1 January 2027, when IFRS 19 will be applicable. Where applicable, the relevant basis for conclusions were also amended.

• IFRS 7 - Paragraph 56A is amended and paragraph 56C is deleted.
• IFRS 18 -
  • Paragraphs 137 and 163 are amended and paragraphs 142–159 and their headings are deleted.
  • Appendix A – Paragraph A3 is amended.
  • Appendix B – Paragraph B8 is amended.
• IAS 7 - Paragraph 167 is deleted and paragraph 168 is amended.
• IAS 12 - Paragraph 198 is deleted and paragraph 199 is amended.
• IAS 21 - Paragraph 222 is deleted and paragraphs 221 and 223 are amended.

Amendments to other IFRS Accounting Standards

Additionally, the following IFRS Accounting Standards were amended to reflect the changes brought on by IFRS 18. These changes do not affect IFRS 19 and accordingly, no additional changes were made.

• IFRS 5 '‘Non-current Assets Held for Sale and Discontinued Operations’ - Paragraphs 5B, 12, 26A and 38 are amended.
• IFRS 17 ‘Insurance Contracts’ - Paragraph C3(a) is amended and a footnote is added.

Future maintenance of IFRS 19

In the future, IFRS 19 will be amended at the same time as the IASB issues or revises other IFRS Accounting Standards. To ensure that IFRS 19 is always up to date, any proposed amendments to IFRS 19 will be included in an exposure draft for the corresponding new or amended IFRS Accounting Standards. As part of this process, the IASB has said it will continue to apply the initial principles of IFRS 19 to determine whether new or amended disclosure requirements being proposed as part of IFRS Accounting Standards provide useful information to users of the financial statements of eligible subsidiaries and, therefore, whether to include those disclosures in IFRS 19.

To assist users in staying apprised of updates, the IASB has created an IFRS 19 disclosure tracker. This tracker will be updated in the future, so it is important to check this tracker for any disclosure updates. Please note, this tracker requires an IFRS subscription.

Effective date

The amendments are effective from annual reporting periods beginning on or after 1 January 2027, allowing eligible reporting entities and their auditors time to assess whether electing to apply IFRS 19 would benefit them. Early adoption of the Standard is permitted.

Our thoughts

We support the release of the amendments to IFRS 19, which should reduce the cost of preparing financial statements for eligible subsidiaries while maintaining the usefulness of the presented information.  

While the effective date is a while away, we would encourage reporting entities to consider whether they are eligible and to assess whether applying IFRS 19 would reduce their reporting burden. For further information on this Standard, refer to our article ‘Get ready for IFRS 19’ which provides a more detailed look at the requirements of this Standard. 

Background

The IFRS Foundation has published 'Disclosures about Uncertainties in the Financial Statements Illustrated using Climate-related Examples,' addressing practical application of the disclosure requirements in IFRS Accounting Standards.
The illustrative examples were developed by International Accounting Standards Board (IASB) in collaboration with the International Sustainability Standards Board (ISSB) to address feedback from stakeholders about insufficient information around uncertainties – particularly climate-related uncertainties. The illustrative examples also address feedback regarding inconsistencies that may arise in the financial statements by complying with the disclosure requirements of the IFRS Accounting Standards and IFRS Sustainability Disclosure Standards.

Illustrative Examples on reporting uncertainties

The collection of examples published as ‘near final’ illustrates how entities can improve the reporting of uncertainties in their financial statements to avoid creating inconsistencies within the Annual Report. The illustrative examples are mainly focused on climate-related fact patterns. However, the principles and requirements illustrated can be applied equally to all types of uncertainties. A summary of the illustrative examples is set out below: 

Illustrative examples

A summary of each example as disclosed in the publication is indicated below

1. Materiality judgements applying paragraph 31 of IAS 1 'Presentation of Financial Statements' [paragraph 20 of IFRS 18 ‘Presentation and Disclosure in Financial Statements’]

• Illustration of how an entity makes materiality judgements in the context of financial statements
• The illustrative example contains two scenarios: one scenario in which these judgements lead to additional disclosures beyond those specifically required by IFRS Accounting Standards and a second scenario in which they do not.

2. Disclosure of assumptions: specific requirements applying IAS 36

Illustration of how an entity discloses information about the key assumptions it uses to determine the recoverable amounts of assets.

3. Disclosure of assumptions: general requirements applying IAS 1

Illustration of how an entity:

• might be required to disclose information about assumptions it makes about the future, even if the specific disclosure requirements in other IFRS Accounting Standards require no such disclosure
• identifies the assumptions about which it is required to disclose information, and
• determines what information about these assumptions it is required to disclose

4. Disclosure about credit risk applying IFRS7 ‘Financial Instruments; Disclosures’

Illustration of how an entity might disclose information about the effects of particular risks on its credit risk exposures and credit risk management practices and how these practices relate to the recognition and measurement of expected credit losses.

5. Disclosure of disaggregated information applying [IFRS 18]

Illustration of how an entity might disaggregate the information it provides in the notes about a class of property, plant and equipment (PP&E) on the basis of dissimilar risk characteristics if necessary to provide material information.

*IFRS Accounting Standards that are not yet effective as at the date of this publication are included in brackets.

Status of the near-final illustrative examples

The illustrative examples have not yet been approved by the IASB. The IASB expects to issue the final illustrative examples, together with the accompanying Basis for Conclusions, in October 2025. No material changes are expected before finalisation. Once finalised, the examples will be included as illustrative examples in the relevant IFRS Accounting Standard to which they relate. There will be no effective date of the illustrative examples as they do not amend the IFRS Accounting Standards as they are currently written. In other words, they will be effective immediately.

Our thoughts

We support the release of the near-final illustrative examples, which should improve the overall quality of financial reporting and ensure consistency with sustainability reporting.  We believe issuing a near-final version of the illustrative examples will provide reporting entities with more time to consider whether any changes to their reporting needs to be made, before the final versions are released. All the illustrative examples are uncontroversial in nature, and our view is they increase clarity to the impacted IFRS Accounting Standards. We encourage entities to consider the application of the illustrative examples to their financial statements.

The publication can be accessed here. 

Executive summary

The International Accounting Standards Board (IASB) has issued a revised ‘Practice Statement on management commentary’ (the Practice Statement). The objective of the revision is to provide a global benchmark for the preparation of management commentary accompanying financial statements including sustainability-related financial disclosures. The Practice Statement achieves this by adopting an objectives-based framework, focusing on what investors need to enable them to assess an entity’s ability to create value and generate cash flows over time. The Practice Statement is non-mandatory but designed to be used alongside IFRS Accounting Standards and IFRS Sustainability Disclosure Standards.

Background

The Practice Statement was originally issued in 2010 to provide a broad, non binding framework for the presentation of management commentary that relates to financial statements that have been prepared in accordance with International Financial Reporting Standards (IFRS).

The revised Practice Statement was designed to improve the quality and consistency of management commentary globally. This was achieved by addressing shortcomings in current practice, particularly around the clarity and connectivity of narrative reporting and thereby provides a global benchmark for regulators to update or develop national guidance. The Practice Statement also aligns with IFRS Sustainability Disclosure Standards, helping entities identify material sustainability-related information for inclusion in management commentary. 

Status of the Practice Statement

The Practice Statement is not an IFRS Accounting Standard or an IFRS Sustainability Disclosure Standard. Financial statements can comply with IFRS Accounting Standards even if they are not accompanied by management commentary or if they are accompanied by management commentary that does not comply with this Practice Statement.

Conversely, the management commentary can comply with the Practice Statement even if it accompanies financial statements prepared on a basis other than IFRS Accounting Standards or if it does not accompany or include sustainability-related financial disclosures prepared in accordance with IFRS Sustainability Disclosure Standards or on another basis.

Therefore, the management commentary might accompany financial statements as a distinguishable part of a larger report or as a stand-alone report.

Key elements of the framework

The Practice Statement introduces an objectives-based framework based on six key areas of content:

1. the entity’s business model focusing on how the entity creates value and generates cash flows
2. management’s strategy for sustaining and developing that business model, including the opportunities management has chosen to pursue
3. the resources and relationships on which the business model and strategy depend, including resources not recognised as assets in the entity’s financial statements
4. risks that could disrupt the business model, strategy, resources or relationships
5. factors and trends in the external environment that have affected or could affect the business model, strategy, resources, relationships or risks, and
6. the entity’s financial performance and financial position—including how they have been affected or could be affected in the future by the matters discussed for the other areas of content.

Each area of content has predetermined disclosure objectives which comprise a headline objective—describing the overall information needs of users for the area of content; and specific objectives—describing the detailed information needs of users for the area of content.

To identify the information needed to meet the disclosure objectives for an area of content, management:

• considers the descriptions of users’ assessments for the area of content
• identifies the information needed to meet the specific objectives for the area of content, and
• evaluates whether the information needed to meet the specific objectives is sufficient to meet the headline objective for the area of content. If the information is insufficient, management identifies additional information needed to meet the headline objective for the area of content.

Concept of materiality

To ensure that the management commentary is useful to the entity’s stakeholders, the Practice Statement requires that information is disclosed if it is material.

In the context of management commentary, information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general-purpose financial reports make on the basis of those reports, which include the management commentary and the related financial statements and which provide financial information about a specific reporting entity.

To help management to identify material information to meet the disclosure objectives, the Practice Statement focuses on key matters, that is, matters that are fundamental to the entity’s ability to create value and generate cash flows, including in the long term. The Practice Statement assumes that key matters likely relate to matters that management actively monitors, manages or reports to internal and external stakeholders. Identifying key matters is therefore entity-specific and considered an area where management will need to apply judgement.

Attributes of useful information

The management commentary should provide a single, concise and coherent narrative setting out management’s perspective of the factors—including sustainability-related factors—that have affected the entity’s financial performance or financial position or that could affect the entity’s ability to create value and generate cash flows in the future.

The Practice Statement asserts that the management commentary can achieve this if the information is

• complete, neutral, and free from error
• understandable
• comparable with information provided by the entity in previous periods, and with information provided by other entities, and
• provided in a way that enhances its verifiability.

The Practice Statement further asserts that the attributes all rely on information being presented as a well-integrated, coherent whole. Coherence does not require information provided outside management commentary to be duplicated in management commentary. Instead, for the management commentary to be considered coherent, the Practice Statement requires information in the management commentary to be provided in a way that clarifies relationships between either related areas of content or related pieces of information. 

Interaction with other reporting requirements or guidelines

Entities can apply this Practice Statement alongside local law or regulation. If local law or regulation specifies only general requirements, an entity can apply the Practice Statement requirements and guidance to help it comply with that law or regulation. Conversely, if local law or regulation is detailed and prescribes disclosure of specific information, an entity is permitted to include all of that information in its management commentary, even if some of the information is not required by the Practice Statement, as long it does not obscure material information.

Entities can also apply this Practice Statement together with narrative reporting requirements or guidelines published by another standard-setting body or other organisations, including requirements or guidelines for use by entities in specific industries or on specific topics, such as sustainability reporting. Such requirements or guidelines could help management identify information it might need to provide to meet the requirements of this Practice Statement. That is more likely to be the case if the requirements or guidelines have a reporting objective that focuses on the information needs of the primary users of general-purpose financial reports, such as IFRS Sustainability Disclosure Standards.

Effective date

This Practice Statement supersedes ‘Practice Statement 1 Management Commentary’ for annual reporting periods beginning on or after 23 June 2025. Earlier application is permitted. If an entity applies this Practice Statement for an earlier period, it must disclose that fact. 

Our thoughts

We support the release of this Practice Statement, which should improve the overall quality of financial and sustainability reporting and enable better comparison of financial statements by investors. We encourage entities to consider the application of the Practice Statement to their management commentary. For entities that apply the Practice Statement, care should be taken to ensure that any statutory financial statements that include management commentary still comply with the requirements of local law or regulation.

Executive summary

According to data in the World Economic Outlook (WEO) report issued by the International Monetary Fund (IMF) in April 2025, and based on economic conditions that currently exist, certain countries are considered to be hyperinflationary at 30 June 2025. Therefore, reporting entities in those countries will be required to apply IAS 29 'Financial Reporting in Hyperinflationary Economies'. Consequently, any entities with interim or annual financial reporting requirements at 30 June 2025 or thereafter should reflect IAS 29 in their IFRS financial statements.

There are two main changes to the countries considered to be hyperinflationary. Firstly, from 30 June 2025 onwards we believe Burundi is considered to be hyperinflationary. The WEO reported a 3-year cumulative rate of inflation of 108% as of December 2024 and predicts a 3-year cumulative inflation rate of 123% for 2025.

Secondly, the WEO report also identifies that Ethiopia and Yemen are no longer considered hyperinflationary as of June 2025 due to the predicted decline in inflation numbers from the succeeding three-year period from 31 December 2024.

This means that from 30 June 2025 onwards there are fifteen countries around the world where IAS 29 should be applied, when entities want to state they are in full compliance with IFRS Accounting Standards. These countries are Argentina, Burundi, Ghana, Haiti, Iran, Lao PDR, Lebanon, Malawi, Sierra Leone, South Sudan, Sudan, Suriname, Turkey, Venezuela and Zimbabwe (Zimbabwe dollar until April 2024). 

Countries that are currently being monitored include Angola, Egypt, Myanmar and Nigeria. For the time being, they are not considered hyperinflationary, but we will be keeping a close eye on further inflation data from these countries.

Countries that could potentially have hyperinflationary economies due to their past inflationary trends but lack reliable information include Syria and Zimbabwe (From April 2024). Entities in these countries should consider the information available at the reporting date to determine whether IAS 29 is applicable.

Recapping the requirements of IAS 29

IAS 29 lists factors that indicate when an economy is hyperinflationary. One of the indicators of hyperinflation is if cumulative inflation over a three-year period approaches or is in excess of 100 per cent. 

The mechanics of restatement

IAS 29 requires amounts in the statement of financial position that are not already expressed in terms of the measuring unit current at the end of the reporting period, are restated by applying a general price index. In summary:

• assets and liabilities linked by agreement to changes in prices, such as index linked bonds and loans, are adjusted in accordance with the agreement
• non-monetary items carried at current amounts at the end of the reporting period (such as net realisable value and fair value) are not restated
• all other non-monetary assets and liabilities are restated
• monetary items (ie money held and items to be received or paid in money) are not restated because they are already expressed in terms of the monetary unit currency at the end of the reporting period, and
• all items in the statement of comprehensive income should be expressed using the measuring unit current at the end of the reporting period, so all amounts need to be restated from the dates when the items of income and expenditure were originally recorded in the financial statements.

Other important factors that should be taken into consideration when applying IAS 29

IAS 29 sets out specific requirements on how to restate prior period comparatives. It requires corresponding figures for the previous reporting period to be restated by applying a general price index so that the comparative financial statements are presented in terms of the measuring unit current at the end of the reporting period.

IAS 29 may result in the creation of additional temporary differences under IAS 12 ‘Income Taxes’. This is because the restatement of items under IAS 29 will often lead to adjustments to the carrying amounts of items without corresponding changes to their tax bases — IAS 12 requires these adjustments to be recognised in profit or loss.

Impairment testing should also not be overlooked. IAS 29 requires any restated non-monetary items to be reduced when it exceeds its recoverable amount, even if those assets were not previously considered impaired under historical cost accounting. It will be important when preparing financial statements to consider whether the restatement of asset carrying values affects the results of impairment tests that were conducted in previous reporting periods, and whether there are any indicators of impairment for assets that were not tested for impairment in previous periods.

IFRIC decisions relating to hyperinflation

The IFRS Interpretations Committee (IFRIC) have previously considered a number of accounting issues in relation to dealing with hyperinflation. These include:

• translating a hyperinflationary foreign operation and presenting exchange differences
• accounting for cumulative exchange differences before a foreign operation becomes hyperinflationary
• presenting comparative amounts when a foreign operation first becomes hyperinflationary, and
• consolidation of a non-hyperinflationary subsidiary by a hyperinflationary parent.

We encourage careful consideration of these issues when preparing IFRS financial statements and applying IAS 29.

Our thoughts 

IAS 29 is not a Standard that can be quickly implemented, particularly in group situations. Careful consideration needs to be given to the IFRIC guidance dealing with situations where there is a hyperinflationary parent that has subsidiaries who also report in a hyperinflationary currency versus situations where a non-hyperinflationary parent has subsidiaries that report in a hyperinflationary currency. Also be mindful of how a hyperinflationary parent with subsidiaries that do not report in a hyperinflationary currency should be accounted for given the requirements set out in IAS 21, ‘The Effects of Changes in Foreign Exchange Rates’.

Any reporting entity considering IAS 29 for the first time will have to adapt their existing accounting systems to be able to process the hyperinflationary adjustments. It is important they understand the mechanics of adjusting for hyperinflation so they can restate in their financial statements both current and comparative periods.

Executive summary

The International Accounting Standards Board (IASB) has recently released the third edition of its IFRS for SMEs Accounting Standard (IFRS for SMEs or the Standard). This edition represents a major update to the Standard and follows a comprehensive review conducted by the IASB over the past few years. The updates to the Standard cover all sections of the current IFRS for SMEs. Some of the most significant updates are on the topics of revenue recognition, fair value measurement and business combinations.

Background

IFRS for SMEs is designed for small and medium sized entities (SMEs) without public accountability that are still required to prepare general purpose financial statements. Entities with public accountability are defined in the Standard as entities who have debt or equity instruments traded in a public market, or entities which hold assets in a fiduciary capacity for a broad group of outsiders (eg banks, insurance companies, securities brokers etc.). The Standard is explicitly not available to entities with public accountability, and if such an entity does apply the Standard, it cannot describe its financial statements as conforming to the IFRS for SMEs Accounting Standard, even if this is allowed by legislation in their local jurisdiction.

The key changes in the new Standard

The changes to the Standard cover a broad range of topics, and for the full list you can refer to the IFRS Foundation’s press release and the published Standard (IFRS - IASB issues a major update to the IFRS for SMEs Accounting Standard). Here we have summarised some of the key changes which may have the most significant impact.

Revenue recognition

Section 23 ‘Revenue from Contracts with Customers’ has been revised to align with the requirements of IFRS 15 ‘Revenue from Contracts with Customers’. This is a significant change from previous practice and will require the application of the five-step model (set out in IFRS 15 ‘Revenue from Contracts with Customers’) to identify revenue contracts, identify performance obligations or promises, determine the transaction price, allocate this price to each promise, and finally recognise revenue as promises are fulfilled.

These new requirements may require more work and new processes to be put in place by the reporting entity. As we saw with the adoption of this model in the full version of IFRS 15, this can be very challenging, so we would encourage preparers to start planning for this transition sooner rather than later.

Fair value measurement

Section 12 ‘Fair Value measurement’ has been added to IFRS for SMEs for the first time in this edition. Previously, information about fair value measurement and disclosure was spread throughout the other sections where it was relevant, but in the third edition this is now grouped into a new separate section.

The reformatting that has taken place should make finding and referring to the guidance much easier, and will also ensure consistent application of fair value principles throughout the financial statements.

Business combinations

Section 19 ‘Business Combinations and Goodwill’ has been updated in the third edition to align it more closely with the detailed requirements set out in IFRS 3 ‘Business Combinations’. This edition now replaces the purchase method of accounting, as it was referred to in the previous edition of IFRS for SMEs, with the acquisition method of accounting. Although the methods are similar in many respects, there are more areas of complexity that need to be addressed in the acquisition method.

Although IFRS 3 has been in effect for some time, it is often not properly understood, and as a result is not appropriately applied. For SMEs that regularly engage in business combinations or acquisitions this may cause significant difficulty when applying the updated Standard. We would recommend that preparers engage with this early. Although it applies to full IFRS requirements, our series ‘Insights into IFRS 3’ may help to provide more information and supporting material on the requirements and application of the acquisition method.

Effective date

The third edition of IFRS for SMEs is effective for reporting periods beginning on or after 1 January 2027. Early application is permitted, however this may be dependent on jurisdictional approvals.

The changes introduced in the third edition must be applied retrospectively as set out in Section 10 of the Standard.

Our thoughts

We support the release of this new edition of the Standard, which should improve the quality of financial information being reported by SMEs.

While the effective date is still some time away, we encourage entities that currently apply IFRS for SMEs to start considering the impact of the changes sooner rather than later. In particular, the changes to the revenue recognition model may be challenging to apply, as we saw with the adoption of IFRS 15. If you will be impacted by these amendments, or would like to discuss them further, please reach out to the IFRS contact at your local Grant Thornton firm.