The International Financial Reporting Standards (IFRS) continue to take feedback from the global business community and evolve to meet expanded requirements while providing greater transparency and comparability across organizations. This article covers the most significant changes impacting international businesses following IFRS for 2026.
New standard and amendment issued in 2026
IFRS 20, Regulatory Assets and Regulatory Liabilities – This pronouncement creates a comprehensive model to account for specified rate-regulated goods and services subject to regulatory agreements such as electricity, water, and gas provided by utility companies. The standard establishes the recognition, presentation, and disclosure requirements for regulatory assets, liabilities, income, and expenses and replaces IFRS 14. The standard is effective for annual reporting periods beginning January 1, 2029 with early adoption permitted.
Amendments to the Fair Value Option for Investments in Associates and Joint Ventures – This pronouncement amends International Accounting Standard (IAS) 28 to provide clarification over which entities can apply the fair value option when making investments. Eligible entities include mutual funds, venture capital organizations, unit trusts and similar entities whose primary business is investing. The standard is applicable when an entity adopts IFRS 18 and should be retrospectively applied. When considering adoption and potential change from the equity method to fair value option, entities should evaluate the investment structure and the future impact to income and expenses.
Standards effective in 2026
Amendments to the Classification and Measurement of Financial Instruments – This pronouncement amends IFRS 9 and IFRS 7 and clarifies the settlement date for derecognizing financial liabilities. It also provides guidance for the timing of settling financial liabilities which are paid using an electronic payment system. The amendment also clarifies how to account for contractual cash flows including those with environmental, social and governance (ESG)-linked components.
Contracts Referencing Nature-dependent Electricity – These amendments to IFRS 9 and IFRS 7 provide targeted improvements in accounting for contracts referencing nature-dependent electricity generated from renewable sources such as solar and wind. Given the variability of uncontrollable natural conditions, qualifying entities may designate forecast purchases (that are highly probable) and sales (based on the proportion generated) in hedging relationships despite uncertainty with the volume of electricity generated. The amendment also requires additional disclosure requirements relating to the nature of these contracts.
Recent standards that could have a significant impact in 2026
Classification of Liabilities as Current or Non-current – While first effective in 2024, this change could have a significant impact this year as many organizations face new economic challenges. Liabilities are now classified as non-current only when the entity has substantive rights to defer settlement for 12 months or longer at the end of the reporting period. Classification is based on conditions at the reporting date regardless of management’s intentions, which could include subsequently obtaining a waiver for failed covenants. Waivers obtained after the reporting date would not create a right to defer settlement at the reporting date. Entities who anticipate challenges with covenants near the end of their reporting period should discuss this situation with their banks in enough time to obtain a waiver before the end of the period.
On the Horizon
IFRS 18, Presentation and Disclosure in Financial Statements, will impact every IFRS reporting entity as it replaces IAS 1, Presentation of Financial Statements. Many of the current principles will remain along with the same accounting recognition of transactions but could change where and how these are reported. The standard provides more structure for the statement of profit and loss, specific disclosure requirements for management-defined performance measures, and additional guidance on aggregating similar items based on shared characteristics. IFRS 18 is effective for annual reporting periods beginning on or after January 1, 2027 and is applied retrospectively with early adoption permitted.
IFRS 19, Subsidiaries without Public Accountability: Disclosures, provides disclosure relief for subsidiary entities whose statements are not subject to public accountability, but have a parent organization that prepares consolidated financial statements for public use. The standard is effective for annual reporting periods beginning on or after January 1, 2027 with early adoption permitted.
How Can Schneider Downs Help?
Schneider Downs provides a full range of services to international organizations, including assurance, tax, and advisory services. For more information concerning global business matters and their impact to your organization, please visit the Schneider Downs Our Thoughts On blog or email us at [email protected].
