IFRS update 2024 – Overview over the new and amended standards

published on 5 December 2024 | Reading time approx. 4 minutes

At the end of each calendar year – if there is no deviating financial year – the preparation and auditing of the financial statements of the past year is imminent. Especially IFRS adopters are accustomed to considering some changes to the accounting regulations each year. On the one hand, companies must thoroughly address the new regulations, which need to be considered for the first time for the financial year ending 2024, e.g., during the preparation of the notes. On the other hand, the changes coming into effect for the upcoming financial year must be considered for day-to-day accounting, and significant changes for future financial years should also be analyzed early.

To keep track of the numerous changes to the IFRS, we present below the changes that must first be applied mandatorily for the financial year 2024, as well as the already decided changes to be applied in future periods.

First-time application in the reporting period 2024

In the reporting period 2024 the following three changes must first be applied mandatorily:

Standard	Title
Amendments to IAS 1	Classification of Liabilities as Current or Non-Current (incl. deferral of effective date) as well as Non-current Liabilities with Covenants
Amendments to IFRS 16	Lease Liability in a Sale and Leaseback
Amendments to IAS 7 and IFRS 7	Supplier Finance Arrangements

The amendments to IAS 1 concern the classification of liabilities as current or non-current for the purpose of presentation on the balance sheet. In this regard, IAS 1.69 defines a set of criteria for classifying a liability as current, while all other liabilities are classified as non-current. Until the amendment, a liability had to be classified as current, among other reasons, if the reporting entity had no unconditional right to defer settlement for at least 12 months after the reporting period. Due to the amendment such an unconditional right is not necessary anymore for the classification as a non-current liability. Instead, it is sufficient if there is a substantial right. If the right to defer settlement for at least 12 months depends on certain covenants that need to be fulfilled after the reporting period, these covenants do not affect the presentation on the balance sheet. The assessment only considers covenants that need to be fulfilled by the end of the reporting period or beforehand. For liabilities classified as non-current that are subject to covenants needing to be fulfilled within 12 months after the reporting period, information must be presented in the notes that enables an assessment of the existing risks in this regard.

The amendments to IFRS 16 concern the accounting rules for sale and leaseback transactions. Here, it is clarified that the lessee must measure the lease liability following a sale in such a transaction in a manner that ensures that no gain or loss is recognized related to the right-of-use asset retained. This clarification addresses a lack of clarity that previously existed regarding the consideration of “real” variable lease payments, which, according to general rules of IFRS 16, are not to be included in the measurement of the lease liability. In case of a sale and leaseback transaction, however, this could lead to a gain or loss being recognized related to the right-of-use asset retained. Possible solutions to avoid this dilemma are presented in the illustrative examples.

In contrast to the two amendments mentioned above, the amendments to IAS 7 and IFRS 7 do not concern the balance sheet itself but result only in an extension of the information to be presented in the notes regarding so-called supplier finance arrangements (often designed in the form of so-called reverse factoring). In these arrangements, an external finance provider offers to pay the amounts that an entity owes its suppliers, with the finance provider being regularly remunerated at a later point in time. In effect, this prolongs the payment term for trade payables. Regarding the balance sheet, it must especially be clarified in such situations if the liability can continue to be presented as part of the trade payables. In this regard, the IFRS IC presented an agenda decision in December 2020 that has also been incorporated on a national level into IDW RS HFA 50. In response to the enhanced information to be presented in the notes, IDW RS HFA 50 has also been revised in this regard.

First-time application in upcoming reporting periods

The following new and amended standards have already been decided by the IASB and must be applied mandatorily in upcoming reporting periods:

Standard	Title	Mandatory application for financial years beginning on
Amendments to IAS 21	Lack of Exchangeability	2025/01/01
Amendments to IFRS 9 and IFRS 7	Classification and Measurement of Financial Instruments	2026/01/01*
Amendments to IAS 7, IFRS 1, IFRS 7, IFRS 9 and IFRS 10	Annual Improvements to the IFRS – Vol. 11	2026/01/01*
IFRS 18	Presentation and Disclosure in Financial Statements	2027/01/01*
IFRS 19	Subsidiaries without Public Accountability: Disclosures	2027/01/01*

* Adoption into EU law (EU endorsement) still pending

The amendments to IAS 21 must be considered from the upcoming financial year 2025 onwards. These amendments close a gap in the regulation regarding currency conversion in cases of a lack of exchangeability of currencies. They add regulations to determine if two currencies are exchangeable and regulations to determine the exchange rates in case of a lack of exchangeability. Thus, the amendments concern a specific special case of currency conversion and will probably have little or limited consequences for many companies.

The further changes are – assuming EU endorsement – only to be applied mandatorily from 2026 or even 2027 onwards. Here, the changes for 2026 are comparably minor. Beside editorial adjustments to some standards in the context of the so-called annual improvements to the IFRS, especially the standards IFRS 9 and IFRS 7 are amended in the context of the classification and measurement of financial instruments. However, the reform concerns especially improved descriptions and application guidelines including examples in this regard. The background is that, in the context of so-called loans with ESG-linked features – meaning loans that oblige companies to comply with certain ESG / sustainability targets or whose interest is linked to ESG / sustainability ratios – it has been discussed to what extent the SPPI criterion for classifying financial assets into the particular measurement categories is fulfilled. The IASB decided neither to fundamentally adjust the SPPI criterion nor to introduce an exemption to this criterion for loans with ESG-linked features. Instead, clarifications and application guidelines have been introduced as described.

For reporting periods beginning on or after January 01, 2027, however, larger reforms are on the agenda. With IFRS 18 and IFRS 19, two new standards must be applied mandatorily for the first time. Whereas IFRS 19, which introduces a facilitation of the preparation of the notes, is only applicable to a limited group of entities (for more on this, see here the prior issue of our newsletter), IFRS 18 concerns all IFRS financial statements and will probably entail a larger effort for analysis and implementation for companies. As described in the previous issue of our newsletter (see here), IFRS 18 particularly changes the structure of the income statement by subdividing it into the categories “operating”, “investing” and “financing” and introduces information to be presented in the notes concerning so-called management performance measures (MPMs). As a result, companies must intensively discuss the performance measurement (also for internal purposes) and its external communication in this context. A deeper analysis of the new requirements and their practical implications is provided in one of the next issues of our newsletter.

Moreover, as a result of the project “Power Purchase Agreements”, a further amendment to IFRS 7 and IFRS 9 will likely be published at the end of 2024, which addresses the accounting for contracts to deliver electricity from renewable energies. However, the amendment is only intended to include smaller, targeted changes. The EU endorsement and the mandatory first-time application are likely still some time away.

Conclusion

The IFRS are subject to high dynamics of change and, therefore, for 2024 and the following years also some changes need to be considered. Even if some of the changes only concern smaller targeted adjustments, especially with the mandatory first-time application of IFRS 18 from 2027 onwards, a change is in sight that, among others, concerns the fundamental presentation on the income statement and the performance measurement of companies. Since always, it is essential that IFRS adopters have an open eye to the upcoming changes and analyze any need for adjustments early, also due to further consequences beyond mere accounting.