Q4 2024 new IFRS® Accounting Standards and amendments: Are you ready?

Updates to IAS 28 and the equity method of accounting

The IASB recently issued an Exposure Draft that proposes amendments to the equity method in IAS 28 for investments in associates and joint ventures³. The IASB anticipates that the proposed changes will reduce diversity in practice. Such diversity occurs today due to IAS 28’s lack of clear requirements or inconsistencies with other IFRS Accounting Standards.

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For example, the proposals aim to bring consistency in the measurement of the cost of an associate or joint venture by addressing the purchase of the initial ownership interest and any additional interests, as well as partial disposals. The proposals would also require additional disclosures, including a reconciliation between the opening and closing carrying amount of investments in associates and joint ventures.

Updates to the guidance on provisions in IAS 37

Effective since 1999, IAS 37, the one-stop standard for accounting for provisions under IFRS Accounting Standards is being put to the test with a recent uptick in climate-related accounting matters. Some of them – such as those relating to emission schemes and climate-related commitments – are being addressed by the IFRS Interpretations Committee. In 2022, an Agenda Decision⁴ explored whether measures to encourage reductions in vehicle carbon emissions give rise to an obligation requiring a liability under IAS 37. In 2024, another Agenda Decision⁵ sets out a two-step approach to first assess if the commitments a company makes to reduce or offset its future greenhouse gas emissions create a constructive obligation, and second if that constructive obligation results in a liability under IAS 37. It highlights that setting or announcing a commitment, on its own, does not trigger recognition of a liability, even if a public announcement has created a valid expectation and resulted in a constructive obligation.

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Meanwhile, the IASB has released proposed amendments to IAS 37⁶, which would provide new guidance on determining when to recognize a provision and clarify which costs to include and which discount rate to use in measuring a provision. Under the proposals, some provisions could be recognized earlier, progressively⁷, and in some cases at a larger amount. See KPMG article, Changes to provisions on the horizon, to understand the potential changes and their impact on your company’s provisions.

 Due to the broad reach of IAS 37, preparers and users of financial statements under IFRS Accounting Standards should consider the proposal and provide their feedback to the IASB by March 12, 2025.