IASB proposes amendments for contracts for electricity from renewable energy sources

On 8 May 2024, the International Accounting Standards Board (IASB) published an Exposure Draft to amend IFRS 9 and IFRS 7: Contracts for Electricity from Renewable Energy Sources (ED/2024/3).

Contracts for renewable energy aim to secure the stability of and access to renewable energy sources. These generally comprise so-called Power Purchase Agreements (PPAs), which can be structured as contracts with physical delivery of electricity or as virtual PPAs. The markets for electricity from renewable energy sources have unique characteristics. These special market characteristics have led to problems in the application of the current accounting rules, particularly in the case of long-term contracts. The IASB is therefore proposing limited changes in the following areas:

• Application of the own use exemption to these contracts.
• Amend the hedge accounting requirements to allow contracts for electricity from renewable energy sources to be used as a hedging instrument if certain conditions are met.
• Introduce additional disclosure requirements to enable investors to understand the impact of these contracts on a company's financial performance and future cash flow.

The deadline for submitting comments is 7 August 2024.

You can download the draft here.