Our semi-annual outlook helps preparers in the US keep track of changes in IFRS Accounting Standards and assess their relevance. New in this edition, IFRS 18 and IFRS 19 have been issued, changing the presentation and disclosure landscape in 2027.
As anticipated, the International Accounting Standard Board (IASB®) has issued two new standards – IFRS 18 Presentation and Disclosure in Financial Statements, and IFRS 19 Subsidiaries without Public Accountability: Disclosures – which will be effective in 2027. Narrow-scope amendments to IFRS 9 and IFRS 7 have also been issued, effective in 2026. In addition, IFRS Accounting Standards preparers need to be ready to implement amendments related to income taxes, debt with covenants, sale-and-leaseback transactions, and supplier finance arrangements, all of which are effective in 2024, as well as the amendment to IAS 21, effective in 2025.
Our semi-annual outlook is a quick aid to help preparers in the US keep track of coming changes to IFRS Accounting Standards and assess the relevance to their financial statements.
The following summaries highlight new authoritative guidance issued by the IASB, provide a high-level comparison to US GAAP, and identify resources for further reading. The content is organized by effective dates1 :
| Effective January 1, 2026 | Effective January 1, 2027 |
As a reminder, to be in compliance with IFRS Accounting Standards, companies also need to timely implement all IFRS Interpretations Committee Agenda Decisions. Read the KPMG IFRS Perspectives article for a summary of 2024 Agenda Decisions.
Lastly, in On the radar, we highlight the upcoming amendments to IAS 37 around commitments and how they should be applied to greenhouse gas emissions. See also the IFRS Foundation work plan for other IASB projects that are currently in progress.
| Amendments to existing standards | |
| New IFRS Accounting Standards requirements | Comparison to US GAAP |
Lease Liability in a Sale-and-Leaseback (Amendments to IFRS 16, Leases) requires a seller-lessee to account for variable lease payments that arise in a sale-and-leaseback transaction as follows.
Seller-lessees are required to reassess and potentially restate sale-and-leaseback transactions entered into since the implementation of IFRS 16 in 2019. | Unlike IFRS Accounting Standards, US GAAP does not include variable lease payments in the measurement of a lease liability arising from a sale-and-leaseback transaction. Accounting for sale-and-leaseback transactions under US GAAP overall differs significantly from IFRS Accounting Standards; therefore, dual reporters may need to separately track the accounting for these transactions. |
Classification of Liabilities as Current or Non-current and Non-current Liabilities with Covenants (Amendments to IAS 1, Presentation of Financial Statements), published in 2020 and 2022 respectively, clarify that the classification of liabilities as current or noncurrent is based solely on an entity’s right to defer settlement for at least 12 months after the reporting date. The right needs to exist at the reporting date and must have substance. Only covenants with which an entity must comply on or before the reporting date affect this right. Covenants to be complied with after the reporting date do not affect the classification of a liability as current or noncurrent at the reporting date. However, disclosure about covenants is now required to help users understand the risk that those liabilities could become repayable within 12 months after the reporting date. The amendments also clarify that the transfer of an entity’s own equity instruments is regarded as settlement of a liability, in certain circumstances. If a liability has any equity conversion options, they generally affect its classification as current or noncurrent (e.g. if the conversion option is bifurcated as an embedded derivative from the host debt), unless these conversion options are recognized as equity under IAS 32 Financial Instruments: Presentation. | The current and noncurrent classification of liabilities was not converged between IFRS Accounting Standards and US GAAP before the amendments to IAS 1. We expect differences will still exist because, unlike IAS 1, US GAAP factors in other elements in the classification assessment – e.g. the intent and ability of the debtor to refinance the obligation on a long-term basis, and certain subsequent events such as covenant breaches and related waivers. Further, under US GAAP, the classification as current or noncurrent is not based on whether the conversion option is separated as an embedded derivative from the host debt. Refer to KPMG Article, Current/noncurrent debt classification: IFRS® Standards vs US GAAP for further discussion on the differences that exist. |
Supplier Finance Arrangements (Amendments to IAS 7, Statement of Cash Flows and IFRS 7, Financial Instruments: Disclosures) requires an entity (the buyer) to disclose qualitative and quantitative information about its supplier finance arrangements2, such as terms and conditions – including, for example, extended payment terms and security or guarantees provided. Amongst other characteristics, IAS 7 explains that a supplier finance arrangement provides the entity with extended payment terms, or the entity’s suppliers with early payment terms, compared to the related invoice payment due date. | Like IFRS Accounting Standards, US GAAP requires an entity (the buyer) to disclose qualitative and quantitative information about its supplier finance programs. However, the characteristics required to qualify as a supplier finance program under US GAAP are different from those under IAS 7. For example, they do not include the entity obtaining extended payment terms under the arrangement. In addition, unlike IFRS Accounting Standards, US GAAP does not require disclosure of:
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KPMG resources:
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| Amendments to existing standards | |
| New IFRS Accounting Standards requirements | Comparison to US GAAP |
| Lack of Exchangeability (Amendment to IAS 21, The Effects of Changes in Foreign Exchange Rates) applies when one currency cannot be exchanged into another. This may occur, for example, because of government-imposed controls on capital imports and exports, or a limitation on the volume of foreign currency transactions that can be undertaken at an official exchange rate. The amendments clarify when a currency is considered exchangeable into another currency, and how an entity estimates a spot rate for currencies that lack exchangeability. The amendments introduce new disclosures to help financial statement users assess the impact of using an estimated exchange rate. | Where the lack of exchangeability is not temporary, Topic 830 (foreign currency matters) explicitly requires an entity to consider the propriety of consolidation, combination, or equity method of accounting for foreign operations with significant non-exchangeable currencies, unlike IFRS Accounting Standards. Also, there is no concept of estimating exchange rates under US GAAP, however, the lack of exchangeability must be disclosed. |
KPMG resources:
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| Amendments to existing standards | |
New IFRS Accounting Standards requirements | Comparison to US GAAP |
Amendments to the Classification and Measurement of Financial Instruments (Amendments to IFRS 9, Financial Instruments and IFRS 7, Financial Instruments: Disclosures) clarify financial assets and financial liabilities are recognized and derecognized at settlement date except for regular way purchases or sales of financial assets and financial liabilities meeting conditions for new exception. The new exception permits companies to elect to derecognize certain financial liabilities settled via electronic payment systems earlier than the settlement date. They also provide guidelines to assess contractual cash flow characteristics of financial assets, which apply to all contingent cash flows, including those arising from environmental, social, and governance (ESG)-linked features. Additionally, these amendments introduce new disclosure requirements and update others. | Under Topic 405, financial liabilities are considered extinguished once the debtor has settled the debt or is legally released from being the primary obligor. There are no specific considerations to assess the timing of debt extinguishment when payments are made via electronic payment systems. Further, US GAAP does not address the timing of the recognition of financial asset settlements. Further, the classification of financial assets under US GAAP is primarily based on management’s intent for holding the assets. Any contingent cash flows, including those arising from ESG-linked features are evaluated for potential bifurcation as embedded derivatives. |
KPMG resources:
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| IFRS 18, Presentation and Disclosure in Financial Statements | |
New IFRS Accounting Standards requirements | Comparison to US GAAP |
IFRS 18 replaces IAS 1, which sets out presentation and base disclosure requirements for financial statements. The changes, which mostly affect the income statement, include the requirement to classify income and expenses into three new categories – operating, investing and financing – and present subtotals for operating profit or loss and profit or loss before financing and income taxes. Further, operating expenses are presented directly on the face of the income statement – classified either by nature (e.g. employee compensation), by function (e.g. cost of sales) or using a mixed presentation. Expenses presented by function require more detailed disclosures about their nature. IFRS 18 also provides enhanced guidance for aggregation and disaggregation of information in the financial statements, introduces new disclosure requirements for management-defined performance measures (MPMs)* and eliminates classification options for interest and dividends in the statement of cash flows. *Non-GAAP measures that meet the definition of MPMs will be subject to the disclosure requirements. | US GAAP generally has no requirements to classify income and expenses by specific category, or present subtotals for profit or loss. SEC regulations prescribe expense classification requirements for certain specialized industries. Non-GAAP measures are generally prohibited from inclusion in the financial statements. Therefore, presentation and disclosure differences are expected to continue to arise in practice when IFRS 18 comes into effect. The FASB has issued a proposal that would require income statement expenses to be disaggregated into certain natural expense categories in the notes. As proposed, the new US GAAP disclosures would be similar in spirit to certain IFRS 18 disaggregation requirements, but may be more cumbersome and would apply only to public business entities. |
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| IFRS 19, Subsidiaries without Public Accountability: Disclosures | |
| New IFRS Accounting Standards requirements | Comparison to US GAAP |
IFRS 19 is a voluntary standard that applies to entities without public accountability, but whose parents prepare consolidated financial statements under IFRS Accounting Standards. For in-scope companies, IFRS 19 simplifies disclosures on various topics, including leases, exchange rates, income taxes, statement of cash flows, etc. If elected, IFRS 19 is expected to reduce the cost of preparing in-scope financial statements while maintaining the usefulness of those financial statements for stakeholders. | Under US GAAP, private companies can elect to apply Private Company Alternatives, aimed at reducing complexity and costs in financial reporting for in-scope companies. This includes the option to amortize goodwill over a set period, the ability to combine similar intangible assets, a simplified approach to evaluating variable interest entities, a simpler approach to lease accounting, and alternative methods for estimating fair value in certain cases. There is no specific alternative focused solely on reducing disclosures; however, certain US GAAP disclosure requirements only apply to public entities. The entities eligible to elect Private Company Alternatives under US GAAP compared to IFRS 19, as well as the results of applying each, may differ. |
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IAS 37 standard-setting developments
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 Decision3 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 Decision4 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, unless an expenditure has been incurred.
Meanwhile, the IASB is considering targeted improvements to IAS 375 itself, and has begun to develop proposals to clarify the requirements related to the recognition of liabilities, non-performance risk in discount rates, and costs to include in measuring a provision.
Given the widespread use of IAS 37, preparers and users of financial statements prepared under IFRS Accounting Standards should monitor upcoming developments in this area.
Insight
2024 IFRS® Interpretations Committee Agenda Decisions
A summary of 2024 IFRIC activity and comparison to US GAAP.
Insight
IFRS® Accounting Standards first-time adoption for US subsidiaries
When a subsidiary converts to IFRS Accounting Standards later than its parent, optional exemptions apply under IFRS 1.
Insight
IFRS Institute
Delivering KPMG guidance, publications and insights on the application of IFRS® Accounting Standards in the United States.
