Learning Outcomes
After reading this article, you will understand the impact of new and amended IFRS standards and IFRS Interpretations Committee (IFRIC) agenda decisions on financial reporting. You will be able to explain how recent developments relate to digital assets, climate and global events, and describe the role of agenda decisions. You will also apply these updates to practical ACCA SBR exam situations.
ACCA Strategic Business Reporting (SBR) Syllabus
For ACCA Strategic Business Reporting (SBR), you are required to understand how the adoption of new and amended IFRS, as well as agenda decisions, affects financial statements and reporting. Focus your revision on:
- Evaluating and applying the impact of recently issued and amended IFRS on current practice
- Appraising accounting implications of IFRIC and Board agenda decisions
- Discussing the financial reporting effects of recent and anticipated developments (including digital assets and climate change)
- Applying existing standards to emerging issues such as natural disasters and global events
Test Your Knowledge
Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.
- Which IFRS or agenda decision is most likely to govern the accounting for an entity’s cryptocurrency holdings for trading purposes?
- What is the accounting treatment if an IFRIC agenda decision creates doubt over a company’s longstanding policy under a particular IFRS? Should changes be retrospective?
- Name two examples of how climate change issues can lead to adjustments under existing IFRS standards.
- True or false? An entity must apply new IFRS standards from the date they are issued, even if they are not yet effective.
Introduction
Financial reporting never stands still. Every year, the International Accounting Standards Board (IASB) issues new standards, amends existing ones, and the IFRIC issues agenda decisions that clarify how existing IFRS should be interpreted. SBR exam questions increasingly present scenarios where a company faces an accounting issue arising from these recent developments. You must know not only the requirements of existing standards but how they are changing, and precisely how to interpret and apply Board and Committee decisions to emerging scenarios.
Key Term: IFRS Agenda Decision
Guidance issued by IFRIC to clarify how specific requirements in IFRS should be applied to certain fact patterns. Agenda decisions are authoritative and should be implemented as soon as practicable.
NEW AND AMENDED IFRS STANDARDS
Stay up-to-date with annual IFRS changes, as exam questions may reference standards that have recently come into force or are about to do so. The following issues are particularly significant:
Digital Assets (e.g., Cryptocurrency)
Most cryptocurrencies do not qualify as cash or financial assets under IAS 32 or IFRS 9, because they lack contractual rights and are not universally accepted as legal tender. The typical classification is as an intangible asset under IAS 38, unless the entity holds them for sale in the ordinary course of business—in which case IAS 2 applies.
Key Term: Digital Asset
An asset existing only in an electronic, non-physical form, such as cryptocurrency, often lacking legal tender status or contractually enforceable rights.
Climate Change and Global Events
The effects of climate change, global pandemics, and related events can impact several standards:
- Impairment reviews (IAS 36) may be triggered by declining demand, asset obsolescence, or increased environmental liabilities.
- Going concern (IAS 1) disclosures may become more prominent if events cast doubt over future viability.
- Inventory valuation (IAS 2) and deferred tax assets (IAS 12) may be affected by shifts in market demand or regulation.
Key Term: Climate-related Risk
The potential financial impact on reporting entities due to physical events (e.g., storms, floods) or changes in law/policy as a response to climate issues.
IFRS INTERPRETATIONS COMMITTEE (IFRIC) AGENDA DECISIONS
What are agenda decisions?
IFRIC agenda decisions interpret existing IFRS where diversity in practice exists. Once published, companies are expected to comply as soon as possible—usually within the next financial statements unless impracticable.
Key Term: Retrospective Application
Adjusting prior period financial statements as if a new accounting policy or interpretation had always applied.Key Term: Impracticable
When an entity cannot apply a requirement after making every reasonable effort to do so, often due to missing historical data.
Practical consequences
A major agenda decision may overturn years of industry practice. Entities may need to revise how they apply certain standards, for example in accounting for supply chain finance or cloud computing arrangements, even if the standard text hasn't changed.
Worked Example 1.1
A company has classified cloud computing arrangement implementation costs as intangible assets. An IFRIC agenda decision concludes that most such costs should be expensed. What should the company do?
Answer:
The company must change its accounting policy to expense these costs, unless it becomes impracticable to do so for earlier periods. The change is accounted for retrospectively, restating comparatives unless impracticable.
Exam Warning
If an agenda decision is published before your reporting date, you must apply the clarified treatment—even if the related standard has not been amended. Do not wait for formal standard amendments to change your accounting policy.
APPLYING EXISTING STANDARDS TO RECENT AND EMERGING ISSUES
Digital Assets and Initial Coin Offerings
Entities investing in digital assets must use existing IFRS to determine accounting treatment. The primary issues are:
- Are digital assets intangible assets or inventories?
- When are they held for trading, and which measurement basis is relevant?
Most are recognised at cost under IAS 38, but if active trading or reliable fair value exists, the revaluation model may be available.
Climate and Global Events
Common areas impacted include:
- Impairment: Environmental events may indicate a triggering event under IAS 36.
- Provisions: Obligations arising due to new environmental laws (IAS 37).
- Measurement uncertainty: Asset valuations and estimates may need updating to reflect climate-related events or global disruptions.
Worked Example 1.2
Due to new climate regulations, a manufacturing company must incur significant costs to upgrade its facilities. How should this be accounted for?
Answer:
If the new law creates a present obligation at the reporting date (e.g., law enacted before year-end), a provision should be recognised for the best estimate of costs (IAS 37). If the obligation only arises after year-end, disclose as a non-adjusting event if material.
Revision Tip
Always check IASB and IFRIC updates before your exam. The SBR exam may ask for practical implications when an IFRS or agenda decision has changed common practice.
OTHER REPORTING DEVELOPMENTS
Effective Dates and Transition
New and amended standards have effective dates for first application. Early adoption may be permitted but is not required. On adoption, follow transitional provisions, which typically require retrospective restatement unless specified otherwise.
Sustainability Standards
The IFRS Governing Body is developing international sustainability disclosures alongside traditional financial reporting. Watch for future exam requirements covering climate-related data, Targets, and stakeholder impact.
Summary
Emerging issues in financial reporting are driven by new or amended IFRS, specific IFRIC agenda decisions, and rapid economic or environmental change. You must be able to apply the latest developments to practical reporting scenarios, justify accounting choices according to clarified requirements, and understand the appropriate disclosures for new and existing issues.
Key Point Checklist
This article has covered the following key knowledge points:
- Identify new and amended IFRS standards impacting current reporting
- Explain the role and authority of IFRIC agenda decisions
- Apply existing IFRS standards to emerging issues such as digital assets and climate risks
- Recognise when retrospective application is required and when it is impracticable
- Understand transitional provisions and disclosure expectations
Key Terms and Concepts
- IFRS Agenda Decision
- Digital Asset
- Climate-related Risk
- Retrospective Application
- Impracticable