IFRS Interpretations Committee Addresses Hyperinflation and Climate-Related Reporting in November 2024 Update

LONDON, December 5, 2024 ​- The International Financial Reporting Standards Interpretation Committee (IFRS) met ​on November 26, 2024 to discuss urgent accounting issues, ​including ​hyperinflationary economies and climate-related financial reporting. These discussions are essential for entities operating in unstable economic environments and those committed to ​making ​sustainability known in a transparent manner.

Evaluation of indicators of hyperinflationary economies

In light of the global economic landscape of the International Monetary Fund ​in October 2024, the Committee assessed which ​economies should be classified as ​hyperinflationary in IAS ​29 “Financial ​reporting in hyperinflationary economies”. ​The countries identified are Argentina, Ethiopia, Ghana, Haiti, Iran, Laos, Lebanon, Malawi, Sierra Leone, South Sudan, Suriname, Turkey, Venezuela, Yemen and Zimbabwe. Entities operating ​in these jurisdictions are required to ​apply IAS 29 in their financial statements for periods ending 31 December 2024 or after that date, ensuring that financial ​reporting reflects widespread inflationary pressures in these economies.

Climate ​commitments and constructive obligations

The Board ​noted whether the public commitments of entities to reduce or offset greenhouse gas emissions were constructive obligations under International Accounting Standards No. 37, “Possible Provisions, Capabilities ​and Assets”. The determination depends on whether these ​commitments create meaningful expectations among stakeholders, ​which binds the entity. The Committee stressed ​that ​the recognition ​of a provision required an existing obligation resulting from past events and that the costs associated ​with future operations did ​not meet this criterion. This clarification helps entities determine when to recognize environmental commitment provisions by promoting consistency ​in financial reporting.

Classification of margin ​cash ​flows

The discussions were extended to the classification of cash flows associated with market-based margin contracts in IAS ​7. The Board considered whether such cash flows should be classified as operational or funding activities. The aim is ​to improve the clarity and comparability of cash flow statements, which will allow stakeholders to better understand an entity ‘ s liquidity and financial flexibility.

Contribution to IASB ​projects

The Commission has contributed to several International Accounting Standards ​Board (IASB) projects, ​including:

• Amortized ​Cost Measurement: Defining project objectives and scope to ensure accurate measurement of ​financial instruments at ​amortized cost.
• Climate-Related and Other Uncertainties in Financial Statements: Reviewing exposure drafts to improve the reporting of uncertainties, particularly those related to climate change.
• Statement of ​Cash ​Flows and Related ​Matters: Conducting initial research to address application questions and enhance the usefulness ​of cash flow statements.

These contributions reflect the Committee’s and Council’s commitment to ​fine-tune financial reporting standards in response to changing economic and environmental challenges.

Administrative ​matters

The Committee reviewed the IFRIC update ​from September 2024, ensuring that previous decisions and interpretations were effectively communicated to stakeholders. In addition, discussions were held on program decisions and updates to IFRS 18 “Presentation ​and disclosure in ​financial statements” to meet current information requirements.

Through these discussions, the IFRS Interpretation Committee continues to play its role in interpreting and guiding the implementation of IFRS, thereby improving the quality ​and consistency of global financial reporting.