Response 3 - Grant Thornton UK LLP

Pauline Wallace Chair UK Endorsement Board Submitted via email: [email protected]

Grant Thornton UK LLP 30 Finsbury Square London EC2A 1AG T +44 (0)20 7383 5100

14 May 2025

Dear Pauline

Response to Invitation to Comment on the Draft Endorsement Criteria Assessment of Amendments to IFRS 9 and IFRS 7 - Contracts Referencing Nature-dependent Electricity

Grant Thornton UK LLP welcomes the opportunity to respond to the UK Endorsement Board's invitation to comment on the Draft Endorsement Criteria Assessment of Amendments to IFRS 9 and IFRS 7 - Contracts Referencing Nature-dependent Electricity.

We are a leading financial and business adviser with offices in 26 locations nationwide and more than 25,000 individual and 15,000 corporate and institutional clients. The Grant Thornton global organisation is one of the world's leading organisations of independent assurance, tax and advisory firms. Grant Thornton member firms operate in over 100 countries.

We advocate a single set of globally consistent financial reporting standards. Therefore, we are in full agreement with the endorsement of the amendments made to IFRS 9 and IFRS 7 dealing with Contracts Referencing Nature-dependent Electricity that were published by the IASB on 18 December 2024. Our detailed responses to the invitation to comment are attached.

Yours sincerely

Director, NAS - Financial Reporting

Chartered Accountants. Grant Thornton UK LLP is a limited liability partnership registered in England and Wales: No.OC307742. Registered office: 30 Finsbury Square, London EC2A 1AG. A list of members is available from our registered office. Grant Thornton UK LLP is authorised and regulated by the Financial Conduct Authority. Grant Thornton UK LLP is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. Services are delivered by the member firms. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another's acts or omissions. Please see grantthornton.co.uk for further details.

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Call for comments on Draft Endorsement Criteria Assessment of Amendments to IFRS 9 and IFRS 7 Contracts Referencing Nature-dependent Electricity

Deadline for completion of this Invitation to Comment:

Close of business, Monday 9 June 2025

Please submit to:

[email protected]

Introduction

The objective of this Invitation to Comment is to obtain input from stakeholders on the endorsement and adoption of Amendments to IFRS 9 and IFRS 7 – Contracts Referencing Nature-Dependent Electricity (the Amendments), published by the International Accounting Standards Board (IASB) in December 2024. The Amendments to IFRS 9 introduce new guidance into that standard for the application of own-use requirements to contracts referencing nature-dependent electricity, and new hedge accounting requirements for those contracts. The Amendments to IFRS 7 require entities to provide relevant disclosure about contracts within their scope. The Amendments will be effective for annual periods beginning on or after 1 January 2026. Earlier application is permitted. The information collected from this Invitation to Comment is intended to help with the endorsement assessment.

UK endorsement and adoption process

The requirements for UK adoption are set out in Statutory Instrument 2019/685¹.

Who should respond to this Invitation to Comment?

The powers to formally adopt international accounting standards for use in the UK were delegated to the UK Endorsement Board in May 2021².

Stakeholders with an interest in the quality of accounts prepared in accordance with IFRS Accounting Standards.

How to respond to this Invitation to Comment

Please download this document, answer any questions on which you would like to provide views, and return it to [email protected] by close of business on Monday 9 June 2025.

Brief responses to individual questions are welcome, as well as comprehensive responses to all questions.

Privacy and other policies

The data collected through submitting this document will be stored and processed by the UKEB. By submitting this document, you consent to the UKEB processing your data for the purposes of influencing the development of and adopting IFRS for use in the UK. For further information, please see our Privacy Statements and Notices and other Policies (e.g. Consultation Responses Policy and Data Protection Policy)³.

The UKEB's policy is to publish on its website all responses to formal consultations issued by the UKEB unless the respondent explicitly requests otherwise. A standard confidentiality statement in an e-mail message will not be regarded as a request for non-disclosure. If you do not wish your signature to be published, please provide the UKEB with an unsigned version of your submission. The UKEB prefers to publish responses that do not include a personal signature. Other than the name of the organisation/individual responding, information contained in the "Your Details" document will not be published. The UKEB does not edit personal information (such as telephone numbers, postal or e-mail addresses) from any other response document submitted; therefore, only information that you wish to be published should be submitted in such responses.

Assessment against endorsement criteria

Our draft assessment [tentatively] concludes that:

• the Amendments meet the criteria of relevance, reliability, understandability and comparability required of the financial information needed for making economic decisions and assessing the stewardship of management, as required by SI 2019/685 (see Regulation 7(1)(c));
• application of the Amendments is not contrary to the principle that an entity's accounts must give a true and fair view as required by SI 2019/685 (see Regulation 7(1)(a)); and
• that the Amendments are likely to be conducive to the long term public good in the UK as required by SI 2019/685 (see Regulation 7(1)(b)), having considered:
  • whether they will generally improve the quality of financial reporting;
  • the costs and benefits that are likely to result from their use; and
  • whether they are likely to have an adverse effect on the economy of the UK, including on economic growth.

Our assessment of the Amendments is set out in Section 2 of the Draft Endorsement Criteria Assessment (DECA).

Technical accounting criteria assessment

1Do you agree with the draft assessment of the Amendments against the technical accounting criteria? Please select one option. Please explain why or why not.

We agree

2Do you agree that the own-use Amendments, and in particular the 'net purchaser' condition, will be capable of being applied in practice? Please select one option. Please explain why or why not.

We agree. As stated in the technical assessment, areas will be subject to judgement (eg the net purchaser assessment), but this is inevitable given the nature of these contracts. Further, as technology evolves, for example as battery storage technology improves, the judgements over the own use criteria could change. The amendments in IFRS 9 B2.7 allow for this ongoing assessment as technology evolves.

3Do you agree that the hedge accounting Amendments will be capable of being applied in practice? Please select one option. Please explain why or why not.

We agree. Given the long-term nature of these contracts, the fair value measurement of both the derivative hedging instrument and the effectiveness will have inevitable valuation complexity. However, in our view, this complexity does not prevent the amendments from being capable of being applied in practice.

True and fair view

4Do you agree with the draft assessment that the Amendments are not contrary to the true and fair view requirement? Please select one option. Please explain why or why not.

We agree

UK long term public good

5Do you agree with the initial overall assessment of costs and benefits likely to arise from the Amendments? Please select one option.

5 (a)Do you agree with the draft assessment that the Amendments may remove a barrier to the use of contracts referencing nature-dependent electricity? Please select one option.

5 (b)Please include any comments you may have in response to questions 5 or 5(a) including, if applicable, any indicative cost estimates or if any costs or benefits have been omitted from the analysis:

We agree

6Do you agree with the draft assessment that the Amendments are likely to be conducive to the long term public good in the UK? Please select one option.

7Please include any comments you may have in response to question 6 including, if applicable, any long-term economic consequences of the Amendments which have been omitted from the analysis:

We agree. As noted in the DECA, these amendments remove barriers to entities from entering into nature dependent electricity referencing contracts which are relevant to sustainability plans. While we have only observed a limited number of such contracts to date within our UK client base, we are aware of various entities considering such contracts.

8Do you agree with the tentative assessment at paragraphs 2.3 to 2.5 of the DECA that the Amendments are not likely to lead to a significant change in accounting practice? Please select one option. Please explain why or why not.

We agree. Given the amendments are narrow in scope, and in our experience, only a limited number of entities have entered into these contracts to date, we agree that the amendments are not likely to lead to a significant change in practice.

9Do you have any other comments you would like to add?

No further comments

Thank you for completing this Invitation to Comment

Please submit this document by close of business on Monday 9 June 2025 to: [email protected]

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