Feedback Statement - Contracts Referencing Nature-dependent Electricity

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Endorsement Criteria Assessment (ECA) July 2025

The UK Endorsement Board (UKEB) is responsible for endorsement and adoption of IFRS for use in the UK and therefore is the UK's National Standard Setter for IFRS. The UKEB also leads the UK's engagement with the IFRS Foundation on the development of new standards, amendments and interpretations.

Purpose of this Feedback Statement

This Feedback Statement presents the views of UK stakeholders received during the UKEB's public consultation on the Draft Endorsement Criteria Assessment (DECA) of Amendments to IFRS 9 and IFRS 7 – Contracts Referencing Nature-dependent Electricity and where relevant explains how the UKEB has addressed those views in the final ECA.

Description of the Amendments

The Amendments	Key changes
IFRS 9 Financial Instruments – Scope	The Amendments apply only to contracts which reference nature-dependent electricity. Such contracts expose an entity to variability in the volume of electricity generated from natural sources which cannot be controlled.
IFRS 9 - Own-use	The Amendments clarify the requirements of the 'own-use' exception included in paragraph 2.4 of IFRS 9 for contracts to purchase nature-dependent electricity.
IFRS 9 - Hedge accounting	The Amendments permit the application of cash flow hedge accounting to hedging relationships in which the hedged item is a variable amount of forecast electricity transactions, and the hedging instrument is a contract referencing nature-dependent electricity.
IFRS 7 Financial Instruments: Disclosures	The Amendments require entities to disclose information about their contracts referencing nature-dependent electricity.

The Amendments have been issued by the IASB to enable entities to more faithfully represent contracts referencing nature-dependent electricity in their financial statements.

The Amendments are effective for annual reporting periods beginning on or after 1 January 2026. Earlier application is permitted. The date of initial application shall be the beginning of a reporting period, which could be a period other than an annual period.

The own-use Amendments to IFRS 9 must be applied retrospectively based on the facts and circumstances in existence at the date of initial application. Comparative information is not required and may only be presented where possible without the use of hindsight.

The hedge accounting Amendments to IFRS 9 must be applied prospectively.

An entity applies the Amendments to IFRS 7 at the same time as it applies the Amendments to IFRS 9.

UKEB consultation on the DECA

Prior to publishing the DECA, we gathered stakeholder feedback through discussions with subject matter experts and certain UKEB advisory and working groups. Their feedback was incorporated in the DECA.

Outreach activities following publication of the DECA included:

discussions with UKEB Advisory and Working Groups including the Preparer Advisory Group, the Accounting Firms and Institutes Advisory Group, the Investor Advisory Group, the Academic Advisory Group and the Financial Instruments Working Group¹;
a round table attended by three members of the Rate-regulated Activities Technical Advisory Group and one subject matter expert from an accounting firm; and
public consultation on the DECA.

The DECA was published for consultation for 91 days, between 10 March 2025 and 9 June 2025. During the consultation period, the UKEB promoted awareness of the DECA and encouraged stakeholders to respond through News Alerts, LinkedIn posts, and the UKEB website.

Five formal written responses from stakeholders were received.
These responses were published on the UKEB website.
All stakeholder comments and views were considered in reaching the UKEB's final assessment of the Amendments.

Stakeholder type	Number of formal responses
Accounting firms	4
Professional body	1
Total	5

Overall Assessment

Respondents to the DECA generally concurred with the UKEB's assessment based on the adoption criteria in paragraph 1 of Regulation 7 SI 2019/685 and are supportive of the adoption of the Amendments.

Detailed assessment - Comments from respondents

Technical Accounting Criteria Assessment

UKEB Tentative Assessment	Stakeholder Views²	UKEB Final Assessment
The DECA tentatively concluded 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 Regulation 7(1) of SI 2019/685.	All five formal responses supported the endorsement of the Amendments. Of these, three addressed the technical accounting criteria and all three agreed with the UKEB's tentative conclusion in the DECA. Respondents who provided formal or informal feedback on whether the Amendments were capable of being applied in practice, agreed that they were. One Advisory Group member highlighted the importance of paragraph 2.3B of the Amendments which states that an entity shall not apply the Amendments to IFRS 9 "by analogy to other contracts, items or transactions."	Amended the ECA to refer to paragraph 2.3B of the Amendments to support the technical criteria assessment.
The DECA tentatively concluded that the Amendments met 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 Regulation 7(1) of SI 2019/685.	One member of the Preparer Advisory Group was of the view that the disclosures required for contracts meeting the 'own-use' exception would be onerous and costly to provide. However, one member of the Investor Advisory Group was of the view that additional disclosures required under the own-use Amendments might provide more useful information than a fair valuation at a single point in time.	The DECA acknowledged at page 27 that stakeholder feedback on the cost of disclosures has been mixed but that, overall, the cost of disclosures is not expected to be significant or higher than the cost of obtaining a fair valuation for the relevant contracts. No changes proposed in the final ECA.

True and fair view assessment

UKEB Tentative Assessment	Stakeholder Views	UKEB Final Assessment
The DECA tentatively concluded that the Amendments are not contrary to the true and fair view principle set out in Regulation 7(1) of SI 2019/685.	All five formal responses supported the endorsement of the Amendments. Of these, three addressed the true and fair view assessment and agreed with the UKEB's tentative conclusion in the DECA.	No changes.

UK long term public good

UKEB Tentative Assessment	Stakeholder Views	UKEB Final Assessment
The DECA tentatively concluded that the use of the Amendments was likely to be conducive to the long term public good in the UK as required by Regulation 7(1) of SI 2019/685.	All five formal responses supported the endorsement of the Amendments. Of these, three responses addressed the UK long term public good assessment. All three agreed with the UKEB's tentative conclusion in the DECA.	Consistent with the tentative assessment in the DECA.

Significant change in accounting practice

UKEB Tentative Assessment	Stakeholder Views	UKEB Final Assessment
The DECA concluded that the Amendments are not likely to lead to a significant change in accounting practice and do not meet the criteria for a post-implementation review under Regulation 11 in SI 2019/685.	All five formal responses supported the endorsement of the Amendments. Of these, three addressed this matter and agreed with the UKEB's tentative conclusion in the DECA. One Advisory Group member fed back that the hedge accounting Amendments might constitute a change in accounting practice, as hedge accounting would potentially be available for certain contracts where this had not previously been the case. However, most respondents who provided formal or informal feedback on this point agreed that the Amendments were unlikely to lead to a significant change in accounting practice, referring to the narrow scope of the Amendments and the limited number of entities who had entered into contracts referencing nature-dependent electricity to date.	No changes.

Disclaimer

This Feedback Statement has been produced in order to set out the UKEB's response to stakeholder comments received on the UKEB's DECA on the IASB's Amendments to IFRS 9 and IFRS 7 – Contracts Referencing Nature-dependent Electricity and should not be relied upon for any other purpose.

The views expressed in this Feedback Statement are those of the UK Endorsement Board at the point of publication.

Any sentiment or opinion expressed within this Feedback Statement will not necessarily bind the conclusions, decisions, endorsement or adoption of any new or amended IFRS by the UKEB.

Contact Us

UK Endorsement Board 13th Floor | 1 Harbour Exchange | Harbour Exchange Square | London | E14 9GE www.endorsement-board.uk

Footnotes

The current number of members of each of these groups is as follows: the Accounting Firms and Institutes Advisory Group has eleven members, the Investor Advisory Group has eleven members, the Academic Advisory Group has nine members, and the Financial Instruments Working Group has ten members. Further information about Advisory and Working Groups can be accessed here. ↩
Formal feedback refers to written feedback which was provided in response to the DECA and published on the UKEB website. Unless explicitly stated in the table, feedback was provided informally. ↩

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