9 Interpretations Committee Update

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22 January 2026
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29 January 2026 Agenda Paper 9

Executive Summary

Project Type: Influencing

Project Scope: Various

Purpose of the paper This paper provides updates to the Board about the work and decisions of the IFRS Interpretations Committee.

Summary of the Issue As agreed with the Board, the Secretariat monitors requests submitted to the IFRS Interpretations Committee.

This paper presents an overview of the topics on the Interpretations Committee's agenda, categorised as follows:

  • I. New pipeline items.
  • II. Tentative Agenda Decisions (TAD) – open for comment.
  • III. Amended and re-exposed Tentative Agenda Decisions – open for comment.
  • IV. Tentative Agenda Decisions (TAD) – comment period closed (25 November 2025).
  • V. Finalised agenda decisions for IASB consideration.

Appendix A presents further details on each of the topics above.

Appendix B provides additional information in relation to one specific topic, Item II.2 (included in Appendix A) which was requested by the Board at its November 2025 meeting.

Questions for the Board

1. Do Board Members agree that the UKEB will not undertake substantive work at this time on the following new pipeline issues:

  1. Assessment of control over a single-investor fund (IFRS 10)? [Appendix A - Item I.1]
  2. Reassessment of relevant activities (IFRS 10)? [Appendix A – Item I.2]

2. In light of the Interpretations Committee's published tentative agenda decisions and on the basis of the feedback received from UKEB's outreach activities, do Board Members agree that the UKEB will not respond to the Committee's invitation to comment on:

  1. Classification of Gains and Losses on a Derivative Managing a Foreign Currency Exposure (IFRS 18)? [Appendix A – Item II.2]
  2. Scope of the requirement to disclose expenses by nature (IFRS 18)? [Appendix A - Item II.4]

3. In light of the Interpretations Committee's published tentative agenda decisions do Board Members agree that the UKEB will not respond to the Committee's invitation to comment on [Appendix A – Item III.1]:

  1. Presentation of payments on non-income taxes (IAS 1 and IAS 12)?
  2. Classification of tonnage taxes (IAS 12)?

Recommendation

The Secretariat recommends that the UKEB does not respond to the Committee's invitation to comment on the above TADs, and instead, the UKEB continues to monitor these issues.

Appendices

Appendix A Interpretations Committee Agenda Items Appendix B Additional information: Classification of Gains and Losses on a Derivative Managing a Foreign Currency Exposure (IFRS 18)

Background

1. The UKEB's Due Process Handbook notes that the UKEB expects to respond to a limited number of tentative agenda decisions published by the IFRS Interpretations Committee (Interpretations Committee or IFRIC). Some factors to consider when deciding whether to respond may be:

  1. the degree of impact of the tentative agenda decision on UK companies (for example, in cases where the tentative agenda decision is expected to affect a significant number of UK companies);
  2. disagreement with the Interpretations Committee's analysis; or
  3. usefulness of the explanations and clarifications included in the tentative agenda decision.

2. The Interpretations Committee met on 25 to 26 November 2025.

3. The next Interpretations Committee meeting is on 17 to 18 March 2026.

Overview

4. Below is an overview of the items that are part of the Interpretations Committee's (IFRIC) agenda. Further details of each item in the table are presented in Appendix A.

Project/Topic IFRIC status Last IFRIC/IASB meeting discussed UKEB status
Section I. New pipeline items
I.1 Assessment of control over a single-investor fund (IFRS 10) Pipeline item - Initial consideration Jan. 2026
I.2 Reassessment of relevant activities (IFRS 10) Pipeline item - Initial consideration Jan. 2026
Section II. Tentative Agenda Decisions (TAD) – open for comment
II.1 Assessment of a specified main business activity for the purposes of the separate financial statements of a parent (IFRS 18) TAD (deadline 6 Feb 2026) Nov. 2025 (IFRIC) Monitoring only [Agreed not to respond Nov. 2025]
II.2 Classification of Gains and Losses on a Derivative Managing a Foreign Currency Exposure (IFRS 18) TAD (deadline 6 Feb 2026) Nov. 2025 (IFRIC) Outreach conducted and UKEB continues to monitor (see pages 6-7 and Appendix B)
II.3 Fair presentation and compliance with IFRS Accounting Standards (IAS 1) TAD (deadline 6 Feb 2026) Nov. 2025 (IFRIC) Monitoring only [Agreed not to respond Nov. 2025]
II.4 Scope of the requirement to disclose expenses by nature (IFRS 18) TAD (deadline 6 Feb 2026) Nov. 2025 (IFRIC) Outreach conducted and UKEB continues to monitor
II.5 Presentation of taxes or other charges that are not income taxes within the scope of IAS 12 Income Taxes (IFRS 18) TAD (deadline 6 Feb 2026) Oct. 2025 (IASB) Nov. 2025 (IFRIC) Monitoring only
Section III. Amended and re-exposed Tentative Agenda Decisions – open for comment
III.1 Updates to Committee's agenda decisions for IFRS 18 [November 2025] Updates to TAD (deadline 6 Feb 2026) Nov. 2025 (IFRIC) Monitoring only
* Presentation of payments on non-income taxes (IAS 1 and IAS 12)
* Classification of tonnage taxes (IAS 12)
Section IV. Tentative Agenda Decisions (TAD) – comment period closed (25 November 2025)
IV.1 Classification of a Foreign Exchange Difference from an Intragroup Monetary Liability (or Asset) (IFRS 18) Deadline closed (25 Nov 25) Sep. 2025 (IFRIC) UKEB Comment Letter submitted (25 Nov 2025)
IV.2 Economic Benefits from Use of a Battery under an Offtake Arrangement (IFRS 16) Deadline closed (25 Nov 25) Sep. 2025 (IFRIC) Monitoring only
Section V. Finalised agenda decisions for IASB consideration
V.1 Updates to Committee's agenda decisions for IFRS 18: Agenda Decision for IASB's consideration IFRIC's discussion of feedback received (Nov. 2025) UKEB Comment Letter submitted (6 Oct 2025)
* Comment letters—changes to nine agenda decisions
* Comment letters—reverse factoring agenda decision
V.2 Determining and Accounting for Transaction Costs (IFRS 9) Agenda Decision for IASB's consideration IFRIC'S discussion of feedback received (Nov. 2025) Monitoring only
V.3 Embedded prepayment option (IFRS 9) Agenda Decision for IASB's consideration IFRIC'S discussion of feedback received (Nov. 2025) Monitoring only

Questions for the Board

1. Do Board Members agree that the UKEB will not undertake substantive work at this time on the following new pipeline issues:

  1. Assessment of control over a single-investor fund (IFRS 10)? [Item I.1]; and
  2. Reassessment of relevant activities (IFRS 10)? [Item I.2].

Update on additional outreach on Tentative Agenda Decisions open for comment

5. At its November 2025 meeting, the Board asked the Secretariat to undertake additional outreach on the certain Tentative Agenda Decisions (TADs). The Board's aim was to obtain evidence to help it consider whether it should develop a formal UKEB response in time for the IFRIC comment deadline. The relevant TADs were:

  1. Item II.2 Classification of Gains and Losses on a Derivative Managing a Foreign Currency Exposure (IFRS 18).
  2. Item II.4 Scope of the Requirement to Disclose Expenses by Nature (IFRS 18).

6. The Secretariat engaged with members of the UKEB's Financial Instruments Working Group (FIWG) and the Accounting Firms and Institutes Advisory Group (AFIAG).

7. Overall, preliminary feedback received indicated that UK stakeholders generally agreed with the Committee's interpretation of the requirements in IFRS 18 and with the explanatory material provided on both above items.

8. In relation to item 5(a), a couple of members from accounting firms noted that the requirements in IFRS 18 are clear and agreed with the Committee's interpretation of the requirements in IFRS 181. They also acknowledged that different conclusions regarding the entity's risk-management approach would lead to different outcomes under the Standard. This is consistent with the results of the Secretariat's desktop research. Further information can be found in Appendix A II.2 and Appendix B.

9. In relation to item in 5(b) above, a member of one of our advisory groups agreed with the Committee's interpretation of the requirements in IFRS 18. However, that member expressed concern about the cost and complexity of disclosing the information by nature required by paragraph 83 of IFRS 18. They considered that changes to preparers' systems may be needed to accommodate this requirement. The Secretariat had previously highlighted to the IASB that clarification was needed regarding the application of the requirements in paragraph 83 to the line items listed in paragraph 75 of IFRS 18. Now that this TAD has clarified that these requirements are applicable, we consider it both appropriate and helpful. Furthermore, as stakeholders have not expressed disagreement with the Committee's conclusions, the Secretariat supports the TAD.

10. Based on the Secretariat's desktop research and having considered the above, on balance, the Secretariat recommends that the UKEB does not respond to the Committee's invitation to comment on the above TADs. Instead, the recommendation is that the UKEB continues to monitor these issues.

Questions for the Board

2. In light of the Interpretations Committee's published tentative agenda decisions and on the basis of the feedback received from UKEB's outreach activities, do Board Members agree that the UKEB will not respond to the Committee's invitation to comment on:

  1. Classification of Gains and Losses on a Derivative Managing a Foreign Currency Exposure (IFRS 18)? [Item II.2]
  2. Scope of the requirement to disclose expenses by nature (IFRS 18)? [Item II.4]

Amended and re-exposed Tentative Agenda Decisions

11. In November 2025, as a result of the Committee's deliberation of the TAD 'Presentation of Taxes or Other Charges that are Not Income Taxes within the Scope of IAS 12 (IFRS 18) [refer to Item II.5 in Appendix A] the Committee decided to further amend and re-expose for public consultation two of the 10 agenda decisions originally included in the TAD ‘Updates to Committee's agenda decisions for IFRS 18[refer to Item V.1 in Appendix A] These TADs are:

  1. Presentation of payments on non-income taxes (IAS 1 Presentation of Financial Statements and IAS 12 Income Taxes).
  2. Classification of tonnage taxes (IAS 12).

12. The Secretariat observes that the amendments to these agenda decisions are not considered substantive. These amendments simply provide additional alignment with the requirements in IFRS 18 and add clarity to the wording of the decision without altering its underlying conclusions. In addition, the TADs are consistent with the UKEB's views expressed in its Final Comment letter to the Committee, submitted on 6 October 2025. Therefore, the Secretariat does not propose responding to the Committee's invitation to comment on these amended tentative agenda decisions.

13. More detailed information on those two TADs is presented in Appendix A (refer to Item III.1).

Questions for the Board (Section III)

3. In light of the Interpretations Committee's published tentative agenda decisions do Board Members agree that the UKEB will not respond to the Committee's invitation to comment on [Item III.1]:

  1. Presentation of payments on non-income taxes (IAS 1 and IAS 12)?
  2. Classification of tonnage taxes (IAS 12)?

Appendix A: Interpretations Committee Agenda Items

A1. This Appendix provides further details of each topic that is part of the Interpretations Committee's (Committee) agenda. New/highlighted material introduced in this update (as compared to the latest Interpretations Committee Update presented to the Board) is shaded. For full details please refer to the IFRS website.

A2. The Board has previously considered the topics included in Sections II–V of this update. This Appendix highlights the following sections for Board's consideration:

  1. Section I. New pipeline items.
  2. Section II (Items II.2 and II.4). The additional outreach undertaken by Secretariat, as agreed by the Board at its November 2025 meeting, on TADs currently open for comment, along with the results of this outreach. Appendix B provides additional information, as requested by the Board at its November 2025 meeting, in relation to Item II.2.
  3. Section III (Item III.1). The amended and re-exposed tentative agenda decisions that formed part of the updates to the Committee's agenda decisions for IFRS 18 that the Board had considered at previous meetings.

A3. For Board's information, Section IV (Item IV.1) presents a summary of the comment letters submitted to the Committee to assess how their positions align with or differ from the UKEB's response in respect to this item.

Section I: New pipeline items

I.1. Assessment of control over a single-investor fund (IFRS 10)

Standard IFRS 10 Consolidated Financial Statements
Question The submission asks how an entity – that is a sole investor in a fund – assesses whether it has control over the fund. The fund described in the submission:
  1. is managed by a fund manager (i.e. the general partner or GP) - The GP has extensive decision-making authority to direct the relevant activities of the fund. The GP receives a market-based fee for its services, and the fee is commensurate with the services provided. The GP also has a 0.01% investment in the fund.
  2. has only one other investor, namely the entity (99.99% investment) - It has no ability to remove or replace the fund manager except for cause (e.g. breach of contract, wilful misconduct or gross negligence).
  3. has a contractual fixed term - The entity cannot withdraw its investment during the contractual life, but it can sell its investment to another party.
The submission asks whether in applying IFRS 10 the fund manager is automatically deemed to act as an agent for the entity and, consequently, the entity is assessed as controlling the fund.
Comment This pipeline item was recently submitted to the Committee and is currently at a preliminary research stage. The UKEB Secretariat is conducting limited desktop research on the topic. Accordingly, it is recommended that the UKEB continues to monitor this issue but does not undertake further work at this time.

I.2 Reassessment of relevant activities (IFRS 10)

Standard IFRS 10 Consolidated Financial Statements
Question The submission asks whether an entity that was involved in setting the design and purpose of an investee should reassess whether it retains control over that investee when the governing document of the investee is amended. A fact pattern is presented in the submission to illustrate the question. The submission asks whether the amendments to the deed of trust require the entity to reassess whether it continues to control the trust.
Comment This pipeline item was recently submitted to the Committee and is currently at a preliminary research stage. The UKEB Secretariat is conducting limited desktop research on the topic. Accordingly, at the January 2026 meeting it is recommended that the UKEB continues to monitor this issue but does not undertake further work at this time.

Section II: Tentative Agenda Decisions: open for comment

II.1 Assessment of a Specified Main Business Activity for the purposes of the Separate Financial Statements of a Parent (IFRS 18)

Standard IFRS 18 Presentation and Disclosure in Financial Statements
Deadline 6 February 2026
Question The submission includes a fact pattern that refers to an ultimate parent of a large group of entities whose activities are limited to holding investments in subsidiaries, making decisions on the management, acquisition and disposal of those subsidiaries and distributing returns on those investments to shareholders. In its separate financial statements, the parent accounts for its investments in subsidiaries (hereafter referred to as investments in unconsolidated subsidiaries) at cost in accordance paragraph 10(a) of IAS 27 Separate Financial Statements. The request asks whether the parent, for the purposes of its separate financial statements, has a specified main business activity of investing in unconsolidated subsidiaries. The outcome of that assessment affects how the parent classifies income and expenses from investments in unconsolidated subsidiaries in its income statement.
Committee's tentative conclusion The TAD notes that determining whether a parent's main business activity is investing in unconsolidated subsidiaries requires judgment based on its specific circumstances. In the fact pattern described, the parent has no substantive activity other than holding and managing investments in subsidiaries and distributing returns. Therefore, the Committee observed that investing in unconsolidated subsidiaries is the parent's main business activity for its separate financial statements. As a result, the parent accounts for these investments at cost and classifies related income and expenses in the operating category of its income statement. The Committee also noted that the absence of segmental analysis or examples in IFRS 18 do not change this conclusion, and the assessment may differ between separate and consolidated financial statements. The Committee concluded that the principles and requirements in IFRS 18 provide an adequate basis for the parent to assess, for the purposes of its separate financial statements, whether it has a specified main business activity—specifically, a main business activity of investing in unconsolidated subsidiaries. Consequently, the Committee tentatively decided not to add a standard-setting project to the work plan.
Comment At its November 2025 meeting the Board agreed not to undertake further work at this time on this issue. The Secretariat notes that although the published TAD open for comment was slightly amended compared to the version considered by the Board (i.e. the proposed IASB TAD), the amendments were made solely to clarify the application of the requirements in IFRS 18. In addition, no new concerns were identified as part of the Secretariat's desktop analysis. Therefore, the Secretariat continues to recommend that the UKEB does not respond to the Committee's invitation to comment and continues to monitor this issue.

II.2 Classification of Gains and Losses on a Derivative Managing a Foreign Currency Exposure (IFRS 18)

Standard IFRS 18 Presentation and Disclosure in Financial Statements
Deadline 6 February 2026
Question The submission to the Committee asked for clarification about how an entity applies the requirements in paragraphs B70-B76 of IFRS 18 to classify gains or losses on a derivative financial instrument (in its consolidated statement of profit or loss) for the fact pattern submitted. As per Board request at its November 2025 meeting, the Secretariat presents further details of the fact pattern and the corresponding technical analysis in Appendix B. The submitter presented three different views (i.e. the financing category, the operating category and an accounting policy choice, respectively).
Committee's tentative conclusion In the TAD, the Committee observes that an entity first needs to identify the risk(s) a derivative is used to manage. Doing so enables the entity to determine the categories in profit or loss that are affected by that risk and the resulting classification of gains or losses on that derivative. In the fact pattern described in the request, the external derivative is used to manage only the net liability foreign currency exposure, which affects a single category of the consolidated statement of profit or loss, that is, the financing category. Therefore, classifying gains or losses on the external derivative in the financing category would not require the grossing up of such gains or losses. As a result, the prohibition in paragraph B72 of IFRS 18 (i.e. not grossing up derivative gains or losses) would not apply. Consequently, the Committee concluded that the entity is required to classify any gain or loss on the external derivative in the same category as the income and expenses affected by the risks the derivative is used to manage, which, in the fact pattern described in the request, is the financing category of its consolidated statement of profit or loss. The Committee concluded that the principles and requirements in IFRS Accounting Standards provide an adequate basis for the classification and consequently decided not to add a standard-setting project to the work plan.
Comment The UKEB Secretariat performed desktop research and sought feedback from members of the UKEB's AFIAG and FIWG. No significant concerns were identified as a result of that work. Therefore, the Secretariat recommends that the UKEB does not respond to the Committee's invitation to comment and continues to monitor this issue.

II.3 Fair presentation and compliance with IFRS Accounting Standards (IAS 1)

Standard IAS 1 Presentation of Financial Statements
Deadline 6 February 2026
Question The Interpretations Committee received a submission concerning the application of paragraphs 15-24 of IAS 1. Paragraph 19 of IAS 1 permits departure from IFRS Accounting Standards only in extremely rare circumstances. The request asks whether an entity applying paragraph 19 of IAS 1 is nonetheless required to comply with the requirement for fair presentation in paragraph 15 of IAS 1.
Committee's tentative conclusion In the TAD, the Committee indicated that the fact pattern described in the request arises infrequently and concluded that the matter described in the request does not have widespread effect. Consequently, the Committee tentatively decided not to add a standard-setting project to the work plan.
Comment At its November 2025 meeting the Board agreed not to undertake further work at this time on this issue. The Secretariat notes that there were no amendments to the published TAD open for comment, compared to the version considered by the Board (i.e. the proposed IASB TAD). Therefore, the Secretariat recommends that the UKEB does not respond to the Committee's invitation to comment and continues to monitor this issue.

II.4 Scope of the requirement to disclose expenses by nature (IFRS 18)

Standard IFRS 18 Presentation and Disclosure in Financial Statements
Deadline 6 February 2026
Question The Committee received a submission about the scope of the requirements in paragraph 83 of IFRS 18. Paragraph 75 of IFRS 18 requires an entity to present line items in the income statement, including for: * operating expenses (paragraph 75(a)(ii)); and * amounts required by IFRS 9 Financial Instruments and IFRS 17 Insurance Contracts (paragraph 75(b)–(c)). Paragraph 83 of IFRS 18 requires an entity that presents in the income statement one or more line items comprising expenses classified by function in the operating category, to also disclose in a single note the total and the amount of the expenses included in each line item for depreciation, amortisation, employee benefits, impairment of non-financial assets (and reversals) and write-down of inventories (and reversals). The submission seeks to clarify whether the requirement in paragraph 83 of IFRS 18 applies: * only to 'operating expenses' classified by nature or function listed in paragraph 75(a)(ii) of IFRS 18, or * to all line items listed in paragraph 75 of IFRS 18, including expenses listed in paragraph 75(b)−(c) of IFRS 18. These expenses might include amounts that resulted from the release to the income statement of costs that were previously capitalised—for example, insurance service expense recognised in the income statement might include the amortisation of insurance acquisition costs that were previously capitalised as part of insurance contract asset.
Committee's tentative conclusion In the TAD, the Committee observed that paragraph 83 of IFRS 18 contains no exceptions or exclusions. Therefore, the Committee tentatively concluded that paragraph 83 of IFRS 18 applies when an entity presents any line item comprising expenses classified by function in the operating category of the income statement, including expenses classified by function listed in paragraph 75(b)−(c) of IFRS 18. The Committee observed that, as paragraph B84 of IFRS 18 states, the amounts disclosed in accordance with paragraph 83 of IFRS 18 need not be the amounts recognised as an expense in the period. The amounts disclosed could include amounts that have been recognised as part of the carrying amount of an asset. If an entity applying paragraph 83(b) of IFRS 18 discloses amounts that are not the amounts recognised as an expense in the period, the entity is required to provide a qualitative explanation of that fact, identifying the assets involved
Comment As agreed by the Board at its November 2025 meeting, the Secretariat undertook additional outreach with stakeholders including seeking the view of members of the UKEB's FIWG and AFIAG to determine whether this issue may be significant for UK stakeholders. This feedback indicated that stakeholders agreed with the Committee's interpretation of the requirements in IFRS 18 and with the explanatory material provided. Only a few UK stakeholders expressed concerns about the cost and complexity of disclosing additional information by nature. The Secretariat observes that it had previously highlighted to the IASB that clarification was needed regarding the application of the requirements in paragraph 83 to the line items listed in paragraph 75 of IFRS 18. Now that this TAD has clarified that these requirements are applicable, we consider it both appropriate and helpful. Furthermore, as stakeholders have not expressed disagreement with the Committee's conclusions, the Secretariat supports the TAD.

II.5 Presentation of Taxes or Other Charges that are Not Income Taxes within the scope of IAS 12 (IFRS 18)

Standard IFRS 18 Presentation and Disclosure in Financial Statements
Deadline 6 February 2026
Question At its meeting in October 2025, the International Accounting Standards Board (IASB) asked the Committee to consider a consistent application matter related to the application of IFRS 18 (this was derived from the IASB's horizon scanning activities). The matter concerns whether an entity applying IFRS 18 is permitted to present taxes or other charges that are not income taxes within the scope of IAS 12 Income Taxes in the: * 'Income tax expense or income' line item of the income statement required by paragraph 75(a)(iv) of IFRS 18; or * 'Income taxes' category of the income statement. The IASB decided to refer this issue for IFRIC's consideration.
Committee's tentative conclusion In the TAD, the Committee observed that, as required by paragraph 67 of IFRS 18, an entity classifies in the income taxes category of the income statement, tax expense or tax income that is included in the income statement applying IAS 12 (and any related foreign exchange differences). The Committee therefore concluded that, applying IFRS 18, an entity is not permitted to present taxes or other charges that are not income taxes within the scope of IAS 12:
  1. in the 'income tax expense or income' line item of the statement of profit or loss required by paragraph 75(a)(iv) of IFRS 18; or
  2. in the income taxes category of the statement of profit or loss.
The Committee noted that in accordance with paragraph 24 of IFRS 18, an entity presents additional line items and subtotals in a primary financial statement if such presentations are necessary for the statement to provide a useful structured summary. The Committee concluded that the principles and requirements in IFRS Accounting Standards provide an adequate basis for an entity applying IFRS 18 to determine how it presents in the income statement taxes or other charges that are not income taxes within the scope of IAS 12.
Comment Consequently, the Committee tentatively decided not to add a standard-setting project to the work plan. At its November 2025 meeting the Board agreed not to undertake further work at this time on this issue. The Secretariat notes that although the published TAD open for comment was slightly amended compared to the version considered by the Board (i.e. the proposed IASB TAD), the amendments were made solely to clarify the application of the requirements in IFRS 18. In addition, no new concerns were identified as part of the Secretariat's desktop analysis. Therefore, the Secretariat continues to recommend that the UKEB does not respond to the Committee's invitation to comment and continues to monitor this issue. The deliberation of this TAD resulted on a decision to re-expose for redeliberation two agenda decisions (refer to Item III.1) previously discussed by the Committee.

Section III. Amended and re-exposed Tentative Agenda Decisions: open for comment

III.1 Updates to Committee's agenda decisions for IFRS 18

Standard IFRS 18 Presentation and Disclosure in Financial Statements
Deadline 6 October 2025
Committee's agenda decision1 In November 2025 the Committee considered feedback on the TAD 'Updates to Committee's agenda decisions for IFRS 18' (see Item V.1) published in the June 2025 IFRIC Update. Included within these updates were the agenda decisions on:
  1. Presentation of payments on non-income taxes (IAS 1).
  2. Classification of tonnage taxes (IAS 12 Income Taxes).
On the basis of the deliberation of the TAD on 'Presentation of Taxes or Other Charges that are Not Income Taxes within the Scope of IAS 12 (IFRS 18)', (see Item II.5 on ‘Tentative Agenda Decisions: open for comment), the Committee decided to amend and re-expose for redeliberation the aforementioned agenda decisions.
Comment The Secretariat observes that the amendments to these agenda decisions are not considered substantive. These amendments simply provide additional alignment with the requirements in IFRS 18 and clarity to the wording of the decision without altering its underlying conclusions. Therefore, the Secretariat does not propose responding to the Committee's invitation to comment on these amended tentative agenda decisions.

Section IV: Tentative Agenda Decisions – comment period closed

IV.1 Classification of a Foreign Exchange Difference from an Intragroup Monetary Liability (or Asset) (IFRS 18)

Standard IFRS 18 Presentation and Disclosure in Financial Statements
Deadline 25 November 2025
Question Applying the requirements of IAS 21 The Effects of Changes in Foreign Exchange Rates, the foreign exchange differences arising from the translation of intercompany monetary assets and liabilities are not eliminated upon consolidation. This is because the monetary item represents a commitment to convert one currency into another and exposes the reporting entity to a gain or loss through currency fluctuations. In the fact pattern described in the submission, an entity enters into a loan with its subsidiary (intragroup loan). The entity and its subsidiary have different functional currencies. This intragroup loan:
  1. is denominated in the functional currency of either the entity or its subsidiary; and
  2. is not part of the entity's net investment in the subsidiary.
The submission asks how an entity applying paragraph B65 of IFRS 18 classifies a foreign exchange difference if the income and expenses from the intragroup monetary liability (or asset) that gave rise to the foreign exchange difference have been eliminated on consolidation. The submitter seeks to clarify in which category in the consolidated income statement the aforementioned foreign exchange difference should be classified as when the underlying asset and liability are eliminated on consolidation.
Committee's tentative conclusion The Committee members were split on what was an acceptable reading of the requirements in IFRS 18 and discussed two views: * View 1 –The exchange difference is classified in the operating category as the default category in accordance with paragraph 52 of IFRS 18. This is because income and expenses arising from the intragroup loan have been eliminated on consolidation and are not presented in the income statement. Consequently, there is no 'same' category within which the entity can classify the exchange difference in accordance with paragraph B65. * View 2 – The exchange difference is classified using the category in which the income and expenses from the intragroup loan would have been classified before the elimination of those income and expenses on consolidation. If the entity determines that classifying the exchange difference in this way would involve undue cost or effort, it instead classifies the exchange difference in the operating category (paragraph B65 of IFRS 18). Members' views were split, and the Interpretations Committee could not reach a conclusion on this topic. * Seven members concluded that View I is the only reasonable reading of paragraph B65 of IFRS 18. * The other seven members concluded that both View I and View II are reasonable readings of paragraph B65 of IFRS 18. The Tentative Agenda Decision noted the split views and tentatively concludes the Committee decided not to add a standard-setting project to its work plan.
Review of comment letters submitted to the Committee The IASB received 51 comment letters (three from the UK, including the UKEB's response). The Secretariat conducted a comparative analysis of the comment letters submitted to the Committee to assess how their positions align with or differ from the UKEB's response. The UKEB agreed with the TAD that a standard-setting project should not be added to the Committee's work plan. A majority of respondents supported this view. The UKEB also encouraged the Committee to add explanatory material in the final agenda decision that clearly explains the Committee's basis for its decision. Many respondents (including the UKEB) supported the Committee's tentative conclusion that View I presented in the TAD is a reasonable reading of paragraph B65 of IFRS 18. The UKEB noted that the TAD was unclear about the status of View II, that including the voting in the TAD was unhelpful and that there was confusion about how the TAD could be interpreted. The UKEB further suggested to either clearly articulate a conclusion on View II or acknowledge that the requirements in relevant IFRS do not provide an adequate basis for an entity to determine whether or not View II is acceptable. Although many respondents supported View II and considered it to be a reasonable interpretation of IFRS 18, a few disagreed with this view, observing that the rationale was difficult to understand (including IOSCO and the Accounting Standards Board from Canada) or considered that it would not lead to a fair representation of the fact pattern analysed (including ESMA and EY).
Comment The Committee is expected to discuss stakeholder feedback on the TAD at a future meeting. Therefore, the Secretariat does not recommend undertaking further work in this respect apart from continuing to monitor this issue.

IV.2 Economic Benefits from Use of a Battery under an Offtake Arrangement (IFRS 16)

Standard IFRS 16 Leases
Deadline 25 November 2025
Question The following provides only a summary of two separate submissions to the IFRS Interpretations Committee pipeline on the same topic. Please refer to the IFRS website for the full details. Both submissions note that there are currently diverging accounting treatments regarding Battery Energy Storage System (BESS) agreements in gross pool electricity markets2, where a single customer agrees to utilise 100% of the capacity of the battery, known as a 100% Offtake Agreement. The customer is able to direct the battery owner to charge and discharge the battery (which cannot be substituted), i.e. buy and sell electricity at different spot prices. The intention can be to profit from the price variability, to hedge their retail pool market purchases, etc. A fixed amount is paid by the customer for the use of the battery. The fixed amount (typically a fee per day, week or year) reflects the size of the battery and duration of use and is payable regardless of whether the battery is charged or discharged. There is net settlement between the fixed amount and the transactions at spot prices. In considering whether the above agreement is, or contains, a lease as defined in IFRS 16, both submitters note that the diverging accounting treatments arise from two different views on paragraph B9(a) of IFRS 16 specifically: "the right to obtain substantially all of the economic benefits from use of the identified asset ...; and". Proponents of the first view note that there is a lease since the primary benefit of the battery is storage, not generation of electricity. Therefore, there is a crucial distinction when compared to the fact pattern in the December 2021 agenda decision Economic Benefits from Use of a Windfarm (IFRS 16 Leases). Proponents of the second view note that there is no lease due to the structure of the gross pool electricity market since the primary benefit of the battery is the electrons or electricity it holds and there can be no value without the physical output of electrons or electricity into the gross pool market. As such, this is similar to the fact pattern in the above December 2021 agenda decision and a similar conclusion should be made, i.e. that there is no lease.
Committee's tentative conclusion The Interpretations Committee concluded that the principles and requirements in IFRS Accounting Standards provide an adequate basis to determine whether, under the battery offtake arrangement described in the fact pattern, the electricity retailer has the right to obtain substantially all of the economic benefits from use of the battery. Consequently, subject to addressing members' comments at the September 2025, the Interpretations Committee published a tentative agenda decision which explains the reasons for not adding a standard-setting project to the IASB's work plan.
Comment The Secretariat notes that the UK has net pool electricity markets3, i.e. the customers contract directly with the energy sellers and the contracts are physically deliverable. The second view on both submissions is formed based on the structure of a gross pool electricity market. At its June 2025 and September 2025 Board meetings, the UKEB decided it would not undertake further work on this matter at this time. The UKEB continues to monitor this issue.

Section V. Finalised agenda decisions for IASB consideration

V.1 Updates to Committee's agenda decisions for IFRS 18

Standard IFRS 18 Presentation and Disclosure in Financial Statements
Deadline 6 October 2025
Committee's agenda decision4 The Committee considered feedback on the TAD ‘Updates to Committee's agenda decisions for IFRS 18' published in the June 2025 IFRIC Update:
  1. to replace the references to IAS 1 with references to the new or amended requirements in IFRS 18 for nine agenda decisions that refer to the general requirements about presentation, materiality and aggregation of information in the financial statements; and
  2. to explain how an entity applies the requirements in IFRS 18 to the fact pattern addressed by the Agenda Decision Supply Chain Financing Arrangements—Reverse Factoring.
Out of these ten tentative agenda decisions, the Committee decided:
  1. To finalise six agenda decisions.
  2. To recommend to the IASB to withdraw two agenda decisions in its entirety. 5 The Committee observed that additional and more specific analysis, along with explanatory material, would be necessary to clarify how the requirements in IFRS 18 apply to the fact patterns included in these agenda decisions. The Committee further noted that if stakeholders identify diversity in applying the requirements in IFRS 18, they may still submit a question to the Committee. These agenda decisions are:
    1. Presentation of income and expenses arising on financial instruments with a negative yield.
    2. Supply Chain Financing Arrangements—Reverse Factoring.
  3. To amend and re-expose two agenda decisions based on the deliberation of the TAD ‘Presentation of Taxes or Other Charges that are Not Income Taxes within the Scope of IAS 12 (IFRS 18)'. The TADs that were amended and re-exposed are:
    1. Presentation of payments on non-income taxes (IAS 1); and
    2. Classification of tonnage taxes (IAS 12 Income Taxes).
Comment [Refer to section 'Amended and re-exposed Tentative Agenda Decisions - open for comment' as part of Item III.1.] The IASB will consider the Committee's decisions at a future meeting. If the IASB agrees, the updates to the six agenda decisions will be published in an addendum to the IFRIC Update. At its June 2025 Board meeting, the UKEB decided it would respond in support of the tentative agenda decision incorporating the proposed updates to the ten agenda decisions, assuming there are no substantive changes to the proposed updates when the tentative agenda decision is published. A Project Initiation Plan, a Final Comment Letter and a draft Due Process Compliance Statement was presented to the Board at its 25 September 2025 meeting. The UKEB Final Comment Letter was submitted to the Interpretations Committee on 6 October 2025. The Secretariat will monitor the IASB's discussions for: * the potential ratification of the six agenda decisions; and * the potential withdrawal of the agenda decisions on Presentation of income and expenses arising on financial instruments with a negative yield and Supply Chain Financing Arrangements–Reverse Factoring.

V.2 Determining and Accounting for Transaction Costs (IFRS 9)

Standard IFRS 9 Financial Instruments
Deadline 6 October 2025
Question7 Transaction costs are defined in IFRS 9 as incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or financial liability. An incremental cost is one that would not have been incurred if the entity had not acquired, issued or disposed of the financial instrument. Clarification is requested on what is meant by the term “incremental” and therefore whether transaction costs can include preparatory costs incurred. Examples of such preparatory costs include legal and advisory fees for reviewing the terms and conditions of the contract as well as professional fees for the valuation of collateral. If such preparatory costs could be included, additional clarification is requested on how those costs should be accounted for if the related financial instrument is not recognised until the subsequent period.
Committee's agenda decision8 Evidence gathered by the Interpretations Committee to date indicates no diversity in applying IFRS 9 that could have a material effect on entities' financial statements with regards to determining and accounting for costs incurred before entering into a contractual arrangement. Feedback suggests that:
  1. costs that are directly attributable to the origination or issuance of a financial instrument but are incurred before entering into the contractual arrangement, can be incremental and, accordingly, can meet the definition of transaction costs in IFRS 9; and
  2. transaction costs are recognised in the statement of financial position, often as prepayments or other assets.
Based on its findings, the Interpretations Committee concluded that the matter described in the request does not have widespread effect. Consequently, the Interpretations Committee tentatively decided not to add a standard-setting project to the work plan.
Comment At its April 2025 meeting, members of the Financial Instruments Working Group (FIWG) said that they were not aware of widespread material diversity. In practice, transaction costs within the scope of IFRS 9 would include such preparatory costs and would typically be accounted for as a prepayment if the related financial asset or financial liability was expected to be recognised in the subsequent period. This accounting practice seems consistent with the accounting guidance from EY and KPMG. The above is consistent with the tentative agenda decision. At its May 2025, June 2025 and September 2025 Board meetings, the UKEB decided it would not undertake further work on this matter at this time. The Interpretations Committee received 15 comment letters. No comment letters were submitted by UK stakeholders. Two of the large accounting firms (Deloitte and Forvis Mazars) responded to this TAD. Respondents to the Committee's TAD expressed mixed views. A few of the respondents asked the Committee to reconsider its tentative decision of not adding a standard-setting project to the work plan. Those respondents invited the Committee to undertake a narrow-scope standard-setting project that considers the interaction of certain concepts in IFRS 9 with those in other IFRS Accounting Standards (such as IAS 32 Financial Instruments: Presentation, IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases).

V.3 Embedded Prepayment Option (IFRS 9)

Standard IFRS 9 Financial Instruments
Deadline 6 October 2025
Question9 Prepayment options embedded in a debt or insurance host contract are not closely related to the host contract unless one of two exceptions apply. The second exception (namely paragraph B4.3.5(e)(ii) of IFRS 9) notes that for a prepayment option to be closely related to the host contract, "the exercise price of a prepayment option reimburses the lender for an amount up to the approximate present value of lost interest for the remaining term of the host contract. Lost interest is the product of the principal amount prepaid multiplied by the interest rate differential. The interest rate differential is the excess of the effective interest rate of the host contract over the effective interest rate the entity would receive at the prepayment date if it reinvested the principal amount prepaid in a similar contract for the remaining term of the host contract." Clarification is requested on whether “the entity" refers to the lender or the reporting entity, i.e. the borrower. Depending on how this is interpreted, the interest rate differential could vary and therefore affect whether the embedded prepayment option is separately recognised.
Committee's agenda decision10 Evidence gathered by the Interpretations Committee to date indicates no diversity in practice that could have a material effect on entities' financial statements with regards to interpreting the term 'the entity' in paragraph B4.3.5(e)(ii) of IFRS 9. Feedback suggests that stakeholders read the requirements as referring to the lender. Based on its findings, the Interpretations Committee concluded that the matter described in the request does not have widespread effect. Consequently, the Interpretations Committee tentatively decided not to add a standard-setting project to the work plan.
Comment Feedback from members of the FIWG indicated that there was no observed diversity in practice on the interpretation of “the entity", which is considered to refer to "the lender". The above is consistent with the tentative agenda decision. At its May 2025, June 2025 and September 2025 Board meetings, the UKEB decided it would not undertake further work on this matter at this time. The Interpretations Committee received 9 comment letters. No comment letters were submitted by UK stakeholders. Two of the large accounting firms (Deloitte and Forvis Mazars) responded to this TAD. Respondents were broadly supportive of the Committee's TAD. However, a few of those respondents recommended the Committee enhances clarity of the requirements, for example with an editorial amendment to paragraph B4.3.5(e)(ii) of IFRS 9 (perhaps in the way of an annual improvement), replacing the term 'the entity' by 'the lender'. At its November 2025 meeting, the Committee considered feedback received on its TAD. The Committee concluded its discussions on this agenda decision. The IASB will consider this agenda decision at a future meeting. If the IASB does not object to the agenda decision, it will be published in an addendum to the IFRIC Update. The UKEB will continue monitoring this issue.

Appendix B: Additional information: Classification of Gains and Losses on a Derivative Managing a Foreign Currency Exposure (IFRS 18)

This Appendix provides additional information in relation to the Tentative Agenda Decision Classification of Gains and Losses on a Derivative Managing a Foreign Currency Exposure (IFRS 18), as requested by the Board at its November 2025 meeting.

Fact pattern described in the TAD

B1. An entity (Parent P) has three subsidiaries, Subsidiary A, Subsidiary B and Treasury Entity, that it consolidates when preparing its consolidated financial statements. Subsidiaries A and B have the same functional currency (LC) and have the following loans denominated in foreign currency (FC):

  1. Subsidiary A issued a loan to a third party of FC 100 (investing asset); and
  2. Subsidiary B obtained a loan from a different third party of FC120 (financing liability).

B2. Therefore, the group has a net liability exposure of FC20.

B3. Parent P assesses that for purposes of its consolidated accounts it does not have a specified main business activity of investing in particular type of assets or of providing financing to customers. Consequently, in its consolidated financial statements, Parent P classifies the interest income from the investing asset in the investing category and the interest expense from the financing liability in the financing category.

B4. To manage the foreign currency (FX) risk of the group's net liability exposure, Treasury Entity enters into a forward contract with a third party at a notional amount of FC20 to sell local currency and buy foreign currency (external derivative). Parent P applies IFRS 9 and does not designate the external derivative as a hedging instrument.

B5. Consistent with the group's risk management policy, the purpose of the external derivative is to manage the identified FX risk of the net liability exposure, not the group of gross exposures that make up the net exposure.

Extracts of the Committee's technical analysis in the TAD

B6. The Committee observed that, based on the application guidance in paragraphs B70–B76 of IFRS 18, an entity first needs to identify the risk(s) a derivative is used to manage. Doing so enables the entity to determine the categories in profit or loss that are affected by that risk and the resulting classification of gains or losses on that derivative.

B7. In the fact pattern, Parent P assessed that the undue cost or effort exemption in IFRS 18 paragraph B72 (see extract below) is not applicable.

B8. The Committee observed that, in the fact pattern described in the request, the external derivative is used to manage only the net liability FX exposure, which affects a single category of the consolidated statement of profit or loss, that is, the financing category.

B9. Therefore, classifying gains or losses on the external derivative in the financing category would not require the grossing up of such gains or losses. As a result, the prohibition in paragraph B72 of IFRS 18 would not apply.

B10. Consequently, the Committee concluded that the entity is required to classify any gain or loss on the external derivative in the same category as the income and expenses affected by the risks the derivative is used to manage, which in the fact pattern described in the request, is the financing category of its consolidated statement of profit or loss.

Alternative scenario

B11. If the group's risk management policy was to use the external derivative to manage the FX risk of both the investing asset and the financing liability on a gross basis, those risks would affect line items in the investing category and in the financing category of the consolidated statement of profit or loss.

B12. However, classifying gains or losses on the external derivative in these categories would have required the grossing up of gains or losses on the derivative, which is prohibited by paragraph B72 of IFRS 18. That is because, to classify the gain or loss on the derivative in each of the categories affected, the entity would need to present in each category a larger gain or loss than occurred on the derivative.

B13. Consequently, in line with paragraphs B72–B75, the group is required to classify the external derivative gains or losses in the operating category.

Key technical references – IFRS 18

Paragraph B70 - Paragraph 47 requires an entity to classify income and expenses in categories in the statement of profit or loss. To apply paragraph 47, an entity shall classify gains and losses included in the statement of profit or loss on a financial instrument designated as a hedging instrument applying IFRS 9 in the same category as the income and expenses affected by the risks the financial instrument is used to manage. However, if doing so would require the grossing up of gains and losses, an entity shall classify all such gains and losses in the operating category (see paragraphs B74–B75).

Paragraph B72 - An entity shall also apply the requirements in paragraph B70 to gains and losses on a derivative that is not designated as a hedging instrument applying IFRS 9, but is used to manage identified risks. However, if doing so would require the grossing up of gains or losses (see paragraphs B74–B75) or involve undue cost or effort, the entity shall instead classify all gains and losses on the derivative in the operating category.

Paragraph B74 - Paragraphs B70 and B72 prohibit the grossing up of gains and losses on financial instruments designated as hedging instruments and derivatives not designated as hedging instruments. The grossing up of gains and losses might arise from situations in which:

  1. an entity uses such financial instruments to manage the risks of a group of items with offsetting risk positions (see paragraph 6.6.1 of IFRS 9 for the criteria for a group of items to be an eligible hedged item); and
  2. the risks managed affect line items in more than one category of the statement of profit or loss.

BC226 - If a hedging instrument hedges a group of items with offsetting risk positions and the hedged items are classified in more than one category of the statement of profit or loss, an entity would have to gross up the gains or losses on the hedging instrument to classify them in the applicable categories. In such circumstances, paragraphs 6.6.4 and B6.6.15 of IFRS 9 require the entity to present gains or losses on the hedging instrument in a separate line item to avoid the grossing up of gains and losses from a single hedging instrument. The IASB decided if the requirement to classify gains or losses on a hedging instrument in the applicable category would result in the grossing up of gains or losses, an entity classifies those gains or losses in the operating category (see paragraphs BC230–BC231).

BC227 - An entity can also use a derivative to manage an identified risk without designating a hedging relationship for the purposes of IFRS 9. [ ........] Consequently, the IASB concluded that classifying gains or losses on other derivatives used to manage exposures to identified risks using the same approach as for gains or losses on designated hedging instruments would provide useful information about an entity's risk management activities.

Footnotes:

Footnotes

  1. As explained in topic 4 in Section II of Appendix A, the Committee tentatively concluded that paragraph 83 of IFRS 18 applies when an entity presents any line item comprising expenses classified by function in the operating category of the income statement, including expenses classified by function listed in paragraph 75(b)–(c) of IFRS 18. Paragraph 83 of IFRS 18 requires an entity that presents in the income statement one or more line items comprising expenses classified by function in the operating category, to also disclose in a single note the total and the amount of the expenses included in each line item for depreciation, amortisation, employee benefits, impairment of non-financial assets (and reversals) and write-down of inventories (and reversals). ↩↩

  2. In a gross pool electricity market, all purchases and sales of electricity are cleared through a market operator on a gross basis, without the market operator taking delivery or on-selling electricity. There is no bilateral contract fulfilment between an actual seller (generator) and an actual buyer (customer). ↩

  3. See paragraph 51 of the June 2023 IASB Staff Paper Agenda Reference 2 Initial consideration. ↩

  4. This provides a summary of IFRIC's agenda decision as published in the IFRIC Update. Please refer to the IFRS website for the full details. ↩

  5. The IASB staff paper refers that withdrawing agenda decisions complies with the Committee's normal due process. IASB staff Agenda Paper 9 (November 2025) in paragraph 6(a) refers that "an agenda decision is withdrawn in its entirety if the explanatory material within it refers to requirements that have been changed or removed from IFRS Accounting Standards”. ↩

  6. Details of the agenda decisions referencing IAS 1 were presented to the Board at its June 2025 meeting and can be found in UKEB 26 June 2025 Agenda Paper 9: Appendix E: Interpretations Committee Update. ↩

  7. This provides a summary of the question only. Please refer to the IFRS website for the full details. ↩

  8. This provides a summary of the Interpretations Committee's tentative conclusion only. Please refer to the IFRS website for the full details. ↩

  9. This provides a summary of the question only. Please refer to the IFRS website for the full details. ↩

  10. This provides a summary of the Interpretations Committee's tentative conclusion only. Please refer to the IFRS website for the full details. ↩