13/06/2024 - EFRAG issues draft comment letter on the IASB ED Contracts for Renewable Electricity
EFRAG has published its draft comment letter ('DCL') on the IASB's Exposure Draft IASB/ED/2024/3 Contracts for Renewable Electricity, Proposed amendments to IFRS 9 and IFRS 7 (the 'ED') and seeks constituents' views on the IASB proposals.
Comments on the EFRAG DCL can be submitted by 15 July 2024.
On 8 May 2024 the IASB published its Exposure Draft Contracts for Renewable Electricity, proposing narrow-scope amendments to ensure that financial statements more faithfully reflect the effects that renewable electricity contracts have on a company. The proposals amend IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures.
In its draft comment letter ('DCL'), EFRAG welcomes IASB's efforts and approach addressing both own-use exception requirements as well as hedge accounting requirements.
EFRAG generally supports the narrow scope of the ED, however notes that the proposed scope is currently limited to the contracts containing a ‘pay-as-produced’ feature, whereas a wide variety of contracts contain other features that pose similar application issues. EFRAG believes that other types of contracts should also be considered in the proposed amendments.
EFRAG agrees with the direction of the proposals on what an entity should consider when assessing if the contracted electricity is consistent with the entity's expected purchase or usage requirements. However, EFRAG foresees application challenges related to some of the requirements outlined in the ED, specifically as relates to the time period considerations.
EFRAG welcomes the IASB’s thorough approach distinguishing the considerations for sellers and purchasers when proposing the hedge accounting requirements for the contracts in scope of the ED.
Regarding the disclosure requirements, EFRAG suggests that proposed disclosure requirements should apply only to contracts within the scope of the ED qualifying for the own-use exception.
Several specific questions on the topics above are addressed to the constituents. You can submit your comments on EFRAG's draft comment letter by clicking here, then open the relevant news item and click on the 'Comment publication' link at the end of the news item.
Feedback about the questions raised and comments on the EFRAG DCL are highly appreciated and should be received by 15 July 2024 to allow EFRAG to comply with the IASB's deadline of the comment period.
