IFRS Update 2025 – Overview of the new and amended standards

The IFRS regulatory system is characterised by a high degree of dynamism. To maintain an overview, the following section provides a summary of the standard amendments to be be applied for the first time in the fiscal year 2025, as well as those relevant for future reporting periods.

First-time application in the 2025 reporting period

In reporting periods beginning on or after 1 January 2025, only the amendments to IAS 21 entitled ‘Lack of Exchangeability’ are mandatory. These close a previously existing regulatory gap in connection with currency translation. The regulation concerns cases in which a currency cannot be freely exchanged into another.

The IASB specifies when a currency is considered exchangeable and how to proceed if this is not the case. Accordingly, a currency is considered exchangeable if a company is able to exchange it into another currency via available markets or mechanisms without lengthy delay at the valuation date and for a specific purpose. If this is not possible or only an insignificant amount can be exchanged, the currency is considered non-exchangeable. In such cases, companies must estimate the spot rate, whereby the estimate must reflect the rate that would have been applied in an orderly transaction between market participants under the current economic conditions. A specific approach is not specified by the IASB, so that different approaches are generally possible. In addition, extended disclosures are required to enable the addressees of the financial statements to understand and assess the effects of the lack of exchangeability.

As this standard amendment concerns a rather specific special case of currency translation, the practical effects for many companies should be minor or non-existent.

Initial application in future reporting periods

The following new and amended standards have already been adopted by the IASB and are mandatory or – in the case of IFRS 19 – voluntary for future financial years:

* Adoption into EU law (“EU endorsement”) still pending.

The following amendments apply to fiscal year starting in 2026 or, subject to EU endorsement, only from 2027 onwards. The impact of the amendments to be considered for reporting periods beginning from January 1, 2026, is relatively minor compared to those effective from 2027. In addition to editorial changes under the “Annual Improvements to the IFRS” project, the other amendments relate to IFRS 9 and IFRS 7.

In einer ersten Standardänderung zur Klassifizierung und Bewertung von Finanzinstrumenten steht die Klarstellung zur Anwendung des Zahlungsstromkriteriums bei sogenannten ESG-gebundenen Darlehen im Fokus. Bei diesen Darlehen verpflichtet sich das Unternehmen regelmäßig zur Einhaltung bestimmter Nachhaltigkeitsziele, wobei die Verzinsung an ESG-Kennzahlen gekoppelt ist. In der Praxis stellte sich die Frage, ob solche Merkmale die Klassifizierung als finanzieller Vermögenswert der Kategorie „amortised cost“, genauer das Kriterium des ausschließlich aus Tilgung und Zins bestehenden Zahlungsstroms („SPPI-Kriterium“) beeinträchtigen. Das IASB entschied sich gegen eine grundlegende Änderung der Klassifizierungsregeln wie auch gegen eine Sonderregelung für ESG-Darlehen. Stattdessen wurden klarstellend erläuternde Beispiele und Anwendungsleitlinien ergänzt, um die Beurteilung zu erleichtern. Diese fokussieren sich auf die Frage, ob durch variable ESG-gebundene Zahlungen das Kreditausfallrisiko oder das Investitionsrisiko kompensiert wird.

In addition, amendments to IFRS 9 and IFRS 7 in connection with so-called ‘Power Purchase Agreements’ (PPAs) were also adopted, effective from 1 January 2026. These relate in particular to the classification and measurement of financial instruments in connection with electricity supply contracts dependent on environmental factors (so-called physical or virtual PPAs). In particular, it is clarified when the so-called ‘own use exemptions’ from IFRS 9.2.4 apply and the contracts accordingly fall outside the scope of IFRS 9 with the prescribed measurement for derivatives at fair value. For this purpose, it must be assessed whether the company is expected to be a net buyer or a net seller of electricity from the corresponding contracts. The regulations apply exclusively to the narrowly defined application and cannot be transferred to other agreements by analogy.

For financial years beginning on or after 1 January 2027, IFRS users will be confronted with comprehensive innovations. With IFRS 18, a new standard comes into force that concerns the presentation and disclosures in the financial statements, which entails what are certainly the most far-reaching changes of recent years within IFRS. This new standard will replace IAS 1 and thus the previous regulations on the presentation of the financial statements with the aim of improving the informative value and comparability of IFRS financial statements. In particular, an amended structure of the income statement is intended to contribute to this. In the future, this will be divided into the three categories ‘Operating’, ‘Investing’ and ‘Financing’ – in addition to the separate presentation of income taxes and discontinued operations as previously practised. This classification, which is already known from the cash flow statement, albeit different in detail, is intended to better reflect the economic reality of the companies and increase the comprehensibility of the results for the addressees of the financial statements. Another central aspect of the standard is the newly required information on the performance indicators defined by management and reported outside the financial statements (e.g. also in the management report) (so-called ‘Management-defined Performance Measures’ (MPMs)). In addition to corresponding descriptions, reconciliations to the most comparable IFRS figures are also required, among other things. In addition, IFRS 18 contains new principles for the aggregation and disaggregation of financial statement items as well as smaller specific changes in the presentation of the balance sheet and cash flow statement. Overall, IFRS 18 will entail considerable conversion costs for many companies, not least in technical terms. All IFRS users should therefore familiarise themselves intensively with the company-specific implications of IFRS 18 as early as possible.

IFRS 19 is a purely disclosure standard that can be applied voluntarily to subsidiaries without their own public accountability for financial years from 1 January 2027, whose parent companies publish full IFRS consolidated financial statements. The standard allows eligible companies to apply significantly reduced disclosure requirements in the individual or sub-consolidated financial statements compared with the ‘full IFRS’. As IFRS individual financial statements in Germany pursuant to § 325 para. 2a HGB can only be used for disclosure purposes and sub-consolidated financial statements are typically not prepared due to the possibilities of exemption under commercial law, the practical relevance of IFRS 19 for German companies appears to be rather low.

In November 2025, the IASB finally published amendments to IAS 21, also applicable from 1 January 2027, which relate to the translation of financial statements from a functional currency not subject to hyperinflation into a reporting currency subject to hyperinflation. The IASB is thus aiming to avoid the current heterogeneity in accounting practice. As the reporting currency of German IFRS users is regularly the euro and thus not a currency subject to hyperinflation, the practical relevance of the amendments for German companies is likely to be very low.

Conclusion

IFRS are subject to continuous development and change, regularly presenting companies with new challenges. Several amendments and new standards must be kept in view for 2025 and the following financial years. While some changes merely aim to clarify existing requirements or address very specific cases, IFRS 18 introduces fundamental changes to the presentation of IFRS financial statements and often entails significant implementation efforts. Early engagement with this standard, as well as with the other upcoming changes and their practical implications, is, therefore, both sensible and strongly recommended. Each year, it remains essential to closely monitor developments within the IFRS framework and to identify potential adjustments in time – not only for the financial statements themselves, but also for internal management and external communication with stakeholders.