What’s New for June 2026 Interim Report

What’s New for June 2026 Interim Reports

For June 2026 interim reporting, the most significant developments arise from amendments to IFRS 9 Financial Instruments, which become effective for annual periods beginning 1 January 2026. These changes are not broad-sweeping revisions to recognition and measurement principles but instead introduce targeted clarifications in areas where diversity in practice has emerged.

In particular, the amendments fall into two distinct packages:

(i) amendments to classification and measurement of financial instruments, and
(ii) amendments relating to contracts referencing nature-dependent electricity.

Together, these changes primarily affect judgement areas in classification, derecognition and hedge accounting.

Financial instruments – classification and measurement amendments

1. Derecognition of financial liabilities

The significant change for most relates to the timing of derecognition of financial liabilities, particularly where settlement occurs through electronic payment systems such as BACS.

The amendments confirm that the default principle remains that a financial liability is derecognised only when it is extinguished (i.e. settled, cancelled or expires). However, an optional and narrowly defined exemption permits earlier derecognition where an electronic payment instruction meets strict criteria. The criteria are that the entity has no practical ability to cancel or withdraw the instruction, has no continued control over the cash, and settlement risk is remote.

Practically, this introduces an important judgement point. Many entities currently derecognise liabilities at the point a payment run is initiated (for example, payroll or supplier BACS runs), even though settlement occurs several days later. While this timing difference may appear operationally immaterial, it becomes more significant where large payment runs occur close to period end. In such cases, liabilities may be removed and cash reduced before extinguishment of the liability, creating potential cut-off risk under the amended requirements.

Where entities elect to apply the exemption, this represents an accounting policy choice within IFRS 9, but it must be applied consistently to all similar electronic payment systems and supported by a clear analysis of when the qualifying conditions are met in practice.

2. Classification of financial assets – ESG-linked features

The amendments provide clarification on the assessment of contractual cash flows for financial assets with ESG-linked features, addressing previous diversity in practice. The focus is on whether such features are consistent with a basic lending arrangement under the SPPI test. In particular, the amendments clarify that sustainability-linked adjustments to interest cash flows do not automatically fail SPPI solely because they are linked to ESG-related targets or metrics.

Instead, entities must assess the nature of the ESG feature and whether the resulting variability in cash flows is consistent with consideration for basic lending risks and costs. This includes evaluating whether the ESG-linked adjustment is proportionate and directly related to the lending arrangement, or whether it introduces exposure to risks more akin to equity or commodity-type returns. In practice, this is particularly relevant for sustainability-linked loans and bonds where coupon rates vary depending on the borrower achieving specified environmental or social performance targets. While the amendments provide helpful clarification, significant judgement may still be required where ESG metrics are complex, non-financial in nature, or capable of creating substantial variability in contractual cash flows.

3. Non-recourse financial assets

The amendments clarify that the existence of a non-recourse feature does not automatically prevent a financial asset from meeting the SPPI condition. Instead, entities must assess whether the contractual cash flows continue to represent solely payments of principal and interest by considering the economic substance of the arrangement and the underlying assets or cash flows to which the lender is exposed.

In practice, this is particularly relevant for financing structures where repayment is limited to the performance of specified assets, such as project finance arrangements, securitisations, or certain forms of asset-backed lending. The amendments emphasise that entities must “look through” to understand whether the lender is exposed only to basic lending risks or whether additional exposure to equity-like or performance-based risks has been introduced.

4. Contractually linked instruments (CLIs)

The amendments also provide additional guidance on the assessment of contractually linked instruments (CLIs), commonly referred to as “tranches”, within structured financing arrangements. These structures typically involve multiple classes of instruments with differing levels of credit risk exposure, where cash flows are prioritised according to a contractual waterfall.

Under IFRS 9, instruments within a CLI structure may qualify for amortised cost or FVOCI measurement only where the arrangement does not expose holders to risks inconsistent with a basic lending arrangement. The amendments clarify aspects of the “look-through” assessment required to evaluate the underlying pool of instruments and the degree of exposure created by the tranching structure.

Nature-dependent electricity contracts

Amendments to IFRS 9 introduce targeted changes to the accounting for contracts referencing nature-dependent electricity (CRNEs), such as power purchase agreements linked to wind or solar generation.

The amendments respond to diversity in practice arising from the variability of electricity generation due to uncontrollable natural factors. They clarify the application of the own-use exception, as well as the hedge accounting requirements, where the volume or timing of electricity delivery is inherently variable.

In particular, entities may now apply the own-use exception to certain CRNEs where specific criteria are met. The amendments also permit the designation of a variable nominal volume of electricity as a hedged item, enabling more consistent application of hedge accounting to renewable energy contracts.

From a practical perspective, this is most relevant for entities with significant exposure to renewable energy procurement or sustainability-linked energy strategies. It may impact:

whether contracts are accounted for as derivatives or executory contracts, and
the availability and structure of hedge accounting relationships for electricity price risk management.

Disclosure implications

The amendments above introduce additional disclosure requirements under IFRS 7 Financial Instruments: Disclosures. These primarily affect annual reporting however, under IAS 34, entities should consider whether new or revised judgements arising from classification, derecognition, or CRNE accounting require updated or expanded interim disclosures.

This may be relevant where:

new ESG-linked or structured instruments are introduced
derecognition policies for electronic payment systems change
significant classification judgements are updated during the interim period
nature-dependent electricity contracts are newly entered into or modified

IFRIC Agenda Decisions

In addition to the IFRS 9 amendments, entities should also be mindful of recent IFRIC agenda decisions, particularly those relating to IFRS 9 (including embedded prepayment features and transaction costs). While these do not change the underlying requirements of IFRS 9, they provide explanatory material that is required to be considered in determining appropriate accounting treatment and may influence classification and measurement judgements in practice.