IFRS Accounting Standards

Major update to the IFRS for SMEs Accounting Standard

On 27 February 2025, following a comprehensive review, the International Accounting Standards Board (IASB) issued a major update to the IFRS for SMEs Accounting Standard. 

The key changes to the Standard are:

• a revised model for revenue recognition;
• bringing together the requirements for fair value measurement in a single location; and
• updating the requirements for business combinations, consolidations and financial instruments.

The updated Standard will be effective for annual periods beginning on or after 1 January 2027, with early application permitted. While not permitted for use in the UK, the IFRS for SMEs Accounting Standard is currently required or permitted in 85 jurisdictions around the world.

Proposed targeted amendments to provisions – ICAEW response

ICAEW responded in March 2025 to a consultation published by the IASB aimed at improving the requirements for recognising and measuring provisions on company balance sheets. 

ICAEW broadly agrees with aligning the definition of a liability in IAS 37 Provisions, Contingent Liabilities and Contingent Assets with the definition in the Conceptual Framework for Financial Reporting and the proposal to specify that an entity should not adjust the rate used to discount a provision for non-performance risk. ICAEW also broadly agrees with the proposals to specify the costs an entity includes when estimating the future expenditure required to settle an obligation, although we believe greater clarity is required with respect to the scope of the proposed requirement and the costs which relate directly to an obligation.

ICAEW has, however, raised concerns over the scale and complexity of the proposed amendments that, in our view, risk adversely impacting the Standard’s understandability and clarity. An area of particular concern in ICAEW’s view, is that the challenges associated with ‘fitting’ levies into IAS 37 have not been adequately identified and addressed. ICAEW supports addressing known issues with accounting for levies but believes further work is required to answer certain fundamental questions before appropriate accounting requirements for levies can be developed. 

IFRS Foundation Due Process Handbook review - ICAEW response

Also in March 2025, ICAEW responded to the proposed amendments to the IFRS Foundation Due Process Handbook (the Handbook) which mainly reflect the creation of the International Sustainability Standards Board (ISSB) in 2021, after the previous update to the Handbook in 2020.

The key points made in ICAEW’s response are:

• support for the general alignment of the due process framework of the ISSB with that of the IASB, while encouraging the IFRS Foundation (the Foundation) to consider whether the due process for ISSB Standards should be more tailored to meet the needs of developing sustainability reporting standards;
• to encourage the Foundation to integrate the Sustainability Accounting Standards Board Standards into ISSB Standards in order to address concerns over the transparency of their current due process and significance they play in the implementation of ISSB Standards;
• to encourage the Foundation to consider the perceived increased reliance on the use of ‘Other Material/Educational material’ on sustainability reporting topics, which although subject to internal reviews, has not gone through the due process to deem it authoritative; and
• support for proposals to build on the IASB’s experience and stakeholder feedback to clearly explain the objective of, process for and possible outcomes of Post-Implementation Reviews (PIRs) in its publications while noting wider concerns about the value and timing of PIRs. 

UKEB adopts Annual Improvements to IFRS Accounting Standards – Volume 11

The UK Endorsement Board (UKEB) adopted the Annual Improvements to IFRS Accounting Standards – Volume 11. The amendments clarify requirements for:

• hedge accounting by a first-time adopter (IFRS 1 First-time Adoption of International Financial Reporting Standards);
• gain or loss on derecognition (IFRS 7 Financial Instruments: Disclosures);
• transaction price (IFRS 9 Financial Instruments);
• derecognition of lease liabilities (IFRS 9);
• determination of a ‘de facto agent’ (IFRS 10 Consolidated Financial Statements); and
• cost method (IAS 7 Statement of Cash Flows).

The amendments are effective for annual reporting periods beginning on or after 1 January 2026, with early application permitted.

Sustainability reporting

European Commission releases its Omnibus proposal

On 26 February 2025, the European Commission (EC) released its Omnibus proposal that focuses on streamlining a collection of European Union (EU) sustainability reporting obligations – Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD), Carbon Border Adjustment Mechanism (CBAM) and EU Taxonomy. The Omnibus aims to simplify reporting requirements and improve the competitiveness of businesses working toward sustainability goals. 

These proposals are subject to approval by the European Parliament and European Council. Companies are subject to the current version of the CSRD while the final amendments are being determined.

Some of the simplifications to the CSRD proposed by the EC Omnibus include:

• amending the definition of large companies to change the scope of reporting requirements;
• delaying reporting requirements by two years for those companies currently due to start reporting in 2026 and 2027; and
• revising European Sustainability Reporting Standards to substantially reduce the number of data points, clarifying certain provisions and improving consistency with other pieces of legislation.

Read the article, Taking a simplified approach to sustainability reporting, to find out more about the Omnibus package.

Guide to help companies apply IFRS S1 when reporting only climate-related disclosures in accordance with ISSB Standards

The Foundation published a new guide to help companies understand how to report only climate-related information in accordance with ISSB Standards in January 2025. The publication is part of a broader commitment to support and help investors to receive decision-useful information. 

The guide focuses on the ‘climate-first’ transition relief in ISSB Standards. This relief was provided to balance investor requests for climate-related information to inform decision making with stakeholders’ concerns about data availability and companies’ readiness to provide information about other sustainability-related risks and opportunities.

UK GAAP

FRS 101 2024/25 annual review – ICAEW response

ICAEW submitted its response to the FRC’s consultation on proposed amendments to FRS 101 Reduced Disclosure Framework relating to developments in IFRS Accounting Standards. ICAEW broadly agrees with the FRC’s proposed amendments to FRS 101 and that FRS 101 will continue to have a positive impact on the cost effectiveness of the preparation of financial statements.

Two new IFRS Accounting Standards were issued in 2024: IFRS 18 Presentation and Disclosure in Financial Statements and IFRS 19 Subsidiaries without Public Accountability: Disclosures. With regard to IFRS 18, ICAEW agrees with the proposed amendments to FRS 101 to:

• exempt most qualifying entities from disclosure requirements relating to management-defined performance measures; 
• exempt qualifying entities from disclosing a disaggregation of specified expenses classified by nature; and
• maintain extant exemptions that apply to requirements in IAS 1 Presentation of Financial Statements that have been retained in IFRS 18 or moved to other IFRS Accounting Standards.

IFRS 19 has a similar objective to that of FRS 101. ICAEW agrees that it therefore does not make sense for a qualifying entity to apply both IFRS 19 and FRS 101 and supports the proposed amendments to FRS 101 to prevent this from happening. 

UK regulation for company accounts

Companies House reform: updated timelines for identity verification changes

As part of the identity verification changes being introduced under the Economic Crime and Corporate Transparency Act 2023, online registration as an Authorised Corporate Service Provider (ACSP) opened on 18 March 2025. Company directors and individuals with significant control will be able to voluntarily verify their identity from 8 April 2025, either through an ACSP or with Companies House directly. These dates are slightly delayed from the original expectation of 25 February for ACSP registration and 25 March 2025 for voluntary ID verification. The delay in the online portal availability may reduce the time those firms intending to offer ACSP services have between registering and beginning identity verification for clients. 

The wider Companies House reform timeline remains unchanged. 

Legislation on directors’ remuneration reporting laid before Parliament

A Statutory Instrument to remove certain overlapping requirements from the directors’ remuneration reporting framework and clarify certain powers of the UK audit regulator has been laid before parliament with an effective date yet to be confirmed.

Some of the key elements of the Companies (Directors’ Remuneration and Audit) (Amendment) Regulations 2025 are:

• to remove certain EU-origin directors’ remuneration reporting requirements on UK listed companies, which overlap with pre-existing and continuing UK requirements;
• to clarify certain powers in relation to overseas audits involving non-UK companies and their auditors; and
• to introduce a discretionary exemption from the prohibition of certain non-audit services in exceptional cases, so that an audit firm providing any such services to a Public Interest Entity will be able to seek to tender for the audit of that entity.

Other

Updated guidance to support going concern reporting

On 25 February 2025, the Financial Reporting Council (FRC) issued its updated, non-mandatory guide, ‘Going Concern Basis of Accounting and Related Reporting, including Solvency and Liquidity Risks’, which pulls together the requirements of company law, accounting standards, auditing standards, listing rules, the UK Corporate Governance Code and other relevant regulation into one place.

The guide aims to help companies demonstrate the assessments underlying their going concern conclusions, thereby increasing confidence from stakeholders, including investors, who rely on these important disclosures.

FRC launches digital tool to transform access to company data

In March 2025, the FRC announced the public beta launch of its digital reporting Viewer, a new tool designed to improve free access to structured company reporting data.

The Viewer enables users to view and analyse Inline eXtensible Business Reporting Language (iXBRL) files, displaying tagged data within reports filed at Companies House. This tool should enable greater accessibility and transparency and comparability of company financial information for investors, businesses and the general public.