How to prepare your business for the next phase of IFRS updates

By Polyvios A Polyviou; HLB Global IFRS Leader

An increasingly globalised financial landscape requires compliance with International Financial Reporting Standards (IFRS). As the next phase of IFRS updates approaches, businesses need to proactively adapt to the changes shaping their financial reporting.

These updates will bring significant changes, particularly in revenue recognition for SMEs and foreign currency transactions and disclosures. Navigating these updates will require proactive preparation, and the right guidance can ensure seamless compliance and continued growth.

IFRS updates for 2025

The International Accounting Standards Board (IASB) has introduced key changes to IFRS standards set to take effect in 2025 to address gaps in existing rules and improve clarity in financial reporting. Some of the changes include the following:

Amendments to IAS 21: Lack of exchangeability

The Lack of Exchangeability amendments to IAS 21 address situations where a currency cannot be exchanged with another, demanding disclosure of information that allows users of financial statements to assess the impact of non-exchangeable currency.

The original IAS 21 required companies to convert foreign transactions into their functional currency using spot exchange rates. However, it only accounted for temporary issues with exchangeability, allowing entities to use the next available rate. The recent amendments address situations where currency exchangeability is prolonged, offering clearer guidelines on how to assess exchangeability, providing guidance for non-exchangeable currencies, and mandating disclosures to help users understand the impact on financial statements.

Understanding these changes is essential for businesses to maintain compliance and avoid potential financial misstatements that could result in inaccurate reporting, regulatory penalties, and diminished stakeholder trust.

The first step in implementing the IAS 21 amendment is to evaluate every foreign exchange transaction for possible exchangeability issues. This includes identifying currencies that may face exchange restrictions or prohibitive costs. Once identified, companies must implement the new framework to estimate the exchange rate and document their methodology comprehensively. New disclosure rules require from businesses to explain the assumptions and processes behind the exchangeability assessments in their financial statements.

IFRS for SMEs accounting standard update

The release of the third edition of the IFRS for SMEs Accounting Standard is scheduled for February 2025, with updates designed to help small and medium enterprises (SMEs) meet modern reporting expectations by enhancing the transparency and comparability of their reporting.

SMEs must align their practices with the requirements of IFRS 15, which were simplified to reflect that these entities typically have simpler contracts with customers and more limited resources compared to companies applying full IFRS Accounting Standards. The simplifications involve using straightforward language that aligns with the way SMEs discuss contracts with customers. They also reduce the amount of judgment and information required from SMEs when applying the revised Section 23, and exclude topics the IASB determined were not relevant to SMEs.

Changes beyond 2025

Looking further ahead, amendments to IFRS 9 and IFRS 7 are intended to address the classification and measurement of financial instruments. Although early adoption is permitted, these changes will become effective on January 1, 2026.

Additionally, the IASB has announced IFRS 18, which will replace IAS 1 starting January 1, 2027. This standard is designed to improve the clarity and comparability of financial statement presentations and disclosures, addressing long-standing concerns about the complexity of financial reports. Similarly, IFRS 19, effective on the same date, introduces simplified disclosure requirements for subsidiaries without public accountability, streamlining compliance for smaller entities within larger corporate groups.

IFRS Checklist

To ensure a seamless adaptation to the upcoming IFRS changes, businesses can follow a structured approach. To facilitate a smooth transition, businesses can use the following checklist:

Firstly, to understand the changes; review the amendments to assess how these changes affect your organisation’s current financial reporting processes. Following this stage, you can begin to assess readiness via the steps below:

IFRS Audit: Preparing for the next phase of standards

IAS 21 amendments and the revised IFRS for SMEs require that businesses reevaluate practices, including foreign currency transactions and revenue recognition policies, to maintain compliance and transparency. An IFRS audit is key for ensuring that financial reporting is aligned with evolving standards.

The audit begins with understanding the scope of updates and identifying areas where existing practices may fall short.

Engaging IFRS specialists helps businesses navigate these complexities and ensure accurate implementation. Adapting internal processes, including accounting systems and controls, is critical for compliance. Tools for exchange rate calculations and revised revenue frameworks can streamline the transition. Additionally, training finance teams on new standards ensure consistent application.

Trial audits are an effective way to test readiness, refine methodologies, and identify potential challenges before the updates take effect. Modern technology further enhances efficiency, automating compliance tasks and providing deeper insights into financial performance.

Regular IFRS audits ensure compliance, strengthen stakeholder confidence, improve operational efficiency, and reduce the risk of penalties or restatements. By proactively preparing for these updates, businesses can navigate the complexities of evolving financial reporting standards and position themselves as leaders in transparency and accountability.

Navigate IFRS updates with HLB Global

Adapting to the latest IFRS updates is essential for businesses to maintain accurate financial reporting and compliance. Staying informed and prepared is key to minimising risks and leveraging new opportunities.

With an international team of professionals with deep IFRS expertise and a proven track record, HLB Global is committed to guiding businesses like yours through the complexities of IFRS compliance, helping them navigate these changes smoothly and efficiently. Contact us today to discover how HLB can help your business stay ahead.