IFRS® Accounting Standards

Power Purchase Agreements

Summary

Canadian entities are increasingly entering into long-term power purchase agreements (PPAs) for the procurement of renewable energy. PPAs are part of entities’ commitment to mitigate the effects of climate change and to decarbonise their production processes and products. PPAs are affected by the structure of energy markets in the jurisdictions entities operate within. Changing market conditions give rise to application challenges and questions when applying the requirements in IFRS 9 Financial Instruments. These challenges can result in accounting outcomes that do not faithfully represent the economic substance of such contracts.

Staff Contact(s)

Alex Levine, CPA, CA Principal, Accounting Standards Board and Sustainability Reporting

+1 604 449 2439

[email protected]

Project Status

Information gathering

The IASB added the Power Purchase Agreements project to its work plan in July 2023
Approving project

After research and outreach, the IASB moved the project into standard-setting

Balloting for proposed amendments was completed in March 2024
Engaging Communities

The IASB issued its Exposure Draft, Proposed Amendments to IFRS 9 and 7, in May 2024
Deliberating feedback

The AcSB submitted its response letter to the IASB in August 2024

The IASB is currently deliberating comments on its Exposure Draft
Final pronouncement

News

June 4, 2024

International Activity, Document for Comment, News

IASB Exposure Draft – Contracts for Renewable Electricity

The IASB has published its Exposure Draft, “Contracts for Renewable Electricity,” which proposes amendments to IFRS 9 Financial Instruments and IFRS 7 Financial Instruments: Disclosures. Respond directly to the IASB with your feedback by August 7, 2024. Also, stay tuned for the AcSB's wraparound exposure draft. If you want the AcSB to consider your feedback before finalizing our comment letter, please respond by July 31, 2024.

Meeting & event summaries

July 9, 2024

AcSB Decision Summary – June 19-20, 2024

The AcSB discussed its plan to respond to the IASB’s Exposure Draft, “Contracts for Renewable Electricity,” which proposes amendments to IFRS 9 and IFRS 7. The IASB issued its Exposure Draft in May 2024, with comments due to the IASB by August 7, 2024. Responses to the AcSB are due by July 31, 2024.

In developing key points to include in the response letter, the AcSB discussed three key points, including own-use exemption for certain physical power purchase agreements (PPAs), hedging, and disclosure for certain physical and virtual PPAs. The AcSB also discussed its approach to targeted outreach activities and obtaining input from its committees.

Regarding the own-use exemption proposed amendment, the AcSB considered its response to the IASB’s Exposure Draft; the AcSB thinks that different treatments for two distinct financial instruments, but that have the same economic outcome, might introduce complexity and inconsistent accounting treatment. The AcSB also thinks that for the hedge accounting specific amendments, this narrow-scope amendment is very focused and that there may be opportunities to expand application to other similar types of contracts. The AcSB recognized that these types of contracts might grow over time.

The AcSB agreed on its plan to respond to the IASB’s Exposure Draft and will discuss its draft response letter at its July 2024 meeting.

Disclaimer

This project summary has been prepared for information purposes only. Decisions reported are tentative and reflect only the current status of discussions on this project, which may change after further Board deliberations. Decisions to publish Handbook material are final only after a formal voting process.