Preparing for IFRS Updates in 2025: Key Changes Impacting Your Business

Preparing for IFRS Updates in 2025: Key Changes Impacting Your Business

As the year 2025 approaches, staying ahead of changes in the International Financial Reporting Standards (IFRS) is critical for businesses seeking to maintain compliance and accurate financial reporting. Below, we provide a detailed explanation of the blog structure, its purpose, and key elements:

Overview of IFRS and Its Importance

The International Financial Reporting Standards (IFRS) are a globally recognized set of accounting standards issued by the International Accounting Standards Board (IASB). These standards ensure that financial statements are transparent, comparable, and consistent across international markets. Adopting IFRS fosters trust among stakeholders, investors, and regulators, as they can rely on standardized financial disclosures irrespective of the company’s geographical location.

This blog is designed to:

Summarize the most significant IFRS changes taking effect on January 1, 2025.

Provide practical guidance on how businesses can adapt their financial reporting systems and processes to align with these updates.

The goal is to help businesses anticipate challenges, leverage opportunities, and ensure compliance while optimizing their financial reporting processes.

2. Key IFRS Amendments Effective January 1, 2025

Amendments to IAS 21: Lack of Exchangeability

Background

In August 2023, the International Accounting Standards Board (IASB) introduced amendments to IAS 21 to address scenarios where a currency is not exchangeable. These amendments provide clarity and a consistent approach for determining the exchange rate to be used in financial reporting when normal market mechanisms for currency exchange are unavailable. This is particularly relevant in economies with stringent foreign exchange restrictions or unstable currencies.

Implications for Businesses

Organizations operating in economies where foreign exchange restrictions or disruptions exist will need to:
Assess Exchangeability: Determine whether a currency meets the exchangeability criteria outlined in the amendments.
Apply the Prescribed Methodology: Use the specific guidance to calculate an exchange rate for financial reporting purposes, ensuring compliance and accuracy in their financial statements.

Evaluate Financial Impacts: Reassess the valuation of foreign currency transactions, assets, and liabilities, as the lack of exchangeability could significantly affect reported results and disclosures.

IFRS for SMEs Accounting Standard Update

Background

The IASB plans to release the third edition of the IFRS for SMEs Accounting Standard in February 2025. This update will integrate improvements made to the full IFRS Accounting Standards, with modifications designed to simplify reporting for small and medium-sized entities (SMEs). This reflects the IASB’s commitment to maintaining proportionality and relevance for smaller entities.

Implications for SMEs

Small and medium-sized businesses should prepare for the new edition by:

Reviewing the Updates: Understand how the revisions differ from the previous standards and how they incorporate changes from full IFRS.

Assessing the Impact: Evaluate how the updated requirements will influence their financial reporting, including adjustments to recognition, measurement, and disclosures.

Updating Policies and Processes: SMEs may need to revise accounting policies, retrain staff, and potentially upgrade systems to align with the new standards.

3. Preparing Your Business for These Changes

To ensure a smooth transition and compliance with the upcoming IFRS updates, businesses should take proactive measures in four key areas:

1. Stay Informed

Why It Matters: The IFRS landscape is constantly evolving, and new updates or clarifications may emerge as implementation challenges are identified. Staying informed will help you remain ahead of compliance deadlines and adapt to any unforeseen changes.

Action Steps:

Regularly monitor official updates from the IASB and relevant regulatory bodies.

Subscribe to newsletters, attend webinars, or follow industry-specific forums to stay updated on developments related to IFRS.

Assign responsibility within your team to track and disseminate information about changes in financial reporting standards.

2. Training and Development

Why It Matters: The new IFRS amendments may require your accounting and finance teams to adopt new methodologies, tools, or processes. Adequate training ensures your team is well-equipped to manage these changes confidently and accurately.

Action Steps:

Conduct training programs and workshops focused on specific IFRS updates, such as the amendments to IAS 21 or the IFRS for SMEs updates.

Provide ongoing professional development opportunities, including certifications and refresher courses on IFRS.
Use case studies and real-life examples to illustrate the practical impact of the changes on financial statements.

3. System and Process Updates

Why It Matters: Effective implementation of IFRS amendments often requires changes to existing financial reporting systems and processes. Inadequate preparation could lead to compliance issues, reporting errors, or inefficiencies.

Action Steps:

Perform a gap analysis to identify any system limitations or process inefficiencies that may hinder compliance with the new standards.

Collaborate with IT and finance teams to update financial reporting software and systems to reflect the new requirements, such as calculating exchange rates under the amended IAS 21.

Test and validate updates to ensure seamless integration and accurate reporting before the changes take effect.

4. Consultation

Why It Matters: IFRS updates can be complex, and their implications vary based on your business’s industry, size, and geographical footprint. Consulting with IFRS specialists can help you tailor your approach to meet your unique needs.

Action Steps:

Engage professional advisors, such as auditors, consultants, or legal experts specializing in IFRS compliance, to understand the specific impact on your financial statements.

Seek advice on potential risks and opportunities arising from the updates.

Use consultants to review your financial reporting policies and verify alignment with the amended standards.

4. Conclusion

The upcoming IFRS amendments, effective from January 1, 2025, mark a significant shift in financial reporting practices. While these changes may pose challenges, they also offer opportunities to enhance the transparency, consistency, and comparability of financial statements on a global scale.

Key Takeaways:

Challenges: Adapting to complex new standards, such as those addressing currency exchangeability and updated SME reporting requirements, requires time, effort, and resources.

Opportunities: These amendments offer a chance to improve the quality of financial reporting, build trust with stakeholders, and align with best practices in global accounting.

Proactive Preparation is Crucial:

By staying informed, training your teams, updating systems, and seeking expert guidance, your business can seamlessly integrate these changes into its financial reporting processes. Early preparation minimizes disruptions, reduces compliance risks, and positions your organization to confidently navigate the evolving financial reporting landscape.
Embracing these updates isn’t just about meeting regulatory requirements—it’s also about leveraging them to drive better financial decision-making and build credibility in international markets.

Contact Ez-XBRL for Financial Reporting

5. References
IFRS