IFRS 2024 news: 2024 annual accounts - don't forget anything!

This overview covers the texts applicable for the first time in 2024 and the changes expected thereafter, in order to help professionals complete their accounting closures and anticipate their impact. Work currently in progress at the IASB proposes approaches to resolving accounting issues that have not yet been resolved. These texts are not yet applicable, and some have not yet been validated, but they do have the advantage of proposing a solution.

1. Texts applicable in 2024

IAS 7 and IFRS 7: Treatment of Reverse Factoring

The amendment to these standards imposes greater transparency on supplier financing arrangements. Required disclosures include:

• The terms of the agreements and their impact on liquidity.
• Reverse factoring debts for which suppliers have already been paid.

These changes are designed to improve understanding of WCR, and harmonize accounting practices.

IAS 1: Classification of debt with Covenant as current or non-current

IAS 1 requires a liability to be classified as non-current if payment is due after 12 months. In the event of a covenant breach, a debt may become due and payable within a shorter period. As a reminder, if the company has obtained a postponement of the repayment obligation (waiver) after the balance sheet date, the debt will nevertheless be classified as current in the balance sheet (in application of IAS 10 events after the balance sheet date).

To be able to classify the debt as non-current, the company would have had to obtain the waiver before the balance sheet date, which is not realistic, as banks generally require the year's financial statements before giving their approval.

The latest amendments to this standard, applicable from January 1, 2024, specify the conditions for classifying a covenanted debt as non-current, in particular when there is a breach or a risk of breach of a covenant at a date subsequent to the balance sheet date.

Companies classify covenanted debts as non-current, even if there is a risk of subsequent breakage.

Companies must specify :

• Risks related to covenant breaches.
• Financial implications in the event of breakage.
• Whether or not the contractual conditions measured at the balance sheet date have been met.

IFRS 16: Lease-back in case of variable rents

IFRS 16 requires the right to use the leased asset to be recognized as an asset on the balance sheet, and the liability representing the lease payments to be recognized as a liability. If the lease payments are variable, this treatment is not applicable. This is the case, for example, with warehouse rents indexed to the volume used during the month. Rents that can be revised according to an index, such as the construction index, are not considered variable rents.

In the case of sale and lease-back, the asset sold is derecognized from the balance sheet, except for the portion corresponding to the right of use over the years covered by the lease.

The amendment to IFRS 16 applies only to infrequent sale and leaseback transactions involving variable lease payments. Theoretically, in the case of variable lease payments, the company does not recognize rights of use or lease liabilities. However, in exceptional cases of sale and lease-back, the asset sold will nevertheless be replaced by a right of use.

2. Outlook for 2025 and beyond: the way forward

IFRS 18: Presentation of Financial Statements and Disclosures

This standard, applicable from 2027 with early application possible from 2025, subject to validation by the European Union, introduces two major axes:

1. Presentation of income and expenses according to 3 categories: Operating, Investment and Financing.

See table below.

The main changes are as follows:

• Financial income will no longer include income from investments (to be classified as investments), dividends received on an equity portfolio, or exchange differences on operating transactions. The Financing category will exclusively concern financing expenses, interest on lease liabilities, pension provisions and other discounted liabilities.
• Gains and losses on fixed assets are always classified as operating when they relate to operations.
• Share of profit of associates will always be classified as an investment.

1. The AMF calls them "Alternative Performance Indicators", and for many years has been calling for these indicators to be reconciled with audited accounting data. IFRS 18 makes this reconciliation mandatory for certain management performance indicators.

The new IFRS 18 standard aims to improve consistency between the income statement and the statement of cash flows, and to enhance comparability between issuers, but may impose severe constraints on the preparation of the income statement. These constraints should be anticipated in the event of planned changes to financial communications and/or information systems.

IFRS 19: Simplification for Subsidiaries without Public Liability

Intended for unlisted subsidiaries of groups publishing under IFRS, this standard simplifies the publication of financial statements, while maintaining the application of fundamental IFRS principles.

In practice, few companies are both unlisted, subsidiaries of IFRS groups, and publish IFRS financial statements, since this is not mandatory in Europe. For example, the COLAS Group, a sub-group of the Bouygues Group, is one of the few likely to apply IFRS 19. In practice, the Bouygues Group, which needs to publish its financial statements under non-simplified IFRS, will probably continue to require the same level of information from the COLAS sub-group.

The expected benefits of IFRS 19 are limited, both in terms of scope and effective simplification.

3. Impact on consolidation and reporting

Equity method(Exposure Draft of IAS 28)

As the draft amendment has not yet been finalized, nor obviously validated, it is not necessarily applicable in 2024. However, as it answers questions that remain unanswered to this day, professionals may be led to apply it as of today.

It answers specific and infrequent questions concerning the equity method, which were not addressed in IAS 28. These include:

• The treatment of unrecognized losses, and their impact on the acquisition of additional shares.
• The gain or loss on disposal of a subsidiary to an entity subject to significant influence.

Conclusion

This article reviews the changes in IFRS standards that have an impact on the preparation of financial statements for the year ending December 31, 2024, as well as the changes expected for 2025 and beyond. Mastering the latest standards applicable today is crucial to preparing your financial statements efficiently and anticipating the requirements of the AMF. Knowledge of future changes in accounting standards is important in two respects. On the one hand, it enables us to anticipate the expected consequences of changes in accounting rules, which is essential when revising information systems or any other finance department project. On the other hand, the new texts sometimes respond to current issues that have yet to be resolved. Even if these new texts are not yet applicable, they can be very useful for the closing.

Training to Anticipate IFRS Changes and Extra-Financial Reporting in 2024-2025

Anticipate these changes with FinHarmony, experts in IFRS training and strategic coaching.

Our dedicated courses will help you to master these transformations and ensure optimal implementation. Here is a selection:

1. IFRS news - Quarterly session

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Dates: 13/05/2025, 17/09/2025, 03/12/2025

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• Three times a year, take a half-day course on current technical developments and find out about draft standards and/or interpretations.
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Duration: 1 day

Dates: 01/30/2025 and 07/07/2025

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These training courses combine technical expertise, practical case studies and interactive exchanges, giving professionals the tools to anticipate and respond to new standards requirements. Contact FinHarmony for registration and information.