IFRS 9 2026: What the Upcoming Amendments Mean for Financial Institutions and Corporates

Disclaimer: This article is intended for general information only and does not constitute personal financial advice under UAE regulations governing financial blogs and advertisements.

The International Accounting Standards Board (IASB) has approved amendments to IFRS 9 Financial Instruments, effective for annual reporting periods starting 1 January 2026, with earlier application permitted. These changes are part of a broader effort to refine and clarify the classification, measurement, recognition and disclosure of financial instruments — ensuring IFRS remains fit for evolving financial and commercial realities.

What’s Changing in IFRS 9

• Classification & Measurement: Updated SPPI and Contract-Linked Instruments

The amendments tighten guidance around the “solely payments of principal and interest” (SPPI) test. Financial assets with contract features that allow the timing or amount of cash flows to vary — for example, instruments linked to performance, ESG targets, or other contractually contingent events — may no longer qualify under SPPI. As a result, such instruments may need to be measured at fair value through profit or loss (FVTPL).

The amendments also provide clearer definitions and examples for “contractually linked instruments,” reducing ambiguity and helping preparers and auditors assess classification more consistently.

• Derecognition of Liabilities: Electronic Payment Settlements Recognized Earlier

A practical change: for certain financial liabilities settled via electronic payment systems (e.g., electronic transfers), entities may deem the liability discharged before the actual settlement date — if specific criteria are satisfied. This change helps reflect economic reality more accurately and may affect timing of derecognition and related disclosures.

• New Rules for Nature-dependent Electricity Contracts & Hedge Accounting

For entities entering into contracts for electricity supply from renewable sources (wind, solar, etc.), the amendments introduce targeted guidance. Under certain conditions, such contracts may be treated under the “own-use” exemption (i.e., outside IFRS 9), or — if not exempt — designated as hedging instruments under hedge accounting. Importantly, this includes allowance for variable volume contracts (not only fixed price), recognizing that renewable generation volumes may fluctuate due to natural conditions.

Disclosure and Transparency: What Must Be Shared

The amendments require enhanced disclosures — particularly when instruments or contracts have features affecting variability, cash flows, or carry embedded risks. These include:

• Disclosure of contractual terms that can change timing or amount of cash flows (e.g., contingent features, ESG-linked payoffs).

• For renewable electricity contracts treated under “own-use”: qualitative and quantitative information about unrecognized commitments, future cash flows, and possible risks (e.g., over-supply, volume variability).

• If such contracts are hedged: additional disclosures by risk category regarding hedging terms, instrument features, and associated cash-flow impacts.

These enhancements are aimed at providing investors and stakeholders with clearer, more transparent insight into companies’ risk exposures and the financial effects of complex contracts.

Practical Implications for Corporates — including UAE-based Entities

For companies, banks and financial institutions operating in the UAE or regionally under IFRS:

• Re-assess financial-instrument portfolios: Investments previously classified under amortised cost or FVOCI may need re-classification — especially those with contingent features, performance-linked returns, or ESG-linked terms.

• Review contract and payment-processing mechanisms: Entities using electronic payment systems to settle liabilities should examine whether early derecognition is applicable under the new guidance.

• For firms involved in renewable energy procurement (e.g. via power-purchase agreements): Evaluate whether contracts qualify for “own-use” exemption or require hedge accounting treatment under IFRS 9 — and prepare to meet the enhanced disclosure requirements.

• Update accounting policies and disclosure templates: Ensure compliance with new classification, measurement, derecognition and disclosure rules; adjust internal controls and financial-reporting processes in time for 2026 fiscal periods.

• Engage auditors and advisory experts early to avoid surprises and to ensure consistent interpretation of the amendments — especially given their potentially broad impact across various types of instruments and contracts.

What Remains Unchanged

It is important to note that the 2026 amendments to IFRS 9 are narrow in scope — they do not overhaul the standard’s fundamental framework. The main goals are clarification, consistency and improved transparency rather than radical change.

For many straightforward financial instruments — standard loans, bonds with fixed interest and principal payments — classification and measurement may remain unchanged. Likewise, general hedge-accounting principles remain intact.

Conclusion — Why 2026 Matters

The upcoming IFRS 9 amendments reflect the evolving complexity of financial instruments, business models and commercial contracts — including growth in ESG-linked assets, renewables-based power purchase agreements, and digital payment systems.

For companies operating under IFRS in the UAE and globally, the lead time until 1 January 2026 provides a vital window to assess exposure, update policies, and ensure compliance. By preparing now — reviewing contracts and portfolios, engaging stakeholders, and updating disclosure frameworks — CFOs and finance teams can mitigate risk and deliver transparent, investor-ready financial statements under the updated standard.

Photo by Jakub Żerdzicki