Contracts Referencing Nature Dependent Electricity
Amendments to NZ IFRS 9 and NZ IFRS 7
Contracts Referencing Nature Dependent Electricity – Amendments to NZ IFRS 9 and NZ IFRS 7 is an amending Standard that updates NZ IFRS 9 Financial Instruments and NZ IFRS 7 Financial Instruments: Disclosures.
The amendments introduce requirements addressing contracts referencing nature-dependent electricity, which are contracts that expose entities to variability in electricity amounts due to uncontrollable natural conditions.
The amendments clarify the application of the 'own-use' exception, allowing entities to assess electricity purchase contracts based on expected usage requirements. The amendments also introduce an exception to the general hedge accounting principles in NZ IFRS 9 to permit the designation of these contracts as hedging instruments against a variable nominal volume of electricity. New disclosure requirements are introduced to enable investors to understand the effects of contracts referencing nature-dependent electricity on an entity's financial performance and cash flows.
Commencement and Application
Application of the amendments is required for accounting periods which begin on or after 1 January 2026.
Early application is permitted for accounting periods that end after the standard takes effect on 29 May 2025.
The amendments apply to both Tier 1 and Tier 2 for-profit entities.