ACCA welcomes the opportunity to provide views in response to the IASB’s exposure draft (ED) for Contracts for Renewable Electricity. Our response has been developed with the assistance of ACCA’s Global Forum for Corporate Reporting.
Our general comments on the proposed amendments are as follows:
Our survey found that 53% of respondents have emissions plans in place to transition to a low carbon economy1. Unsurprisingly, more entities would be entering into contracts with power producers to secure supply of renewable electricity, to fix the price over the contract’s duration and to help achieve their net zero goals.
Due to the nature of electricity that cannot be easily stored for later use or market structures that require the sale of excess electricity, the sale of unused electricity is unavoidable. The circumstances leading to sale of unused electricity is a key factor in determining whether an entity has purchased the electricity for own use.
Accounting for these contracts at fair value in all circumstances and recognising fair value changes in profit or loss for these contracts would not faithfully represent the actual situation.
Therefore, we support the proposed narrow-scope amendments that would permit entities to account for some of these contracts as executory contracts, subject to meeting specific circumstances, and clarifying the hedge accounting requirements.
Our detailed responses to the specific questions asked include suggestions for further clarifications and guidance that would help entities better understand and apply the amended requirements.
To read the response in full, please download the consultation response document on this page.