Tier 2 disclosures required for nature-dependent electricity contracts (power purchase arrangements )

On 26 August 2025, the Australian Accounting Standards Board published amendments to AASB 1060 General Purpose Financial Statements – Simplified Disclosures for For-Profit and Not-for-Profit Tier 2 Entities that require disclosure about an entity’s nature-dependent electricity contracts (sometimes referred to as ‘power purchase arrangements’).

The amendments, contained in AASB 2025-3 Amendments to Australian Accounting Standards – Contracts Referencing Nature-dependent Electricity: Tier 2 Disclosures, are a streamlined version of disclosures required by entities applying the own use and hedge accounting amendments in IFRS 9 for nature-dependent electricity contracts.

What is a contract referencing nature-dependent electricity (CRNE) contract?

CRNEs expose an entity to variability in the underlying amount of electricity because the source of electricity generation depends on uncontrollable natural conditions (for example, sunshine and/or wind). Contracts referencing nature-dependent electricity include both contracts to buy or sell nature-dependent electricity and financial instruments that reference such electricity.

New disclosures about CRNEs in Tier 2 financial statements

AASB 2025-3 contains new requirements to disclose information about an entity’s CRNEs that meet the ‘own use’ criteria and are recognised as procurement (purchase) contracts in accordance with paragraphs B2.7–B2.8 of AASB 9.

In such cases, AASB 1060, paragraph 122A requires the entity to disclose, in a single note in its financial statements:

  • Information about contractual features that expose the entity to:
    • Variability in the underlying amount of electricity
    • The risk that the entity would be required to buy electricity during a delivery interval in which the entity cannot use the electricity (see paragraph B2.7 of AASB 9)
  • Qualitative information about how the entity assesses whether a contract might become onerous (see AASB 137 Provisions, Contingent Liabilities and Contingent Assets), including the assumptions the entity uses in making this assessment, and
  • Qualitative information about the effects on the entity’s financial performance for the reporting period.

When are the new disclosures required?

The new disclosures must be included in financial statements for annual reporting periods beginning on or after 1 January 2026, with earlier application permitted.

They apply for the first time in the same period as the changes to AASB 9 Financial Instruments and AASB 7 Financial Instruments: Disclosurescontained in AASB 2025-1 Amendments to Australian Accounting Standards – Contracts Referencing Nature-dependent Electricity.

Comparative information is not required in the first year

Entities are not required to provide comparative information for any reporting periods presented before the beginning of the annual reporting period in which the entity first applies these requirements.

Change in accounting policy disclosures

In the first period that the entity applies the amendments to AASB 9 for CRNEs, it is required to include disclosures about changes to accounting policies (AASB 1060, paragraph 106). However, it is not required to disclose the quantitative information that would otherwise be required by AASB 1060, paragraph 106(b), regarding the quantitative impact of the change in policy on the current and prior periods.

Challenges accounting for CRNEs – Why was change needed?

For many entities (both suppliers and purchasers), the inherent features of nature-dependent electricity and the electricity markets have to date, limited their capacity to account for CRNEs as supply contracts outside of the scope of AASB 9 Financial Instruments. This is because the own use exemption in paragraph 2.4 of AASB 9 only applies to contracts entered into for the purpose of receipt or delivery of a non-financial item in accordance with the entity’s expected purchase, sale or usage requirements.

With nature-dependent electricity such as solar and wind highly susceptible to unexpected variations in supply and excess quantities not readily storable (particularly in large quantities) for future consumption, purchasers, for example, are generally compelled to sell excess electricity into the most accessible electricity grid, thereby failing the own use exemption in paragraph 2.4.

Amendments to IFRS 9 and IFRS 7

To address these challenges, in December 2024, the International Accounting Standards Board published amendments to IFRS 9 to address these measurement challenges, and also added disclosures about CRNEs to IFRS 7 Financial Instruments: Disclosures. These amendments, adopted in Australia as AASB 2025-1, and effective for annual periods beginning on or after 1 January 2026:

        • Clarify how the ‘own use’ criteria apply to CRNEs
        • Modify the normal hedge accounting requirements to facilitate the application of hedge accounting to CRNEs, and
        • Add new disclosures to enable users of financial statements to better understand the effect of CRNEs on an entity’s financial performance and cash flows.

More information

Our recent article and publication contain further information about the amendments to IFRS 9/AASB 9 for power purchase arrangements.

Need assistance?

Accounting for CRNEs is complex. Please reach out to our IFRS & Corporate Reporting team if you require assistance.