Application of the ‘Own Use’ Exception to some Physical Power Purchase Agreements (Amendments to IFRS 9)

In June 2023, the Committee discussed a request about applying paragraph 2.4 of IFRS 9 to physical delivery contracts to buy energy. The Committee observed that the purchase of renewable energy such as solar and wind via long term energy contracts with physical delivery is widespread and is increasing as renewable energy generation also increases. The request states that entities are experiencing application challenges and questions when applying the requirements in IFRS 9 particularly due to the unique characteristics of the renewable energy market and the related features of the long-term physical delivery contracts.

Based on its analysis, the Committee concluded that the principles and requirements in IFRS 9 do not provide an adequate basis for an entity to determine a consistent accounting outcome for PPAs in the circumstances described in the submission. Therefore, the Committee consider it necessary to add or change the requirements for the ‘own use’ exception in IFRS 9 in limited circumstances to improve financial reporting.