What Will Change in IFRS in 2025? Key Updates and Their Impact on Business

The International Financial Reporting Standards (IFRS) continue to evolve, adapting to the ever-changing needs of modern businesses and financial reporting requirements. As we approach 2025, several important updates will come into effect, which will impact businesses across various industries. These changes are significant as they aim to provide more accurate, transparent, and comparable financial reporting. But how will these updates affect financial and managerial processes, and what should businesses do to prepare? Let’s explore the key IFRS updates for 2025 and their potential impact.

Key IFRS Changes in 2025

1. IFRS 17: Insurance Contracts

The new IFRS 17 standard is set to replace IFRS 4 and introduces major changes in the way insurance contracts are accounted for. The goal of these changes is to increase transparency in insurance financial reporting, offering a more standardized approach across the industry.

Key Aspects of IFRS 17:

• Transparency: Insurers will need to provide more detailed information on risks, including their financial positions and how these risks affect the pricing of contracts.
• Standardized Approach:All types of insurance contracts will be accounted for under the same principles, which will make comparisons between companies and across countries much easier.
• Objective Liability Assessment: The standard moves towards a more objective assessment of liabilities, ensuring a more accurate and comparable financial reporting system for stakeholders.

Who is Affected?

The implementation of IFRS 17 will primarily affect insurance companies, financial analysts, investors, and regulators. Companies in the insurance sector will need to assess how their current policies align with these new standards.

What Should You Do?

• Review Insurance Liability Accounting Policies: Companies should start by reviewing their accounting policies for insurance liabilities to ensure they align with the new standards.
• Employee Training: A crucial step will be to train employees, particularly in finance and accounting departments, to handle the new reporting requirements.
• Adapt Accounting Systems: Businesses should evaluate their current accounting systems and make necessary upgrades to accommodate IFRS 17 requirements. It may involve changes to software or processes related to the measurement of insurance contracts.

2. IFRS 9: Financial Instruments

Although IFRS 9 has been in effect since 2018, some important clarifications will take effect in 2025. These changes will address specific areas of financial asset classification and impairment assessment, which are crucial for ensuring more accurate reporting of financial instruments.

Key Aspects of IFRS 9:

• Asset Impairment: One of the major updates in IFRS 9 relates to the impairment of financial assets. The revised methodology for credit risk assessment is designed to address concerns about the timeliness and accuracy of impairment calculations.
• Financial Asset Classification: Stricter criteria will be introduced for recognizing financial instruments, which will require businesses to reassess their portfolios and accounting methods.
• Simplified Approach: For small organizations and banks, a simplified approach will be introduced, easing the burden of compliance and reporting.

Who is Affected?

Banks, financial institutions, and companies engaged in active investment activities will be directly impacted by these changes. Companies with large portfolios of financial assets will need to assess the impact of these changes on their accounting and reporting processes.

What Should You Do?

• Review Financial Asset Valuation Methodologies: Businesses should review their methods for valuing financial assets, especially in light of the new classification criteria.
• Adapt Credit Risk Identification Processes: Update internal processes related to credit risk assessment and impairment measurement to align with IFRS 9’s new requirements.

3. IFRS 15: Revenue Recognition

The updates to IFRS 15 in 2025 focus on providing greater clarity in revenue recognition, particularly for complex contracts. Companies involved in long-term contracts or variable payment arrangements will need to pay special attention to these changes.

Key Aspects of IFRS 15:

• Clarifications in Revenue Recognition: There will be more detailed guidelines for recognizing revenue from complex contracts, especially those involving multiple performance obligations and variable payments.
• Expanded Disclosure Requirements: Businesses will be required to disclose more detailed information about their revenue recognition practices and the timing of recognizing revenue.
• Changes in Accounting for Variable Payments: For contracts involving performance bonuses, royalties, or other variable payments, IFRS 15 introduces new methods for recognizing revenue.

Who is Affected?

IFRS 15 changes will impact companies involved in long-term contracts, such as construction, consulting, IT, retail, and other industries with complex revenue arrangements.

What Should You Do?

• Review Accounting Policies: Companies should assess their current revenue recognition policies, especially for long-term contracts and contracts with variable payments.
• Adjust Revenue Recognition Processes: Adapt processes to account for the complexities and changes outlined in IFRS 15, ensuring compliance with the new guidelines.

4. Expanded Disclosure Requirements

In 2025, IFRS will impose stricter reporting requirements, increasing the volume and depth of disclosed information. These changes aim to improve transparency, particularly in relation to risk management, climate change, and ESG factors.

Key Aspects of Expanded Disclosure Requirements:

• Risk-Related Information: Companies will need to disclose more comprehensive information about the risks they face, including financial, operational, and strategic risks.
• Segment Reporting Requirements: There will be tighter requirements around segment reporting, which may require companies to disclose more detailed financial information about different parts of their business.
• Climate and ESG Risks: New standards will require businesses to disclose information related to climate change, environmental, social, and governance (ESG) risks, which are becoming increasingly important to investors and stakeholders.

Who is Affected?

All companies will be affected by these changes, but the impact will be particularly significant for those preparing for IPOs, attracting investors, or working in industries facing increasing regulatory pressure on sustainability and risk transparency.

What Should You Do?

• Develop a New Disclosure Policy: Companies will need to update their internal policies to ensure that all required disclosures are made in a timely and comprehensive manner.
• Strengthen Reporting Quality Control: As the volume of required disclosures increases, businesses will need to strengthen their reporting quality control systems to maintain accuracy and reliability.



How to Prepare for the Changes?




Preparing for the 2025 IFRS changes requires a strategic approach, involving multiple steps to ensure that businesses can effectively implement the new requirements.

1. Conduct an Audit of Current Accounting Processes

Start by auditing your current accounting processes and policies to identify areas that need to be updated or revised in line with the new IFRS standards. This will help you pinpoint gaps and inefficiencies in your current system.

2. Adapt Accounting Systems and Software

Invest in upgrading your accounting systems and software to handle the more complex calculations and reporting requirements introduced by IFRS 17, 9, and 15. This may involve adopting new tools or integrating additional features into your existing system.

3. Train Employees on New Requirements

Training is crucial. Ensure that your accounting and finance teams are well-versed in the new IFRS standards. Provide them with the resources and tools they need to understand and implement these changes effectively.

4. Consult with Auditors and Financial Experts

Work closely with auditors and financial experts who can guide you through the complexities of the new IFRS standards. Their expertise will be invaluable in ensuring compliance and addressing any challenges that may arise.




Are You Ready for the Changes?




IFRS updates in 2025 will bring significant changes that will impact many aspects of financial reporting and accounting. Being proactive in preparing for these changes can help you avoid pitfalls and ensure that your company remains compliant with the latest standards.

If you have any questions about implementing the new IFRS standards or need guidance on how to make the transition smoother, feel free to leave a comment. Let’s discuss together how to prepare for these changes effectively!