IFRS quarterly update: Key IFRS developments in Q1 2026

Proposed amendments to the fair value option for investments in associates and joint ventures (IAS 28)

What’s new?

The IASB has published an exposure draft proposing amendments to IAS 28 Investments in Associates and Joint Ventures to clarify the scope of entities eligible to apply the fair value option for such investments. Under the current standard, venture capital organisations, mutual funds, unit trusts and similar entities may elect to measure investments in associates or joint ventures at fair value through profit or loss in accordance with IFRS 9.

The proposal aims to clarify that “similar entities” include those whose main business activity is investing in particular types of assets, as described in IFRS 18. This clarification seeks to ensure consistent application of the fair value option by entities whose business model is investment-driven but that may not fall clearly within the existing categories.

The IASB proposes that the amendments should be applied at the same time as IFRS 18, using the existing transition provisions for the fair value option. The exposure draft was  open for comment until 20 April 2026.

Who is affected?

The proposal is particularly relevant for Luxembourg’s investment management industry, including private equity, private debt and real estate investment structures. Many Luxembourg-based funds and investment vehicles hold minority stakes in portfolio companies or joint ventures where fair value measurement is consistent with their investment strategy and investor reporting expectations.

Clarifying the scope of “similar entities” could enable a broader range of investment structures to apply fair value accounting to associates and joint ventures. This may improve alignment between financial reporting and how investors assess performance, especially where equity investments are managed on a fair value basis.

For banks and credit institutions, the impact may be more limited but could still be relevant for investment arms or asset management subsidiaries that hold strategic or investment-driven equity stakes.

For insurance companies, the amendments may also be relevant where insurers hold equity investments backing policyholder liabilities. Clarifying “similar entities” could allow more insurance investment vehicles to apply the fair value option, improving alignment between financial reporting and internal performance metrics, particularly for unit-linked or investment-driven businesses.

IASB discussions on intangible assets and emerging digital assets

What’s new?

At its January 2026 meeting, the IASB continued exploratory work on potential changes to the definition and recognition requirements for intangible assets. The discussion focused on test cases such as cloud computing arrangements (including software-as-a-service), and agile software development, which increasingly challenge the existing boundaries between research, development, and intangible asset recognition.

The Board explored whether current accounting requirements adequately reflect modern digital business models. Attention was given to the concept of control over intangible assets and the appropriate unit of account, especially when entities access software or digital infrastructure through contractual arrangements rather than owning the underlying assets.

The IASB also acknowledged the growing relevance of data resources and artificial intelligence-related assets, although these areas are expected to be considered at a later stage in the project.

Who is affected?

Although still at an early stage, this project has potential implications for a wide range of entities operating in Luxembourg. Banks, financial institutions, and asset managers increasingly rely on cloud-based systems, data platforms, and internally developed technology, raising questions about whether related costs should be capitalised or expensed.

For investment funds and alternative asset managers, the implications may arise indirectly through portfolio companies, particularly in technology-driven sectors such as fintech, data analytics or digital infrastructure.

Private equity investors may also face greater scrutiny over the treatment of internally developed software and digital assets within portfolio companies, potentially affecting EBITDA metrics, valuation models, and investor reporting.

IFRS Interpretations Committee agenda decisions under IFRS 9

What’s new?

The IASB confirmed the finalization of two IFRS Interpretations Committee agenda decisions relating to IFRS 9 financial instruments. These address:

• the treatment of embedded prepayment options in loan contracts; and
• the definition and accounting treatment of transaction costs.

In both cases, the IFRS Interpretations Committee concluded that the existing IFRS requirements provide sufficient guidance and that no standard-setting project is required. The agenda decisions therefore serve as interpretative guidance clarifying how existing requirements should be applied in practice.

Who is affected?

These clarifications are particularly relevant for banks and credit institutions, where loan instruments with embedded features and transaction cost considerations are common.

Bank and credit institutions may need to review whether their existing accounting treatments for loan origination costs, embedded features or contractual prepayment options align with the interpretations reflected in the agenda decisions.

Investment funds and asset managers with debt portfolios or structured credit exposures may need to review how these features are accounted for in their investment strategies, potentially affecting fair value measurements, amortized cost calculations, or performance reporting.

Equity method: Ongoing IASB clarifications

What’s new?

The IASB continued redeliberating the proposals in the Exposure Draft Equity Method of Accounting and largely confirmed its proposed approach to accounting for changes in ownership interests while retaining significant influence, including treating increases and decreases in ownership as purchases or disposals of an additional interest.

However, the Board decided not to proceed with several more complex proposals, particularly those relating to hybrid instruments, combinations of transactions, and exemptions for transactions to which the investor is not directly a party.

 A key area of debate was the treatment of equity-settled share-based payments, where many IASB members opposed the staff recommendation due to concerns over complexity and a lack of clear user benefits, leading to its likely exclusion or deferral.

In parallel, the IASB agreed to introduce a practical relief allowing alternative measurement to fair value when acquiring additional ownership interests, subject to a materiality-based assessment, reinforcing the overall direction toward targeted simplification and a reduced implementation burden.

Who is affected?

This project is highly relevant for Luxembourg’s financial sector, where the use of associates and joint ventures is common. Private equity and infrastructure funds frequently structure investments through minority stakes or joint arrangements, making the equity method a key component of financial reporting.

Banks and financial institutions may also be impacted where they hold strategic participations accounted for using the equity method. Any clarification or simplification could affect how performance is recognized, particularly in complex structures involving partial disposals or layered investment vehicles. For asset managers, greater consistency in applying the equity method would enhance comparability across portfolios and improve transparency for investors.

Improvements to the accounting for provisions and levies (IAS 37)

What’s new?

The IASB continued redeliberations on its project to introduce targeted improvements to IAS 37 Provisions, Contingent Liabilities and Contingent Assets. One of the key areas discussed relates to the recognition of levies, including how entities determine the past event that gives rise to a present obligation.

To address concerns raised during consultation, the IASB tentatively decided to introduce additional application requirements clarifying that the economic benefit or activity that meets the past-event condition for a levy is the economic benefit or activity the government seeks to levy. The Board also supported introducing a constraining presumption linking this activity to the conditions specified in the relevant legislation.

The aim is to improve consistency and clarity compared with the current guidance under IFRIC 21 Levies, which stakeholders have sometimes found difficult to apply.

Who is affected?

The proposed clarifications could affect a broad range of regulated entities in Luxembourg, particularly banks, financial institutions, and insurance groups, which are often subject to regulatory or supervisory levies.

Entities operating within regulated industries may need to reassess when a provision for levies is recognised, particularly where the triggering event depends on regulatory thresholds or annual activity levels.

While the proposal aims to improve consistency, it may also require entities to review existing accounting policies, and ensure that the timing of provision recognition aligns with the clarified principles.

IFRS 16 post-implementation review: Focus on cost and complexity

What’s new?

As part of its post-implementation review of IFRS 16 leases, the IASB analyzed feedback indicating that the ongoing application of lease accounting requirements is more costly and operationally complex than initially expected. Key challenges identified include the frequency of lease liability remeasurements, the determination of discount rates, and the overall system burden associated with maintaining lease data.

In response, the IASB decided to explore potential targeted simplifications through a future research project. Areas under consideration include simplifying remeasurement requirements, reducing the need for frequent updates and allowing more practical approaches to discount rate determination. The Board also decided not to introduce additional disclosure requirements, reflecting concerns around cost-benefit balance, and reporting overload.

Who is affected?

This update is particularly relevant for Luxembourg entities with significant lease portfolios, including real estate funds and asset management firms. These entities often manage large volumes of leases across jurisdictions, making lease accounting a resource-intensive process.

Banks and financial institutions may also be affected where lease accounting relates to branch networks or infrastructure. For alternative investment structures, particularly real estate funds, any future simplifications could reduce operational burden, and influence how lease-related metrics are monitored and reported.

Progress on improving cash flow reporting

What’s new?

The IASB has decided to move its project on statement of cash flows and related matters from the research phase to the standard-setting work plan. This follows feedback from the Board’s Third Agenda Consultation indicating that investors consider improved cash flow reporting a high priority.

The project aims to address perceived deficiencies in current reporting, particularly around the usefulness of cash flow information for forecasting future cash flows and assessing financial performance. Based on the research performed so far, the IASB believes it has sufficient information to begin developing an exposure draft proposing improvements to cash flow reporting requirements.

Who is affected?

Improved cash flow reporting would have a cross-industry impact, affecting virtually all IFRS preparers given it is one of the primary financial statements and mandatory for compliance with IFRS accounting standards. However, a recent EFRAG discussion suggests that for financial institutions, including banks and insurers, the statement of cash flows in its current form may be of limited relevance. Users often rely on other metrics, such as liquidity ratios or asset-liability management disclosures, rather than traditional cash flow statements.

Luxembourg-based investment funds and asset managers may also be affected if new requirements influence the classification or disclosure of investment-related cash flows, particularly where complex investment structures are involved.