The International Accounting Standards Board (IASB) has reached a tentative decision that could affect how some financial liabilities arising from contingent settlement provisions are measured. The proposal is still under development and is not an amendment that businesses must apply today.

The development was included in the IASB’s October 2026 update, published in November. The IASB met on 27 and 28 October 2026 and is continuing work on targeted improvements to the amortised cost measurement requirements in IFRS 9 Financial Instruments. The IASB’s update explains the decision and its current status. The IFRS Foundation separately confirmed that the October update is now available.

What the IASB has proposed

The tentative decision is that a financial liability arising from a contingent settlement provision should be measured at an amount that is not less than the transaction price. The transaction price is described as the fair value of the consideration received for the financial instrument as a whole.

The proposed approach would apply both when the liability is initially recognised and when it is subsequently measured. The IASB recorded unanimous support from its 13 members for this tentative decision. However, the Board will continue deliberating before an Exposure Draft is developed and issued. The project page records the current stage and next milestone.

Who may be affected

The issue is most relevant to entities that enter into financial arrangements containing settlement terms that depend on uncertain future events or conditions. The effect will depend on the contract’s wording, the nature of the settlement feature and the accounting framework applied by the entity.

For South African businesses, the immediate relevance is mainly for finance teams preparing IFRS financial statements, groups with complex funding arrangements and entities whose accountants or auditors monitor IASB developments closely. Smaller businesses may not be directly affected, but a review could still be useful where loans, preference instruments, earn-out arrangements or other contracts contain contingent settlement features.

What businesses should check now

  • Identify financial liabilities that include contingent repayment, settlement or redemption terms.
  • Review the original contracts, amendments and side agreements rather than relying only on the general ledger description.
  • Document the current accounting conclusion under the applicable IFRS requirements.
  • Ask whether the arrangement could be affected if the IASB’s tentative direction becomes a formal amendment.
  • Keep the matter on the technical accounting or year-end reporting agenda where the contract is material or judgmental.

Why the proposal matters before it becomes a rule

A tentative IASB decision does not change South African reporting requirements. Businesses should not adjust their accounts solely because this proposal has been discussed. The practical value of an early review is preparation: finance teams can identify affected instruments, gather contract evidence and discuss possible consequences with their auditors before a formal Exposure Draft or final amendment is issued.

YFP clients can also review their wider reporting controls and financial-instrument documentation through the firm’s accounting and advisory services.