IASB has proposed amendments to the IFRS standards to assist companies in providing useful information to investors about the effects of interest rate benchmark reform on financial statements. The IFRS standards to which the amendments are being proposed are IAS 39 and IFRS 9, which are old and new standards on financial instruments; IFRS 7 on disclosures of financial instruments; IFRS 4 on insurance contracts; and IFRS 16 on leases. This is Phase 2 of the IASB project on interest rate benchmark reform. The proposals address issues affecting financial statements when changes are made to contractual cash flows and hedging relationships as a result of interest rate benchmark reform. The comment deadline is May 25, 2020. IASB aims to issue the final amendments in 2020.
IASB has been considering the effects of interest rate benchmark reform on financial reporting since 2018, splitting its work into two phases. The first phase culminated in amendments to some IFRS Standards—IFRS 9, IAS 39, and IFRS 7—in September 2019, providing temporary exceptions to specific hedge accounting requirements and requiring related disclosures in the period during which there is uncertainty about contractual cash flows arising from interest rate benchmark reform. IASB has now proposed amendments as part of the second phase of its project. The main proposed amendments relate to:
- Modifications—A company would not "derecognize" or adjust the carrying amount of financial instruments for modifications required by interest rate benchmark reform, but would instead update the effective interest rate to reflect the change in the interest rate benchmark
- Hedge Accounting—A company would not discontinue its hedge accounting solely because of replacing the interest rate benchmark if the hedge meets other hedge accounting criteria
- Disclosures—A company would disclose information about new risks arising from the interest rate benchmark reform and how it manages the transition to alternative benchmark rates.
Comment Due Date: May 25, 2020
Keywords: International, Accounting, Banking, Insurance, IFRS 9, IAS 39, Financial Instruments, Hedge Accounting, Disclosures, Interest Rate Benchmark, IBOR, Insurance Contracts, IASB
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleESRB Publishes Risk Dashboard in April 2020
EBA published a report analyzing the impact of the unwind mechanism of the liquidity coverage ratio (LCR) for a sample of European banks over a three-year period, from the end of 2016 to the first quarter of 2020.
In response to questions from a member of the European Parliament, the ECB President Christine Lagarde issued a letter clarifying the possibility of amending the AnaCredit Regulation and making targeted longer-term refinancing operations (TLTROs) dependent on the climate-related impact of bank loans.
IASB started the post-implementation review of the classification and measurement requirements in IFRS 9 on financial instruments and added the review as a project to its work plan.
FSB published a report that examines progress in implementing policy measures to enhance the resolvability of systemically important financial institutions.
EBA published a report on the benchmarking of national loan enforcement frameworks across 27 EU member states, in response to the call for advice from EC.
FSB published a letter from its Chair Randal K. Quarles, along with two reports exploring various aspects of the market turmoil resulting from the COVID-19 event.
RBNZ launched a consultation on the details for implementing the final Capital Review decisions announced in December 2019.
The Trustees of the IFRS Foundation, which are responsible for the governance and oversight of IASB, have announced the appointment of Dr. Andreas Barckow as the IASB Chair, effective July 2021.
HKMA issued a letter to consult the banking industry on a full set of proposed draft amendments to the Banking (Capital) Rules for implementing the Basel standard on capital requirements for banks’ equity investments in funds in Hong Kong.
ESRB published an opinion assessing the decision of Swedish Financial Supervisory Authority (FSA) to extend the application period of a stricter measure for residential mortgage lending, in accordance with Article 458 of the Capital Requirements Regulation (CRR).