IASB published a summary of the meeting of the Accounting Standards Advisory Forum (ASAF), along with the agenda papers and recordings. The meeting was held during July 11, 2019 to July 12, 2019 at the IFRS Foundation office in London. IASB staff asked ASAF members for information about the current state of interest rate benchmark reform (IBOR reform) in their jurisdictions and their views on what specific financial reporting issues they have identified and whether and how IASB should address these issues as part of the phase II of the project.
The European Financial Reporting Advisory Group (EFRAG) member said that EFRAG had not yet discussed nor reached a conclusion on the Phase II issues. However, respondents that replied to the draft comment letter of EFRAG suggested issues that should be addressed in Phase II. These include de-recognition and modification of financial instruments, re-calibration of hedging accounting relationship, and changes in hedge documentation. Other ASAF members agreed with this list being the main issues that need to be addressed in the second phase. Additionally, some of these members highlighted the following issues:
- Derecognizing a financial instrument and recognizing a new one as a result of the changes from IBOR reform could have a consequential effect on the potential move of those financial instruments between different impairment stages.
- Given the large number of contracts that are referenced to IBOR, IASB should consider if there is a possibility to allow for some type of practical expedients when considering the scope of the amendments so that the transition process becomes less burdensome for entities.
- There is a need for information on the timeline for Phase II.
- IASB may consider aligning, to the extent possible, the proposed amendments with other standard-setters (particularly FASB), that are also undertaking standard-setting activities to address similar matters.
Keywords: International, Accounting, Banking, Securities, IBOR, Interest Rate Benchmarks, Financial Instruments, Hedging, IFRS 9, ASAF, FASB, IASB
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