IASB (or the Board) has added the second phase of its project focused on potential financial reporting implications linked to the interest rate benchmark reform—interbank offer rate (IBOR) reform—to its work plan. Phase one of the project focuses on financial reporting issues in the period before the current interest rate benchmark is replaced with an alternative rate, while phase two focuses on potential issues that might affect financial reporting once the existing rate is replaced with an alternative rate.
As part of the work on the interest rate benchmark reform, the technical staff at IASB has started to analyze the issues to be considered as part of phase two. The Board will start deliberations on these matters during the third quarter of 2019. Under phase one of the interest rate benchmark reform, IASB, in May 2019, had published an Exposure Draft that proposes exceptions to specific hedge accounting requirements in IFRS 9 and IAS 39. The Board met on July 25, 2019 to discuss the staff’s analysis of feedback on the phase one Exposure Draft, which proposes amendments to IFRS 9 and IAS 39. The Board is considering comments received on this Exposure Draft and aims to finalize the amendments as soon as possible.
Interest rate benchmarks such as IBORs play an important role in global financial markets. These benchmarks index a wide variety of financial products worth trillions of dollars and other currencies, ranging from mortgages to derivatives. Some jurisdictions have already made clear progress toward replacing existing benchmarks with the alternative, nearly risk-free rates. This work has, in turn, led to uncertainty about the future of existing interest rate benchmarks, which may affect financial reporting by companies. In 2018, the Board noted the increasing level of uncertainty about the long-term viability of some interest rate benchmarks and decided to add a project to its agenda to consider the financial reporting implications of the reform. In its outreach with stakeholders, the Board has identified two groups of accounting issues that could have financial reporting implications. These are:
- Pre-replacement issues (addressed in phase one)—These are issues affecting financial reporting in the period before the replacement of an existing interest rate benchmark with an alternative risk-free rate.
- Replacement issues (addressed in phase two)—These are issues that might affect financial reporting when an existing interest rate benchmark is replaced with an alternative risk-free rate.
Keywords: International, Accounting, Banking, Securities, IBOR, Interest Rate Benchmark, Reporting, IFRS 9, IASB
Previous ArticleIMF Publishes Reports on 2019 Article IV Consultation with Mauritius
The Bank of England (BoE) published a consultation paper on approach to setting minimum requirement for own funds and eligible liabilities (MREL), an operational guide on executing bail-in, and a statement from the Deputy Governor Dave Ramsden.
The European Banking Authority (EBA) is seeking preliminary input on standardization of the proportionality assessment methodology for credit institutions and investment firms.
Certain regulatory authorities in the US are extending period for completion of the review of certain residential mortgage provisions and for publication of notice disclosing the determination of this review until December 20, 2021.
The Prudential Regulation Authority (PRA) published the policy statement PS18/21, which introduces an amendment in the definition of "higher paid material risk taker" in the Remuneration Part of the PRA Rulebook.
The European Banking Authority (EBA) published its annual report on asset encumbrance in banking sector.
The European Banking Authority (EBA) published a methodological guide to mystery shopping.
The Australian Prudential Regulation Authority (APRA) released a letter to authorized deposit-taking institutions to provide an update on key policy settings for the capital framework reforms, which will come into effect from January 01, 2023.
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) published a report that assesses the business continuity planning activities of financial market infrastructures or FMIs.
The Bank of England (BoE) published questions and answers (Q&A) on OSCA to BEEDS migration for statistical reporting as well a presentation from the project overview session held with statistical reporters.
The Basel Committee on Banking Supervision (BCBS) is consulting on a technical amendment to the Basel Framework to reflect a new process reviewing the global systemically important bank (G-SIB) assessment methodology.