EC Adopts Financial Reporting Changes Arising from Benchmark Reforms
EC published Regulation 2021/25 that addresses amendments related to the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates. Regulation 2021/25 amends Regulation 1126/2008 and relates to the adoption of certain international accounting standards in accordance with Regulation 1606/2002; these accounting standards are IAS 39 and IFRS 9, which are the old and new standards on financial instruments; IFRS 4 on insurance contracts; and IFRS 7 on disclosures of financial instruments. Regulation 2021/25 shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.
In August 2020, as part of the phase 2 of interest rate benchmark reforms, IASB published amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4, and IFRS 16 on leases to address the financial reporting consequences of replacement of the existing interest rate benchmarks with alternative reference rates. These amendments provide for a specific accounting treatment to spread value changes of financial instruments or lease contracts due to the replacement of the interest rate benchmark over time, which prevents a sudden impact on Profit or Loss, and prevents necessary discontinuation of hedging relationships as a consequence of the replacement of the interest rate benchmark.
Following a consultation with the European Financial Reporting Advisory Group, EC has concluded that the amendments to IAS 39, IFRS 4, IFRS 7, and IFRS 9 meet the criteria for adoption set out in Article 3(2) of Regulation 1606/2002. Regulation 1126/2008 has, therefore, been amended. The amendments have been described in Article 1 and detailed in Annex to the Regulation 2021/25. The amendments for the IFRS 9 relate to amortized cost measurement, temporary exceptions from applying specific hedge accounting requirements, additional temporary exceptions arising from interest rate benchmark reform, and the effective date and transition. Each company shall apply the amendments from the commencement date of its first financial year starting on or after January 01, 2021.
Related Links
Effective Date: February 03, 2021
Keywords: Europe, EU, Banking, Insurance, Accounting, IFRS 4, IFRS 9, IAS 39, IFRS 7, Insurance Contracts, Financial Instruments, Disclosures, Interest Rate Benchmarks, Reporting, EC
Featured Experts
Metin Epözdemir
Metin Epözdemir helps European and African banks with design and implementation of credit risk, stress testing, capital management, and credit loss accounting solutions.
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer
Previous Article
EBA Issues Erratum for Technical Package on Reporting Framework 3.0Related Articles
BSP Tackles Aspects of Lending and Islamic, Open & Sustainable Finance
The Central Bank of the Philippines (BSP) issued communications covering developments related to online lending platforms, open finance framework and roadmap, and on the expected regulations in the area sustainable finance.
US Agencies Issue Regulatory Updates, FDIC Launches Tech Sprint
The Board of Governors of the Federal Reserve System (FED) published the final rule that amends Regulation I to reduce the quarterly reporting burden for member banks by automating the application process for adjusting their subscriptions to the Federal Reserve Bank capital stock, except in the context of mergers.
EBA Issues Guide on Bank Resolvability, Consults on Transferability
The European Banking Authority (EBA) published its assessment of risks through the quarterly Risk Dashboard and the results of the Autumn edition of the Risk Assessment Questionnaire (RAQ).
MFSA Publishes CRD5 Updates and Supervisory Priorities for 2022
The Malta Financial Services Authority (MFSA) updated the guidelines on supervisory reporting requirements under the reporting framework 3.0.
HKMA Extends Repayment for Trade Facilities, Consults on Crypto-Assets
The Hong Kong Monetary Authority (HKMA) published a circular, along with the reporting form and instructions, for self-assessment, by authorized institutions, of compliance with the Code of Banking Practice 2021.
FCA Registers Securitization Repositories; PRA Issues 2022 Priorities
The Financial Conduct Authority (FCA) decided to register European DataWarehouse Ltd and SecRep Limited as securitization repositories under the UK Securitization Regulation, with effect from January 17, 2022.
EC Regulation Sets Out Methods for Measuring K-Factors Under IFR
The European Commission (EC) published the Delegated Regulation 2022/25, which supplements the Investment Firms Regulation (IFR or Regulation 2019/2033) with respect to the regulatory technical standards specifying the methods for measuring the K-factors referred to in Article 15 of the IFR.
BIS Studies How Platform Models Impact Financial Stability & Inclusion
The Bank of International Settlements (BIS) published a paper that assesses the ways in which platform-based business models can affect financial inclusion, competition, financial stability and consumer protection.
CBE Issues Additional Measures to Ease Disruptions from Pandemic
The Central Bank of Egypt (CBE) published a circular with instructions on emergency liquidity assistance to banks that are unable to meet their liquidity requirements.
ESAs Publish List of Financial Conglomerates for 2021
The European Supervisory Authorities (ESAs) published the list of identified financial conglomerates for 2021.
