IFRS published update on the meeting of the IFRS Interpretations Committee (IFRIC) in September 2019. The update offers a summary of the tentative decisions of IFRIC, with key discussions focusing on the financial instruments (IFRS 9) standard and the leases (IFRS 16) standard.
At the meeting, the Committee discussed certain matters and decided not to add them to its standard-setting agenda, including the following:
- Fair Value Hedge of Foreign Currency Risk on Non-Financial Assets (IFRS 9 on financial instruments)—IFRIC received two requests about fair value hedge accounting applying IFRS 9. Both requests asked whether foreign currency risk can be a separately identifiable and reliably measurable risk component of a non-financial asset held for consumption that an entity can designate as the hedged item in a fair value hedge accounting relationship. IFRIC concluded that the principles and requirements in IFRS 9 provide an adequate basis for an entity to determine whether foreign currency risk can be a separately identifiable and reliably measurable risk component of a non-financial asset held for consumption that an entity can designate as the hedged item in a fair value hedge accounting relationship.
- Lessee’s Incremental Borrowing Rate (IFRS 16 on leases)—IFRIC received a request about the definition of a lessee’s incremental borrowing rate in IFRS 16. It was asked whether a lessee’s incremental borrowing rate is required to reflect the interest rate in a loan with both a similar maturity to the lease and a similar payment profile to the lease payments. The definition of a lessee’s incremental borrowing rate in IFRS 16 does not explicitly require a lessee to determine its incremental borrowing rate to reflect the interest rate in a loan with a similar payment profile to the lease payments. Nonetheless, IFRIC observed that, in applying judgment in determining its incremental borrowing rate as defined in IFRS 16, it would be consistent with the IASB objective when developing the definition of incremental borrowing rate for a lessee to refer as a starting point to a readily observable rate for a loan with a similar payment profile to that of the lease. IFRIC concluded that the principles and requirements in IFRS 16 provide an adequate basis for a lessee to determine its incremental borrowing rate. Consequently, IFRIC decided not to add the matter to its standard-setting agenda.
Keywords: International, Accounting, Banking, IFRS 9, IFRS 16, Financial Instruments, Leases, Hedge Accounting, IFRIC, IFRS
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