IASB Proposes Amendments to IFRS Standards in Response to IBOR Reform
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
Featured Experts
Scott Dietz
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
Anna Krayn
CECL adoption expert; engagement manager for loss estimation, internal risk capability enhancement, and counterparty credit risk management
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Next Article
BoE Publishes Version 2.0.1 of Capital+ XBRL UtilityRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.