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
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