IASB Publishes Summary of October 2019 Meeting of Advisory Forum

The objective of the session on IBOR reform was to provide an update to the ASAF members on the IBOR Reform project and request further inputs from the ASAF members on potential accounting issues to be considered by IASB during Phase II of the project. A member of the European Financial Reporting Advisory Group (EFRAG) suggested that IASB should focus on the main Phase II issues by adopting a more principle-based approach and by solving the most prominent ones first (that is, modification and derecognition), which might also affect continuity in hedge accounting. The Financial Reporting Council, UK (FRC) member agreed with this view and highlighted the importance of prioritizing the issues that are more urgent. 

A member of the Korea Accounting Standards Board (KASB) emphasized modification of financial assets as the most important issue, as timing for IBOR reform gets closer. The KASB member noted that it might be necessary to review whether the IFRS Interpretations Committee’s opinion on this issue should be maintained. Additionally, some members asked IASB to consider multiple exposure hedges for Phase II, where entities manage both foreign currency risk and interest rate risk at the same time. 

Moreover, ASAF members discussed the range of project direction alternatives for the project on financial instruments with characteristics of equity; these are the alternatives that were discussed by IASB at its September 2019 meeting. Most ASAF members were supportive of the tentative project direction decided by IASB—that is, making clarifying amendments to IAS 32 on presentation of financial instruments. IASB is mindful of the interaction between presentation and disclosure requirements and its decisions on classification. For example, it would be more efficient for stakeholders and IASB to consult on a comprehensive package that considers both classification and disclosures. Furthermore, developing disclosures independently of the classification requirements may require IASB to revisit disclosures once amendments to classification requirements are developed.

Keywords: International, Accounting, Banking, Securities, IBOR, Interest Rate Benchmarks, Financial Instruments, ASAF, IASB