The International Accounting Standards Board (IASB) issued Thursday amendments to IFRS to help companies provide investors with information about the effects of ongoing reform to interbank offered rates (IBORs) and other interest rate benchmarks.
The amendments are to IFRS 9, Financial Instruments; IAS 39, Financial Instruments: Recognition and Measurement; IFRS 7, Financial Instruments: Disclosures; IFRS 4, Insurance Contracts; and IFRS 16, Leases.
The amendments complement those issued in 2019 and focus on the effects on financial statements when, as a result of the reform, a company replaces the old interest rate benchmark with an alternative benchmark rate, the IASB said.
The second-phase amendments relate to:
- Changes to contractual cash flows — a company will not have to derecognise or adjust the carrying amount of financial instruments for changes required by the reform, but will instead update the effective interest rate to reflect the change to the alternative benchmark rate;
- Hedge accounting — a company will not have to discontinue its hedge accounting solely because it makes changes required by the reform, if the hedge meets other hedge accounting criteria; and
- Disclosures — a company will be required to disclose information about new risks arising from the reform and how it manages the transition to alternative benchmark rates.
The amendments are effective for annual reporting periods beginning on or after 1 January 2021, with early adoption permitted.
The phase two amendments can be downloaded here (free basic IASB subscription required).
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.
