12. October 2017
Today, the IASB published a limited amendment to IFRS 9 (Prepayment Features with Negative Compensation) that aims at clarifying IFRS 126.96.36.199(b), which was deemed unclear. IFRS 188.8.131.52(b) relates to the classification and measurement of financial instruments with symmetric prepayment options. Those financial instruments do not meet the contractual cashflow condition for being measured at amortised cost or at fair value through other comprehensive income only as a result of such prepayment options, but are eligible to be so measured if the prepayment amount only comprises (unpaid) nominal and interest and a reasonable “additional compensation” for early termination. It was considered unclear, whether such compensation pay only be paid or also be received by the party that chooses to early terminate the contract.
This amendment to IFRS 9 now clarifies, by adding a new para. B4.1.12A (and a related basis for conclusion), that those financial instruments with prepayment options – be it the party that chooses early termination receives or pays a reasonable compensation – be accounted for identically.
This amendment shall be initially applied as per 1 January 2019, which is one year later than IFRS 9 in its entirety.
The text of this amendment is available at the IASB only subject to a charge. (further Information)