27. August 2020

IBOR Reform (Phase 2): IASB finalise further Amendments to IFRSs

Today, the IASB released Amendments to IFRS 9, IAS 39 and some other IFRSs, thereby completing the second phase of its project IBOR Reform and its Effects on Financial Reporting. These amendments provide relief for financial accounting during the IBOR reform.

In September 2019 already, the IASB had finalised Phase 1 of this project and had published amendments to IFRS 9 and IAS 39. Those amendments have addressed accounting issues prior to the IBOR reform and help to avoid discontinuation of current hedge accounting.

The recent amendments comprise the following matters in respect of IFRS 9 and IAS 39:

  • clarification that a change in how contractual cash flows are determined can constitute a modification, even in the absence of an amendment to the contractual terms;
  • a practical expedient to apply paragraph B5.4.5 of IFRS 9 to account for modifications to the interest rate benchmark on which a financial instrument’s contractual cash flows are based, if these modifications are directly required by the reform,
  • continuation of hedging relationships, as and when changes to the documentation of a hedging relationships are required as a direct consequence of IBOR reform;
  • no further changes, as current requirements in IFRS 9 provide sufficient guidance as regards derecognition, determination of the business model, the SPPI test, and recognizing expected credit losses.

Further, the IASB finalise minor amendments to IFRS 16 and IFRS 4 as well as additional disclosure requirements to IFRS 7. The IASB also notes potential effects of the reform on the application of other standards, namely IFRS 13, IFRS 17, and requirements in other IFRSs with respect to discount rates. However, any related changes are not deemed necessary.

All amendments shall be applied for annual periods beginning on or after 1 January 2021. These amendments are available from the IASB, subject to a charge.