On or about 3 May 2019, the Accounting Standard Council Singapore (ASC) invites comments on Exposure Draft ED/2019/1 Interest Rate Benchmark Reform (Proposed amendments to financial instruments standards, IFRS 9 and IAS 39). Comments are to be submitted by 24 May 2019.
The International Accounting Standards Board (IASB) has published for public comment on proposed changes to the old and new financial instruments Standards, IAS 39 and IFRS 9, in light of the reform of interest rate benchmarks such as inter-bank offer rates (IBORs).
The IASB has proposed to amend IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement to modify specific hedge accounting requirements to ensure that entities would apply those requirements assuming that the interest rate benchmark on which the hedged cash flows and the cash flow of hedging instrument are based is not altered as a result of interest rate benchmark reform.
The proposals are not planned to provide relief from any other consequences arising from interest rate benchmark reform. Further, discontinuation of hedge accounting is still required if a hedging relationship no longer meets the requirements for hedge accounting for reasons other than those specified by this ED.
IFRS Standards require companies to use forward-looking information to apply hedge accounting. While interest rate benchmark reform is ongoing, uncertainty exists about when the current interest rate benchmarks will be replaced and with what interest rate. Without the proposed amendments, this uncertainty could result in a company having to discontinue hedge accounting solely because of the reform’s effect on its ability to make forward-looking assessments. This, in turn, could result in reduced usefulness of the information in the financial statements for investors.
The IASB is considering the accounting implications arising from the reform in two stages. These proposed amendments relate to the effects of uncertainty in the period leading up to the replacement of interest rate benchmarks. As more information becomes available about the replacements, the IASB will assess the potential accounting implications of reform and determine whether to take further action.
Source: ASC, 6 May 2019