On or about 26 September 2019, the International Accounting Standards Board (IASB) has amended some of its requirements for hedge accounting. The amendments are designed to support the provision of useful financial information by companies during the period of uncertainty arising from the phasing out of interest-rate benchmarks such as inter-bank offered rates (IBORs).
Interest Rate Benchmark Reform, has amended IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, as well as IFRS 7 Financial Instruments: Disclosures.
The amendments:
- modify some specific hedge accounting requirements to provide relief from potential effects of the uncertainty caused by the IBOR reform, and
- require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties.
The amendments come into effect from 1 January 2020 but companies can choose to apply them earlier.
The IASB followed a phased response to the reform of interest-rate benchmarks:
- Phase 1 culminates with the amendments issued and focuses on the accounting effects of uncertainty in the period up to the reform
- Phase 2 considers the potential consequences on financial reporting of replacing an existing benchmark with an alternative.
The amendments come into effect from 1 January 2020 but companies may choose to apply them earlierI
A project summary that provides further information about the IASB’s work in relation to IBOR reform, is available at the IASB website.
Source: IFRS website, 26 September 2019.