IASB amends hedge accounting standard for IBOR changes

The International Accounting Standards Board (IASB) has amended hedge accounting rules under IAS 39 to ensure companies continue to provide useful financial information on interbank rates as IBOR is phased out as a measure

The standard setter says this is critical during the period of uncertainty arising from the phasing out of interest-rate benchmarks such as interbank offered rates (IBORs).

This has seen the revision new and old financial instruments standards, IFRS 9 Financial Instruments and IAS 39 Financial Instruments: Recognition and Measurement, as well as the related standard on disclosures, 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. In addition, the amendments require companies to provide additional information to investors about their hedging relationships which are directly affected by these uncertainties.

Hans Hoogervorst, IASB chair, said: ‘The board has worked to an accelerated timetable to give companies a solution to the accounting challenges they face from the uncertainty surrounding the reform of interest-rate benchmarks. The amendments provide useful information for investors during this period of uncertainty.’

IASB has followed a phased response to the reform of interest-rate benchmarks. Phase one has culminated with the amendments which have just been issued and focused on the accounting effects of uncertainty in the period leading up to the reform.

The board has now started work on phase two, which 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 earlier.

The IASB will shortly publish for consultation a proposed update to the IFRS Taxonomy to reflect these amendments.

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