The International Accounting Standards Board (IASB) is planning to amend three key accounting standards - IFRS 9 Financial Instruments, IFRS 16 Leases and the not yet issued IFRS 17 Insurance Contracts - as a result of proposed interbank lending rate (IBOR) reforms
In its second phase of the reform project, the IASB is addressing issues affecting financial statements when changes are made to contractual cash flows and hedging relationships as a result of interest rate benchmark reform.
The affected standards include IFRS 9 Financial Instruments, IAS 39 Financial Instrument: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts, and IFRS 16 Leases.
Phase 1 of the project amended IFRS 9 and IAS 39 in September 2019 to provide temporary exceptions to specific hedge accounting requirements and added related disclosure requirements to IFRS 7.
Phase 2 will now consider, as a priority, the effects of the reform on a company’s financial statements that arise when, for example, an interest rate benchmark used to calculate interest on a financial asset is replaced with an alternative benchmark rate.
The deadline for comments on the proposals is 25 May 2020.