At its meeting in February 2019, the International Accounting Standards Board (IASB) tentatively agreed to amend IAS 39 and IFRS 9 to provide relief to allow hedge accounting to continue, despite uncertainty resulting from the transition from IBOR to Risk Free Rates (RFRs). This was covered in a previous update here.
At its March 2019 meeting, the IASB tentatively decided to amend IAS 39 and IFRS 9 to require mandatory application of the relief to all hedges for which there is uncertainty arising from IBOR reform. The relief will only be applicable to those hedging relationships for which IBOR reform contributes uncertainty to the cash flows of the hedging instrument and/or the hedged item.
The decisions taken at the March meeting complete the IASB’s initial discussions of the phase one issues. The Board plans to publish an Exposure Draft for phase one in April or May 2019, with a 45-day comment period. The final amendments are expected to be published by the end of 2019. Once finalised, the resulting amendments will allow hedge accounting to continue (subject to entities meeting the other hedge criteria), until the uncertainties arising from IBOR reform have ended.
The IASB considers that it can only start phase two (issues arising once IBOR has undergone reform) of the project once the nature of the RFRs that will replace IBOR has been determined by regulators (including whether there will be ‘term’ RFRs such as three-month rates).
Download the details using the link below and, if you have a question, don’t hesitate to reach out to Danny Buckley, Head of Financial Services FAAS (Financial Accounting Advisory Services). You can also explore all of our latest IBOR insights here.