At its latest meeting on 8 February 2019, the International Accounting Standards Board, or IASB, decided to amend IAS 39 and IFRS 9 to provide relief to allow hedge accounting to continue despite IBOR reform and the expected transition from IBOR to RFRs.
This follows on from the decision made by the IASB in December 2018, to assess the effects of Interbank Offered Rates (IBOR) reform on financial reporting. The project has two phases: the first focuses on issues leading up to IBOR reform. The IASB plans to issue an Exposure Draft in April or May, with an accelerated comment period, which would allow for final amendments to be published in late 2019. The second phase will focus on issues arising once the IBOR has undergone reform, such as the consequences of amending a hedge designation. The final amendments are expected to be published in November / December 2019
Our view is that it is positive that the Board has commenced this project and has proposed these reliefs. As identified by Board members, these amendments will require careful wording so as to have the intended narrow scope and to be clear. We note that the decision to amend IFRS 9 in respect of assessing whether there is an economic relationship, potentially provides guidance on how this assessment should be made. However, IFRS 9 is not clear on whether the bar to considering whether there is an economic relationship is so high currently that it would be difficult to assert that there is still an economic relationship between IBOR and future variable interest rates, despite the uncertainties arising from IBOR reform.
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.
The next IASB meeting will take place on 11 – 15 March 2019.