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The Interpretations Committee discussed the ramifications of the presentation of negative effective interest rates in the statement of comprehensive income

 19 September 2012


The Interpretations Committee discussed the ramifications of the economic phenomenon of negative interest rates for the presentation of income and expenses in the statement of comprehensive income.

The Interpretations Committee noted that interest resulting from a negative effective interest rate on a financial asset does not meet the definition of interest revenue in IAS 18 Revenue because it reflects a gross outflow, instead of a gross inflow, of economic benefits. The Interpretations Committee also noted that this amount is not an interest expense because it arises on a financial asset instead of on a financial liability of the entity. Consequently, the expense arising on a financial asset because of a negative effective interest rate should not be presented as interest revenue or interest expense, but in some other appropriate expense classification. The Interpretations Committee noted that in accordance with paragraphs 85 and 112(c) of IAS 1 Presentation of Financial Statements, the entity is required to present additional information about such an amount if that is relevant to an understanding of the entity’s financial performance or to an understanding of this item.

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