The International Accounting Standards Board (Board) has today amended some of its requirements for hedge accounting. The amendments are designed to support the provision of useful financial information by companies during the period of uncertainty arising from the phasing out of interest-rate benchmarks such as interbank offered rates (IBORs).
The Board has amended its 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, Chair of the International Accounting Standards Board, 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.
The Board followed a phased response to the reform of interest-rate benchmarks. Phase 1 culminates with the amendments issued today and focuses on the accounting effects of uncertainty in the period leading up to the reform. The Board has started work on Phase 2, 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.
Interest Rate Benchmark Reform, which amends IFRS 9, IAS 39 and IFRS 7, can be accessed here (subscription required). A project summary, providing further information about the Board’s work in relation to IBOR reform, is also available.
The Board will shortly publish for consultation a proposed update to the IFRS Taxonomy to reflect these amendments.