Amortised Cost Measurement

The IASB met on 22 September 2026 to discuss:

• the application of the 10-per-cent test to specific financial instruments (Agenda Paper 11A);
• the accounting for the effective interest rate of a modified financial instrument (Agenda Paper 11B); and
• the accounting for costs or fees on modification of a financial instrument (Agenda Paper 11C).

Application of the 10-per-cent test (Agenda Paper 11A)

The IASB discussed stakeholders’ questions about applying the 10-per-cent test in paragraph B3.3.6 of IFRS 9 Financial Instruments to financial instruments that have options or contingent terms, and financial instruments that are revolving credit facilities.

The IASB tentatively decided to clarify that an entity applying the 10-per-cent test to a financial asset or financial liability:

1. considers all contractual terms of the financial instrument.
2. determines the contractual cash flows of a financial instrument that includes an option or contingent term on the basis that the option is exercised—or that the contingent event occurs—at the earliest possible date specified in the contract. The probability or estimated timing of the option being exercised, or the contingent event occurring, has no effect on determining those cash flows.

Nine of 12 IASB members agreed with these decisions.

The IASB also tentatively decided to clarify that an entity applying the 10-per-cent test to a financial asset or financial liability that is a revolving credit facility determines the facility’s contractual cash flows based on the contractual terms of the facility as a whole. In particular, the entity determines the contractual cash flows based on the maximum credit capacity over the remaining term of the facility, under the new and original contractual terms.

All 12 IASB members agreed with this decision.

Accounting for the effective interest rate of a modified financial instrument (Agenda Paper 11B)

The IASB discussed stakeholders’ questions about accounting for the effective interest rate of a modified financial instrument when the modification does not result in derecognition. The IASB tentatively decided to propose amending IFRS 9 to require that, when a modification of a financial instrument does not result in derecognition, an entity adjusts the effective interest rate to reflect a change in the contractual interest rate that provides consideration for the time value of money or for credit risk.

Eleven of 12 IASB members agreed with this decision.

Accounting for costs or fees on modification of a financial instrument (Agenda Paper 11C)

The IASB discussed stakeholders’ questions about accounting for costs or fees when a financial instrument is modified and the modification does not result in derecognition.

The IASB tentatively decided to clarify that:

1. for the purposes of an entity applying paragraphs 5.4.3 and B3.3.6A of IFRS 9, the term ‘costs or fees incurred’ includes:  
   1. all fees and points paid or received between parties to the contract that are directly attributable to the modification of the financial instrument, including fees paid or received by either the borrower or the lender on the other’s behalf; and
   2. transaction costs and all other premiums or discounts that are directly attributable to the modification of the financial instrument.
2. if the modification of a financial asset or financial liability does not result in derecognition, an entity continues to recognise any unamortised costs or fees at the time of the modification as part of the gross carrying amount of the modified financial asset or the amortised cost of the modified financial liability. Those costs or fees are amortised over the remaining term of the modified financial instrument. 

All 12 IASB members agreed with these decisions.