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Financial Instruments – Final prepayment amendments

Financial Instruments – Final prepayment amendments

This IFRS newsletter reports on the IASB's July discussions on financial instruments.


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We report on the IASB’s discussions at its July meeting.

Discussions continue on financial instrument projects

At its July meeting, the Board concluded its discussions on the Exposure Draft (ED) Prepayment Features with Negative Compensation.

At the same meeting, the IASB staff presented the Board with its analysis of the main concerns in relation to the modification or exchange of financial liabilities.


“The IASB has decided to improve its proposals on prepayment features and is on course to issue final amendments in October.”


Chris Spall KPMG’s global IFRS financial instruments leader

For more detail on the discussions, read Issue 41 of our IFRS Newsletter: Financial Instruments. (PDF 814 KB)

Prepayment features with negative compensation

After re-deliberating the eligibility conditions, the Board decided to:

  • retain the first eligibility condition that the asset be consistent with the SPPI criterion except for the negative compensation feature;
  • include a clarified explanation of its application in the basis for conclusions;
  • remove the second eligibility condition -- i.e. that the feature should have an insignificant fair value on initial recognition; and
  • clarify that the existing exception for certain prepayment features at par would accommodate reasonable negative compensation. 

After re-deliberating the effective date and transition provisions, the Board decided to:

  • set the effective date of the amendments as annual periods beginning on or after 1 January 2019, with earlier application permitted; and
  • require retrospective application subject to relevant IFRS 9 Financial Instruments transition provisions, including relief from restating comparatives, and particular disclosures. 

The Board gave the staff permission to start the balloting process with a view to issuing final amendments in October 2017.

Modification or exchange of financial liabilities

The IASB staff presented its analysis of the main concerns and suggested a solution on how the Board could confirm the relevant accounting required by IFRS 9.

The Board decided to describe the relevant accounting in the basis for conclusions that will accompany the prepayment amendments to IFRS 9. 

Find out more

Go to our IFRS – Financial instruments hot topics page for more on these and other aspects of financial instruments accounting under IFRS. 

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