The remaining feedback on the proposed hedge accounting amendments in the IBOR phase 2 Exposure Draft1 (ED) has now been analysed by the International Accounting Standards Board (the Board), and at its July meeting it completed its redeliberation process. The Board is now satisfied that it has been provided with sufficient analysis and has undertaken appropriate consultation and due process to approve the proposed amendments.
The final phase 2 amendments are expected to be published by the end of August with an effective date of 1 January 2021. Earlier application would be permitted.
The Board’s redeliberation process allayed some concerns and clarified the application of the amendments. It’s time for preparers of financial statements to start considering how the final amendments would be applied to their IBOR transitions.
Clarifications to the hedge accounting amendments
During the July meeting, the Board tentatively agreed to permit, rather than require, companies to reset cumulative fair values to zero for the purpose of performing a retrospective hedge effectiveness assessment under IAS 39 Financial Instruments: Recognition and Measurement on a hedge-by-hedge basis.
The Board also tentatively agreed to confirm the other proposals in the ED related to the accounting for qualifying hedging relationships, subject to some clarifications and improvements in the wording of the final amendments, including:
Now that the redeliberations have concluded, the balloting process has started and the final amendments are expected to be issued by the end of August 2020.
Speak to your usual KPMG contact to find out more about the Board’s discussion and visit home.kpmg/IBORreform to keep up to date with the latest news and discussion.
1 Interest Rate Benchmark Reform — Phase 2: Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16