United States

More proposed amendments: Interest rate benchmark reform

FINANCIAL REPORTING INSIGHTS  | 

Ongoing interest rate benchmark reform has led to uncertainty about when interbank offered rates will be replaced and with what interest rate. In September 2019, the International Accounting Standards Board (IASB) amended certain hedge accounting requirements to provide relief from interest rate benchmark uncertainty. Recently the IASB proposed additional amendments to address financial reporting issues that arise when an existing interest rate benchmark is replaced with an alternative interest rate.

If finalized, the Exposure Draft, Interest Rate Benchmark Reform – Phase 2, would amend specific requirements related to:

  • Modifications of financial assets and financial liabilities, including lease liabilities – The amendments propose that a company would not derecognize or adjust the carrying amount of financial instruments for modifications required by interest rate benchmark reform but would instead update the effective interest rate to reflect the change in the interest rate benchmark.
  • Hedge accounting – Per the proposed amendments, a company would not discontinue its hedge accounting solely because of replacing the interest rate benchmark if the hedge meets other hedge accounting criteria.
  • Disclosures – The proposed amendments would require a company to disclose information about the risks arising from the interest rate benchmark reform and how it manages the transition to alternative benchmark rates.

The Exposure Draft is available for comment until May 25, 2020.

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