United States

Proposed amendments address interest rate benchmark uncertainty

FINANCIAL REPORTING INSIGHTS  | 

International Financial Reporting Standards (IFRS) require companies to use forward-looking information to apply hedge accounting. Ongoing interest rate benchmark reform has led to uncertainty about when the current interest rate benchmarks will be replaced and with what interest rate. This uncertainty could result in a company having to discontinue hedge accounting solely because of the reform’s effect on its ability to make forward-looking assessments.

The International Accounting Standards Board recently issued proposed amendments to IFRS 9, Financial Instruments, and International Accounting Standard 39, Financial Instruments: Recognition and Measurement. If finalized, the amendments would modify specific hedge accounting requirements so that entities would apply those requirements assuming that the interest rate benchmark on which the hedged cash flows and cash flows of the hedging instrument are based is not altered as a result of interest rate benchmark reform. The proposed amendments would not provide relief from any other consequences arising from interest rate benchmark reform.

The Exposure Draft, Interest Rate Benchmark Reform, is available for comment until June 17, 2019.