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Financial reporting changes in phase 2 of the interest rate benchmark reform

Financial reporting changes in phase 2 of the interest rate benchmark reform

Moore Singapore

On 9 April 2020 the International Accounting Standards Board (IASB) published an Exposure Draft (ED), Interest Rate Benchmark Reform – Phase 2, Proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16.

The Exposure Draft is a follow up to the Phase 1 amendments made to IFRS 9, IAS 39 and IFRS 7, in September 2019 to provide specific accounting relief, as global financial supervisory boards undertake to substitute existing Interbank Offered Rates (IBORs) with alternative benchmarks for risk-free rates (RFRs). Potential RFRs that are been considered across the globe include, inter alia, the EONIA in the Eurozone, SOFR in US, and SORA in Singapore. The substitution of IBORs for these RFRs have important implications for accounting. Although the amendments have not been finalised, being only in ED stage, the final amendments are expected to be made effective in less than half a year from the date of writing, by 1 January 2021, with earlier application permitted, underlining its urgency for affected companies. This article aims to provide a high-level overview of the issues and the proposals in the ED.

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