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23/04/2020 - EFRAG's draft comment letter on the IASB's ED/2020/1 Interest Rate Benchmark Reform - Phase 2 (proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

​​​​EFRAG has published its draft comment letter in response to the IASB's Exposure Draft ED/2020/1 Interest Rate Benchmark Reform - Phase 2 (proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) and seeks constituents' views on the proposals. Comments on the draft comment letter are requested by 15 May 2020.


​On 9 April 2020, the IASB issued the Exposure Draft ED/2020/1 Interest Rate Benchmark Reform - Phase 2 (proposed amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) ('the ED') with a comment period ending on 25 May 2020.

The IASB ED represents the second phase of the IASB project addressing the impacts of the Interest Rate Benchmark Reform that  affect financial reporting when an existing interest rate benchmark is replaced with an alternative interest rate and covers the following issues:

  • modifications of financial assets and financial liabilities, including lease liabilities;

  • hedge accounting; and

  • disclosures.

​​In its draft comment letter, EFRAG generally supports the proposed amendments, as they will enable entities to reflect the effects from transitioning from IBOR to alternative benchmark rates without giving rise to accounting impacts that would not provide useful information to users of financial statements. EFRAG issued a pre-consultation document on 31 March 2020, providing an anticipation of EFRAG’s preliminary views and announcing this consultation. The views in this draft comment letter are aligned with the contents of the pre-consultation document. ​

EFRAG notes the IASB proposal to clarify that a change in the basis on which the contractual cash flows are determined after initial recognition of financial instrument constitutes a modification even if the​ contractual terms of that financial instrument are not amended. As an assessment of the impact of this clarification is not possible within the limited timeframe available for this urgent project, EFRAG agrees with this proposal provided that this new definition is limited to the changes directly related to the IBOR reform.

EFRAG also suggests that the IASB carries forward to the final Standard its tentative decision to amend IAS 39 to require an entity changing the hedged risk in the hedge documentation for a portfolio hedge of interest rate risk to assume that all items included in the portfolio of financial assets or financial liabilities share the risk being hedged.

In addition, EFRAG proposes some drafting and clarification suggestions to the final standard.

​​EFRAG requests comments on its draft responses to the questions raised in the ED and to the questions raised by EFRAG by 15 May 2020. You can comment on EFRAG's draft comment letter by clicking on the 'Comment publication' link below.

The draft comment letter is available here​.