27-3-2009 | EFRAG requests comments on its initial assessments of the Amendment to IFRIC 9 and IAS 39 against the EU Endorsement Criteria

EFRAG is today issuing an Invitation to Comment relating to the endorsement for use in the EU of the amendment to IFRIC 9 Reassessment of Embedded Derivatives and IAS 39 Financial Instruments: Recognition and Measurement. It is consulting both on its assessment of the Amendment against the EU endorsement criteria and on its initial assessment of the costs and benefits that would arise from the implementation of the Amendment in the EU. Comments are requested by 8 May 2009.
	The Amendment clarifies that an entity must assess whether embedded derivatives are required to be measured separately at fair value when the entity no longer measures the hybrid financial containing the embedded derivatives asset at fair value through profit or loss.  The amendment further clarifies that in order to ensure consistency in treatment of embedded derivatives, assessment of embedded derivatives on reclassification should be made on the basis of the circumstances that existed when the entity first became a party to the contract. If however, the entity concludes that embedded derivatives require fair value accounting but is unable to measure the fair value of the embedded derivatives separately, the Amendment clarifies that the entity has to continue to account for the entire hybrid instrument at fair value through profit or loss. EFRAG’s initial assessment is that the Amendment meets the criteria for EU endorsement and that the benefits that will arise from its implementation in the EU are likely to exceed the costs incurred in implementing it.
Document : Amendment to IFRIC 9 and IAS 39 endorsement advice EFRAG Invitation to Comment.doc
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