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Prepayment Features with Negative Compensation (Amendments to IFRS 9) [Completed]

Effective date and transitional provisions:

The amendments are to be applied retrospectively for fiscal years beginning on or after January 1, 2019, i. e. one year after the first application of IFRS 9 in its current version. Early application is permitted so entities can apply the amendments together with IFRS 9, if they wish so. Additional transitional requirements and corresponding disclosure requirements must be observed when applying the amendments for the first time.

The AcSB is­sued the fi­nal Hand­book ma­te­r­ial in November 2017

Last up­dated:

November 2017

Overview

The objective of the project was to examine whether amortized cost measurement would provide relevant and useful information for instruments that contain symmetric prepayment options and otherwise have contractual cash flows that are solely payments of principal and interest (SPPI).

The IFRIC received a submission relating to the accounting for financial assets that include particular contractual prepayment options. The submission asked how a company would classify and measure a debt instrument if the borrower was permitted to prepay the instrument at an amount less than the unpaid principal and interest owed. Such a prepayment amount is often described as including 'negative compensation'. Applying IFRS 9, a company would measure a financial asset with so-called negative compensation at fair value through profit or loss.

Most Interpretations Committee members were of the view that the prepayment options described in the submission do not meet the requirements in paragraph B4.1.11(b) of IFRS 9 and, thus, a debt instrument with such a contractual provision does not meet the SPPI requirements in IFRS 9. They suggested that the Board consider changing the requirements in IFRS 9 in this respect, taking into account the broader range of prepayment options that exist in practice, not only the options described in the submission.

To respond to concerns raised about the usefulness of information provided about these instruments, the IASB proposed minor amendments to IFRS 9 to enable companies to measure some prepayable financial assets at amortized cost.

In October 2017, the IASB issued Prepayment Features with Negative Compensation (Amendments to IFRS 9). These amendments enable entities to measure at amortized cost some prepayable financial assets with so-called negative compensation.

 

Other de­vel­op­ments

November 2017

On November 1, 2017, the AcSB issued the final Handbook material.

October 2017

On October 12, 2017, the IASB published Prepayment Features with Negative Compensation (Amendments to IFRS 9) to address the concerns about how IFRS 9, Financial Instruments classifies particular prepayable financial assets. In addition, the IASB clarifies an aspect of the accounting for financial liabilities following a modification.

July 2017

On July 21, 2017, the staff of the IASB updated the work plan to indicate that the IASB expects to issue the final amendments to IFRS 9 in October 2017.

June 2017

In June 2017, the IASB staff updated the work plan to indicate that the IASB expects to issue the final amendments to IFRS 9 in Q4/2017.

April 2017

On April 21, 2017, the AcSB issued an Exposure Draft that corresponds to the IASB’s Exposure Draft on this topic. Stakeholders are encouraged to submit their comments by May 24, 2017.

On April 21, 2017, the IASB published an Exposure Draft "Prepayment Features with Negative Compensation (Proposed amendments to IFRS 9)" to address the concerns about how IFRS 9 "Financial Instruments" classifies particular prepayable financial assets. Comments are requested by May 24, 2017.

March 2017

On March 23, 2017, the IASB staff updated the Work Plan in respect of this project to change its name to Prepayment Features with Negative Compensation (proposed amendments to IFRS 9).

January 2017

On January 19, 2017, the IASB staff up­dated the Work Plan in re­spect of this pro­ject to in­di­cate that the IASB ex­pects to pub­lish an Exposure Draft for comment in April 2017.

 

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