IFRS implementation issues

Date recorded:

IFRS Implementation Issues - Agenda paper 12

The purpose of this session was to discuss the following:

  • Proposed amendments to IAS 19 and IFRIC 14: Agenda papers 12A-12E
  • IFRS 9 Financial Instruments: Prepayment Options: Symmetric ‘make whole’ and fair value prepayment options and the assessment of the SPPI condition — Feedback received from the IFRS Interpretations Committee and possible next steps: Agenda paper 12F

Proposed amendments to IAS 19 and IFRIC 14 – Cover memo – Agenda Paper 12A


At its meetings in July and September 2016, the IC discussed the feedback on the Exposure Draft Remeasurement on a Plan Amendment, Curtailment or Settlement/ Availability of a Refund from a Defined Benefit Plan (see the related IFRIC Updates).

APs 12B and 12C present the IC’s analyses of the comments received on the proposed amendments to IFRIC 14 and IAS 19 respectively, together with the IC’s recommendations. AP 12D presents the IC’s recommendations on transition requirements (including those for first-time adopters) and the effective date of the amendments. AP 12E summarises the due process steps taken to date.

The Staff will seek the Board’s permission to ballot at this meeting.

IC recommendations

The IC recommends the following:

  1. That the Board finalise the proposed amendments to IAS 19 and IFRIC 14, subject to some drafting changes, with an effective date of 1 January 2019, with earlier application permitted.
  2. Applying the amendments to IFRIC 14 retrospectively (with an exemption for adjustments to the carrying amount of assets outside the scope of IAS 19);
  3. Applying the amendments to IAS 19 prospectively; and
  4. Not providing transition relief to first-time adopters.


The Board unanimously approved the IC recommendations on the proposed amendments to IFRIC 14 and IAS 19 (APs 12B and 12C), except for the issue relating to minor plan events (see AP 12C question 1).

Minor plan events: A few Board members were concerned with the apparent contradiction between the proposed amendment to the body text of IAS 19 relating to minor plan events (which was approved by the IC) and the proposed amendment to the basis for conclusions (as suggested by the Staff but which was not reviewed by the IC) regarding how the proposed amendment would affect the frequency of remeasurement of the net defined benefit liability/asset and how materiality plays a role in this determination. The Staff agreed with the Board’s suggestion of preparing a short paper to the IC on the proposed changes to the body text and the basis for conclusions in this regard for clarification and approval.

For the rest of the discussion, the Staff clarified various questions that different Board members had. Some Board members re-emphasised the need to include particular Staff analyses and feedback from respondents in the basis for conclusions to highlight key points.

The discussion of APs 12D and 12E regarding transition provisions and due process respectively had been deferred pending the resolution of the minor plan events issue with the IC.

IFRS 9 Financial Instruments: Prepayment Options - Symmetric ‘make whole’ and fair value prepayment options and the assessment of the SPPI condition — Feedback received from the IFRS Interpretations Committee and possible next steps – Agenda Paper 12F


The IC received a query related to whether a debt instrument with a symmetric make whole prepayment option or a fair value prepayment option could meet the ‘solely payments of principal and interest on the principal amount’ (SPPI) criterion for measurement at amortised cost under IFRS 9. See AP 7 to the November 2016 IC meeting for a summary of the staff’s analysis.

Feedback from the IC

The IC discussed this at their November 2016 meeting. Most IC members were of the view that the prepayment options described in the submission do not meet the requirements in IFRS 9.B4.1.11(b) and thus, a debt instrument with such a prepayment option would fail the SPPI requirements. The IC 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, and not only the options described in the submission; and
  • what measurement would provide the most relevant and useful information about particular financial assets that would otherwise meet the SPPI condition, but fail it because of the existence of a symmetric ‘make whole’ prepayment option.

However, a number of IC members did note that amortised cost measurement would not be appropriate for all financial assets with a symmetric ‘make whole’ prepayment options, and that it would be difficult to define the relevant population.

Staff recommendation

The Staff recommends that the Board consider adding a limited-scope project on IFRS 9 for symmetric ‘make whole’ prepayment options as part of its implementation and maintenance activities.

The Staff will bring back a paper for future discussion should the Board approve the Staff recommendation.


The Board approved the Staff’s recommendation.

The Vice-Chair explained that the Staff and the IC had in mind a narrow-scope amendment to IFRS 9 to deal with this issue. The proposed amendment would have a further aim to reinforce the need to assess whether an instrument met the SPPI criterion when determining whether it should be measured at amortised cost, as the Vice-Chair noted that people had a mindset of measuring an instrument at amortised cost when it felt right and when they thought the instrument should be eligible for amortised cost measurement, rather than by applying the specific principles underlying the SPPI criterion properly when making that assessment.

The Board generally agreed that depending on the nature and substance of the prepayment options, FVTPL or amortised cost might be more appropriate in giving the most useful information to users of the financial statements. The challenge, however, would be in identifying the characteristics of those prepayment clauses for which amortised cost measurement would provide more relevant information despite the instrument failing the SPPI test. The key task for the Staff would be to define a scope for the proposed amendment that was wide enough to establish a principle (as opposed to a checklist of items) that could be applied consistently to the multitude of different prepayment clauses in practice; while keeping the scope narrow enough to constrain it to the right population such that the proposed exception (i.e. contracts that failed SPPI because of prepayment clauses could still be measured at amortised cost) would not be inappropriately applied by analogy. One Board member also noted that the Staff should consider the effective date and transition provisions (e.g. should comparative information be restated?) especially for entities that had already early adopted IFRS 9.

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