IFRS 9 — Classification of a particular type of dual currency bond

Date recorded:


The Committee received a request in relation to how to apply IFRS 9:4.1.2(b) and 4.1.2A(b), which relate to determining whether a financial instrument has contractual cash flows that are solely payments of principal and interest on the principal amount outstanding. The submitter describes a ‘dual currency bond’ with a par amount denominated in one currency and fixed interest coupon payments denominated in another currency. The fixed interest payments are paid annually and the par amount is repaid at a stated maturity date. The submitter says it is unclear whether the analysis must be performed for the bond as a whole based on the currency in which the par amount is denominated or whether the dual currency bond can be considered as having two components with each having cash flows in the same currency.

The Committee observed that the financial instrument described is not common and decided not to add this matter to its standard-setting agenda.

Comment letter analysis and staff analysis

Six comment letters received and all agree with the Committee's decision not to add the matter to its standard-setting agenda but a few of respondents disagree with the Committee's decision not to provide further guidance on the matter.

One of the respondents suggests the Committee provide guidance on application of IFRS 9:B4.1.8. The staff consider it is not appropriate to answer highly-specific questions which might inadvertently undermine the appropriate use of judgement that is required when applying the principle-based framework of IFRS Standards. Another respondent suggests consideration of the appropriate unit of account for the purposes of the SPPI condition, but the staff consider it is a much broader matter than the matter in the submission.

Staff recommendation

The staff recommend finalising the tentative agenda decision as published in IFRIC Update in March 2018.

Discussion and decision

The Committee decided to finalise the Agenda Decision.

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