IFRS 9 — Modifications and exchanges of financial liabilities

Date recorded:

Modifications and exchanges of financial liabilities — Agenda paper 11


This issue was discussed initially by the Interpretations Committee at its November 2016 meeting.

The submitter requested a clarification of the requirements in IFRS 9 relating to modifications or exchanges of financial liabilities. The submitter asked whether an entity should recognise a gain or loss, in profit or loss, when a financial liability was modified or exchanged and that modification or exchange did not result in derecognition of the financial liability.

The submitter noted that paragraph 5.4.3 of IFRS 9 required an entity to recognise any gain or loss arising from a modification of a financial asset that did not result in its derecognition in profit or loss immediately.

At that meeting the Committee supported the view that an entity should recognise a gain or loss at the date of modification. This view was based on the application of paragraph B5.4.6 of IFRS 9 which was considered clearer than AG8 of IAS 39. Paragraph B5.4.6 states that if an entity revised its estimates of payments or receipts (excluding modifications in accordance with paragraph 5.4.3), it is required to adjust the gross carrying amount of the financial asset or liability to reflect the revised contractual cash flows, with the difference recognised in profit or loss as income or expense.

In November, the Committee also debated how best to convey that view and concluded that an interpretation would be the most efficient means. Members were concerned that more prominence should be given to this matter than could be done via an agenda decision. However, there was hardly any support by the Board members present in the IC for an interpretation on grounds of timing and the fact that they believed IFRS 9 was sufficiently clear on this issue.

The matter was referred to the IASB, where it was discussed at its February 2017 meeting. The IASB did not support the publication of a draft interpretation. The IASB asked the Committee to issue an agenda decision.

Staff recommendation

The staff recommended issuing an “educative” agenda decision, which is included in Appendix A of the paper.


The IC approved the Staff’s recommendation, and emphasised that the tentative agenda decision should highlight what is different in IFRS 9 that requires the change from IAS 39. The IC also supported providing further educational guidance via a webcast. The IC further explored possible ways to enhance the visibility of these technical communications.


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