We support amendments proposed to IFRS 9 to explicitly permit the derecognition of financial liabilities at the date of the instruction to remit cash under an electronic payment system if certain criteria are met. However, we believe that the requirement to assess whether the paying entity has the right to cancel the instruction is not necessary and is unduly onerous. We believe that the other criteria proposed in the ED would be sufficient to support the assessment for derecognition of the financial liability at the date of the payment instruction.

We are also generally supportive of the IASB’s efforts to amend the classification and measurement of financial assets in response to the growth in ESG-linked investing and lending activities. However, we are concerned that the proposed criteria would affect the accounting for other financial instruments for which the interest rate is linked to contingent events that are not specific to the debtor (for example, changes in benchmark interest rate or increased costs of lending adjustments). These commonly encountered features would fail the SPPI test if the proposals in the ED were implemented. We do not believe it was the IASB’s intention to change the classification of such financial assets and therefore we have proposed alternative wording to address this issue.

Finally, we suggest that entities should be allowed to apply the amendments to the SPPI criteria (and associated disclosures in IFRS 7) in advance of the adoption of the remainder of the amendments proposed in the ED. We note that the amendment to the SPPI criteria are independent from the other amendments to IFRS 9. This approach would be particularly helpful in addressing issues currently faced by lenders and investors with material ESG-linked debt portfolios.

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