17 January 2013

EFRAG comments on negative interest rates: implications for presentation

EFRAG published its final comment letter on the IFRS Interpretations Committee's tentative rejection notice on IAS 39 'Financial Instruments: Recognition and Measurement, Negative interest rates: implications for presentation in the statement of comprehensive income'.

In the IFRIC Update of September 2012, the IFRS Interpretations Committee published a tentative rejection notice on IAS 39 Financial Instruments: Recognition and Measurement, Negative interest rates: implications for presentation in the statement of comprehensive income.

In EFRAG´s view, the wording for rejection used by the Committee in the ‘IFRIC Update’ to explain the agenda rejection is similar to an Interpretation. EFRAG urges the IFRS Interpretations Committee not to issue any rejection notice that would effectively prescribe specific accounting treatments. While rejection notices have no authoritative status, in practice EFRAG´s constituents refer to rejection notices in the exercise of their judgement.

Rejection notices cannot add or interpret the existing requirements, as they are not subject to a full due process, and also not subject to an endorsement process in the European Union.

EFRAG observes that the IFRS Interpretations Committee conclusion that “the expense arising on a financial asset because of a negative effective interest rate should not be presented as interest revenue or interest expense, but in some other appropriate expense classification” is interpretative in nature, as it is currently not an explicit requirement.

Therefore, EFRAG suggests that the IFRS Interpretations Committee reconsider its tentative decision. EFRAG believes that the IFRS Interpretations Committee should consider issues such as the ones raised in the letter from the Accounting Standards Committee of Germany, dated 23 November 2012.

Press release

Final comment letter

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