ESBG has published its position paper on the EFRAG Draft Comment letter on the Interest Rate Benchmark Reform Exposure Draft (ED) issued by the IASB on 3 May 2019.
ESBG overall agrees with the DCL on the IASB ED related to the Proposed Amendments to IFRS 9 and IAS 39 due to the Interest Rate Benchmark Reform. ESBG fully supports the IASB initiative to provide limited relief regarding financial instruments qualifying for hedge accounting as long as uncertainty due to IBOR reform exists.
ESBG understands that there remain some uncertainties around the timing and precise changes of the IBORs reform. The IASB has to address the topic worldwide while different solutions are being prepared across jurisdictions and at different speeds. Even when the IASB is able to address the issues through a fast procedure, according to the foreseen calendar of this first phase, final amendments are planned to be issued by the end of 2019. ESBG supports the IASB decision of phasing the analysis on the impacts derived from IBOR reform, prioritising those related to forward-looking hedge-accounting requirements. However, since broad solutions of the IBOR reform are already known and are progressing quickly, ESBG considers that the IASB would be in the position to start to deal with the second phase issues so as to be ready with accounting solutions soon as possible when IBOR reform begins to take effect.
ESBG notes a key point that is of its particular importance. As stated in Appendix II of EFRAGs DCL, EURIBOR is not transitioning to a new benchmark index. Instead, some changes to its calculation methodology are being undertaken to ensure compliance of the index with the Benchmark Regulation. Hence, ESBG considers there is no replacement and then there would not exist uncertainties affecting the timing and amount of the interest rate benchmark-based cash flows arising from the hedge item or the hedging instrument. And so, the exceptions of the ED would not be applicable. However, if the Euribor were to be replaced by a new term-rate based on €ster, the ED would be applicable.
Full press release
Full position paper
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