ASCG comment letter to the IASB Exposure Draft ED/2020/1 (IBOR Reform – Phase 2)

Today, we have submitted to the IASB our comment letter as regards the Exposure Draft ED/2020/2 Amendments to IFRSs due to the IBOR reform (Phase 2). We entirely agree with the intention of the IASB and the specific proposed amendments. We have made only few additional comments, which relate to the following aspects:

• Modifications (Question 1): We expect a challenge with assessing whether modifications are “required as a direct consequence of IBOR reform”. As we see it, sometimes entities are clearly required to modify contracts, sometimes they just feel (economically) compelled to do so, or even do it voluntarily. While fully agreeing with granting relief only for modifications related to the IBOR reform, we suggest to simply delete the term “required”. The condition then reads as “modification … as a direct consequence from IBOR reform”, which in our view is more practicable and still completely in accordance with what the IASB’s proposals intend.
• Existing hedging relationships (Question 2): We are unclear whether the proposals in respect of accounting for fair value hedges would also – and similarly – apply to portfolio fair value hedges of interest rate risk. For avoidance of doubt, we suggest the IASB clarifying this explicitly.