Further progress has been made in exploring the classification of derivatives on own equity
At its July meeting, the Board continued its discussions on financial instruments with characteristics of equity (the ‘FICE project’), having previously considered possible ways to attribute profit or loss and other comprehensive income (OCI) to derivative equity claims.
The Board focused its discussion on how to apply the Gamma approach1 to:
“The FICE project has highlighted challenges in classifying derivatives on own equity but also provides welcome opportunities to enhance consistency.”
KPMG’s global IFRS financial instruments leader
The macro hedge accounting project was not discussed during the July meeting.
The Board discussed a sweep issue regarding the interaction of IFRS 4 Insurance Contracts and IFRS 9 and agreed to revise the disclosure requirements for entities that apply the temporary exemption from applying IFRS 9 (as part of the proposed IFRS 4 amendments), limiting the SPPI assessment to those financial assets that are not held for trading or managed on a fair value basis.
For more detail on these discussions, read Issue 31 of our IFRS Newsletter: Financial Instruments.
1 See September 2015 IFRS Newsletter: Financial Instruments.
A next step for the project will be to consider the separate presentation requirements for different classes of liabilities including variable-for-fixed derivatives and some application challenges in applying the fixed-for-fixed condition. At future meetings, the Board will also discuss:
© 2016 KPMG IFRG Limited is a UK company, limited by guarantee. All rights reserved. KPMG IFRG Limited, registered in England No 5253019. Registered office: 15 Canada Square, London, E14 5GL, UK.