Financial instruments – FICE discussions continue

Financial instruments – FICE discussions continue

The IASB has continued its discussions on financial instruments with characteristics of equity.

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We report on the IASB’s discussions at its February meeting.

The FICE project continued to receive attention from the Board this month, among other topics related to financial instruments.

At its February meeting, the IASB continued discussions on its project on
classifying financial assets with symmetric ‘make-whole’ prepayment options
(the ‘symmetric prepayment options project’) under IFRS 9 Financial Instruments. It also focused on its project on financial instruments with characteristics of equity (the ‘FICE project’) and addressed a number of other topics.

 

“Stakeholders will have 30 days to respond to a rapid-fire exposure draft on symmetric prepayment options this April.”

Chris Spall
KPMG’s global IFRS financial instruments leader

 

For more detail on these discussions, read Issue 37 of our IFRS Newsletter: Financial Instruments.

At the same meeting, the Board discussed a summary of the requirements of IFRS 9 that apply to revolving credit facilities – such as credit cards – specifically in determining the period of exposure. Read our IFRS Newsletter: Impairment to find out more.

The Board also addressed feedback received from the external testing and drafting process of IFRS 17 Insurance Contracts – which is expected to be issued in May 2017. Read our IFRS Newsletter: Insurance to find out more.

Symmetric prepayment options project

The Board discussed the due process steps taken in developing the proposed amendments to IFRS 9 and agreed to allow 30 days for comments on the exposure draft (ED) expected to be published in April.

FICE project

The Board tentatively decided:      

  • to require an entity to apply the Gamma approach to the contractual terms of a financial instrument consistently with IAS 32 Financial Instruments: Presentation and IFRS 9;   
  • to consider whether it should take any action to address the accounting for mandatory tender offers, including potential disclosure requirements; and
  • not to reconsider IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments.

The Board also discussed proposed application guidance and illustrative examples for clarifying how the Gamma approach would apply to the accounting within equity for different subclasses of equity instrument.

Modification or exchange of financial liabilities

The Board agreed with the IFRS Interpretations Committee’s conclusion
that under IFRS 9 a modification not resulting in derecognition leads to a
recalculation of amortised cost, with any adjustment recognised in profit or
loss. It decided that the Committee should not proceed with an interpretation
but educative material should be published instead.

Find out more

Visit our IFRS Newsletters page for the latest discussions on these issues.

And go to our IFRS –Financial instruments hot topics page for more on these and other aspects of financial instruments accounting under IFRS.

© 2017 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.

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