Responses to IASB Documents for Comment

IFRS 9 Financial Instruments

Exposure Draft – Prepayment Features with Negative Compensation – April 2017

On May 24, 2017, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft issued in April 2017. The letter supports the proposals to permit amortized cost measurement for instruments that contain prepayment features with negative compensation and otherwise have contractual cash flows that are solely payment of principal and interest. However, the letter expresses concerns over the timing of the amendments and the potential implications the amendments could have beyond prepayment features with negative compensation. Read the AcSB letter posted by the IASB.

Exposure Draft – Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts – December 2015

On February 8, 2016, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft issued in December 2015. The letter agrees with the concerns raised in the Exposure Draft and supports a global solution. The letter supports both the overlay and the deferral approach for a specific group of entities. However, as stated in the Exposure Draft, the current proposals for the predominance test would exclude many entities recognized as insurance entities. As such, the letter proposed modifications to the predominance test. Modifying the predominance test could allow the threshold to be very high, such as substantially all liabilities. A high threshold is important so that only a limited group of entities have the opportunity to defer IFRS 9. The letter also supports the deferral approach at the reporting entity level. However, the letter recognizes that in order to ensure that an entity with significant banking activities implements IFRS 9 in 2018, the deferral approach might need to go below the reporting entity level. Read the AcSB letter posted by the IASB.

Exposure Draft – Financial Instruments: Expected Credit Losses – March 2013

On July 5, 2013, the AcSB submitted a comment letter responding to the IASB's Exposure Draft issued in March 2013. The letter supports the proposed standard but encourages convergence with the FASB. It expresses concern that the standard focusses very heavily on the financial services industry and notes that many entities and, in particular, smaller financial institutions and non-financial entities, will need to incur significant costs to implement the requirements. The letter also notes concerns with the lack of a conceptual basis for recognizing day one credit losses and with basing credit allowances on relative changes in credit risk as opposed to absolute changes. The letter requests the mandatory effective date of IFRS 9 be postponed to allow at least three complete years after the final standard is published. Read the AcSB letter posted by the IASB.

Exposure Draft – Novation of Derivatives and Continuation of Hedge Accounting (Proposed amendments to IAS 39 and IFRS 9) – February 2013

On March 26, 2013, the AcSB submitted a comment letter responding to the IASB's Exposure Draft issued in February 2013. The letter supports the proposal to amend the hedge accounting requirements in IAS 39 Financial Instruments: Recognition and Measurement and IFRS 9 Financial Instruments, when issued, to require that hedge accounting be continued when a derivative is novated to a central clearing party. However, the letter disagrees that the novation must be as a result of law or regulation. Read the AcSB letter posted by the IASB.

Exposure Draft – Classification and Measurement: Limited Amendments to IFRS 9 – November 2012

On March 28, 2013, the AcSB submitted a comment letter responding to the IASB's Exposure Draft issued in November 2012. The letter supports the proposed clarification that financial assets with the characteristics described as a "modified economic relationship" can be instruments with contractual cash flows that are solely payments of principal and interest. The letter also agrees with the proposed fair-value-through-other-comprehensive-income category and the proposed amendments to the transition provisions. The letter requests that the mandatory effective date of IFRS 9 be postponed to allow three complete years after the final standard is published. Read the AcSB letter posted by the IASB.

Exposure Draft – Mandatory Effective Date of IFRS 9 – August 2011

On October 21, 2011, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft issued in August 2011. The letter supports the proposal to delay the mandatory effective date of IFRS 9 Financial Instruments but only on completion of all components of IFRS 9 following full due process and publication of the final standard before December 31, 2012. If IFRS 9 cannot be completed by the end of 2012, the letter recommends further delaying the effective date by at least two full calendar years. The AcSB letter posted by the IASB is available here.

Exposure Draft – Offsetting Financial Assets and Financial Liabilities – January 2011

On April 28, 2011, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft. The letter agrees with the proposed offsetting requirements because when the criteria are met, an entity has a right to, or obligation for, only the net amount that is equivalent to a single net financial asset or financial liability. However, the letter disagrees with the disclosure proposals because the required information is excessive, and may be too costly, or perhaps even impractical, for entities to provide. To balance the information needs of users and provide financial statements that are understandable, the letter recommends that the IASB explain how these additional disclosures will help users make more informed investing and lending decisions. The AcSB letter posted by the FASB is available here.

Supplementary Document to the 2009 Exposure Draft – Financial Instruments: Impairment – January 2011

On April 1, 2011, the AcSB submitted a comment letter responding to the IASB’s Supplementary Document to its 2009 Exposure Draft, “Financial Instruments: Amortised Cost and Impairment.” The letter acknowledges that the proposals address some of the concerns with the model proposed in the 2009 Exposure Draft. However, the letter expresses concern that the proposals are more complex than necessary to achieve the objectives of the project and will not provide better information for users. The letter recommends that the Boards adopt the FASB’s approach to recognizing and measuring impairment in financial assets measured at amortized cost. The AcSB letter posted by the FASB is available here.

Exposure Draft – Hedge Accounting – December 2010

On March 9, 2011, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft. The letter acknowledges that there are aspects of the proposals that would be helpful to preparers and provide meaningful information to users. However, the letter expresses concern that the proposals will not reduce complexity for preparers or provide better information for users. The AcSB urges the IASB to take the time necessary to achieve convergence with the FASB and to complete the proposals with a macro-hedging model. The AcSB also encourages the IASB to make revisions that would permit hedging of any risk provided it is separately identifiable and reliably measurable. The letter recommends that the IASB re-expose a simpler, more realistic and comprehensive model for hedge accounting. The  AcSB letter posted by the IASB is available here.

Exposure Draft – Fair Value Option for Financial Liabilities – May 2010

On July 16, 2010, AcSB staff submitted a comment letter responding to the IASB’s Exposure Draft. The letter does not support the IASB’s proposal because the IASB and FASB proposals in this area are not converged. As well, the proposal requires the increased use of other comprehensive income without articulating a principle that distinguishes between items to be recognized in net income and those to be recognized in other comprehensive income. The AcSB staff letter posted by the IASB is available here.

Exposure Draft – Financial Instruments: Classification and Measurement – July 2009

On September 14, 2009, the AcSB submitted a comment letter responding to the IASB’s Exposure Draft. The letter expresses concern that the speed with which the project is progressing and the apparent lack of co-ordination with the FASB will not result in the best possible standards for financial instruments. The letter also recommends that the IASB combine the three phases of the IAS 39 replacement project (classification and measurement, impairment and hedge accounting) and develop a comprehensive exposure document. The AcSB letter posted by the IASB is available here.