[PDF] Snapshot: Interest Rate Benchmark Reform Phase 2 - IFRS

What is interest rate benchmark reform?

Interest rate benchmarks play an important role in global financial markets and index a variety of financial products worth trillions of dollars, including mortgages and derivatives.

Which paragraphs apply to hedging relationships affected by interest rate benchmark reform?

An entity shall apply paragraphs 6.8.4–6.8.12 and paragraphs 7.1.8 and 7.2.26(d) to all hedging relationships directly affected by interest rate benchmark reform. These paragraphs apply only to such hedging relationships.

Why do markets need to reference benchmarks?

Where the value of contracts referencing the benchmark is very large, markets will need to reference a robust benchmark, such as overnight RFRs, to avoid systemic risk. Benchmarks which are used extensively must be especially robust in order to ensure financial stability.

Does the IBOR reform result in derecognition of a financial instrument?

After an entity applies the practical expedient to the changes required by the IBOR reform, it would separately assess any other changes to the contractual terms that are not necessary as a direct consequence of the IBOR reform, to determine if they result in derecognition of a financial instrument.