EY European IFRS banking conference ... Agenda and speakers ÈFriday, 7 June 2019 Page 1 EY...
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EY European IFRS banking conference Minds made for transforming financial services
Friday, 7 June 2019
Agenda and speakers — Friday, 7 June 2019
EY European IFRS banking conferencePage 1
09:00-09:15 Introduction — Michiel van der Lof, EY
09:15-09:45 International Accounting Standards Board (IASB) update — Sue Lloyd, IASB
09:45-10:30 Challenges related to Interbank offer rates (IBOR) — Tony Clifford, EY and Fiona Thomson, Goldman Sachs
11:00-11:45 IFRS 9 — What did banks disclose? — Laure Guegan, EY with Tony Clifford, EY and Fabio Fabiani, EY
11:45-12.15 Finance function of the future — Francois Rossouw, EY and Ladislas Tyl, EY
12:15-12:45 Supervisory update — Nic van der Ende, European Banking Authority
13:45-14:15 Integrated reporting and climate risk — Doug Johnston, EY and Rebecca Self, HSBC
14:15-14:45 IFRS hot topics and accounting in the digital age — Marek Walendowski, EY and Jane Hurworth, EY
15:15-15:45 The macro environment and related accounting and reporting impacts — Mark Gregory, EY
15:45-16:15 Inside Brussels — David Doyle, EY
16:15-16:30 Closing comments — Michiel van der Lof, EY
16:30 Drinks reception
The views expressed in this presentation are those of the presenter, not necessarily
those of the International Accounting Standards Board or the IFRS Foundation.
Copyright © 2019 IFRS Foundation. All rights reserved.
Vice-chair, International Accounting Standards Board
3What I will cover
• IBOR reform
• Dynamic Risk Management
• Financial Instruments with Characteristics of Equity
• Recent Interpretations Committee activities
• Primary Financial Statements
• Amendments to IFRS 17
What are IBORs?
What led to the reform?
Interest rate benchmarks such as interbank offer rates (IBORs) play an
important role in global financial markets. They index a wide variety of
financial products worth trillions of dollars, ranging from mortgages to
Market developments have undermined the reliability of existing
benchmarks. The FSB has recommended reforms. Some jurisdictions
have made progress towards replacing existing benchmarks with nearly
risk-free rates (RFRs).
This has, in turn, led to uncertainty about the future of existing interest
rate benchmarks. Such uncertainties have some market implications
which may also affect entities’ financial reporting.
Pre-replacement issuesPhase I
• Issues affecting financial reporting
before the replacement of an
existing benchmark with RFR.
The Board identified two groups of accounting issues:
The Exposure Draft addresses Phase I issues only
Replacement issuesPhase II
• Issues that might affect financial
reporting when an existing
benchmark is replaced with RFR.
The pre-replacement issues are more urgent because they may affect financial reporting
before the reform is enacted and can be addressed without knowing details of RFR.
Therefore, the Board decided to address these issues as a priority.
7Phase I – why the Board is proposing amendments
Uncertainties around timing and
amount of designated future cash flows may
affect some hedge accounting
Entities could be required to
discontinue hedge accounting. Entities
may also not be able to designate new relationships.
Discontinuation of hedge accounting solely due to such uncertainties could
produce information that
would not be useful to users of financial
The Board decided to propose
amending some hedge accounting
requirements during this period
from the reform
Potential effects on
What is the
Board’s view? As a result…
Find out more
8Which issues are addressed?
• Reform creates uncertainty about timing/ amount of future cash flows based on IBOR.
• How to consider uncertainty when assessing if future IBOR cash flows are highly probable?
Highly probable requirement
• IFRS 9 requires the existence of an economic relationship; and IAS 39 expectation of offsetting between hedged item and hedging instrument.
• How to consider uncertainties from reform?
• If the hedged item is a risk component, then it must be separately identifiable.
• Reform may impact market structure and therefore ability to identify a risk component.
Other hedge accounting requirements would not be changed
Until uncertainty is
resolved assume cash
flows based on
interest benchmark do
required only at
9Timeline and next steps
Publish final Phase I
Proposed effective date
Annual periods beginning on or after 1 January 2020. Earlier application is permitted. The comment
period and effective date reflects the urgency of this issue.
10Phase II – replacement issues
The staff is currently assessing the potential issues arising in Phase II.
At the time of the Board’s discussions leading to the Exposure Draft, the
specific conditions and details of the replacement RFR have yet to be
Therefore, the Board decided to monitor developments in this area and assess
the potential implications as more information becomes available.
Examples of issues raised by stakeholders include:
• Derecognition vs. modification: whether the amended contract should be accounted for as a
modified, derecognised or ‘continuing’ financial instrument and any resulting effects on the effective
• Change in hedge documentation: whether amending hedge documentation to reflect RFR as the
new hedged risk would trigger discontinuation of hedge accounting and resulting effect.
• Non-FI-related implications: whether IBOR reform will impact areas such as lease accounting,
insurance, intangible assets, etc.
Dynamic Risk Management
12Dynamic Risk Management (DRM)
• Improve information regarding interest rate risk management and how interest rate risk management activities affect the entity’s current and future economic resources
• Recognition, measurement and presentation aspects of the core model tentatively agreed by the Board
• July 2019 – Discuss operational simplifications, disclosure and demonstrate the completed core model
• 2nd Half 2019 – Outreach on core model
13Dynamic Risk Management (DRM)
At this juncture the Board has decided not to issue a formal due process document
Outreach will involve discussions with relevant stakeholders based on tentative decisions to date to obtain feedback on those decisions
The Board will consider the specifics of outreach in the coming months
Based on feedback received, the Board will determine next steps
Financial Instruments with Characteristics of Equity
• IAS 32 Financial Instruments: Presentation works well for most financial instruments, but presents challenges for some complex financial instruments
• limited information available to investors about equity instruments other than ordinary shares
• no clear rationale for classification
• articulate classification principles—clear rationale
• propose additional information through presentation and disclosure
Board’s proposals—Discussion Paper 2018
Financial Instruments with Characteristics of Equity– Feedback received
• Board’s proposals perceived as a fundamental change from IAS 32 for reasons including:
- use of new terminology that would require significant efforts to assess potential effects and to implement if they were to be finalised
- classification changes for particular types of financial instruments
• General support for: - retaining a binary distinction between liabilities and equity
- standard-setting to address known practice issues but mixed views on how
- disclosure proposals, with particular support from investors