IFRS IC agenda decision on negative interest rates : implications for presentation

In the IFRIC Update of September 2012 the IFRS Interpretations Committee published a tentative rejection notice on the IAS 39 Financial Instruments: Recognition and Measurement, Negative interest rates: implications for presentation in the statement of comprehensive income.

On 23 December 2012 EFRAG issued a draft comment letter on the IFRS IC tentative agenda decision.  EFRAG observed that the IFRS IC conclusion that “the expense arising on a financial asset because of a negative effective interest rate should not be presented as interest revenue or interest expense, but in some other appropriate expense classification” was interpretative in nature, as it was not an explicit requirement. As a result, EFRAG urged the IFRS IC not to issue any rejection notice that would be akin to an interpretation. 

EFRAG received two comment letters. On 15 January 2013 EFRAG issued its final comment letter where it kept its view taken in the draft comment letter.

At its January 2013 meeting, the IFRS IC refrained from finalising the tentative agenda decision until the IASB has completed its redeliberations on the Exposure Draft Classification and Measurement: Limited Amendments to IFRS 9.   

At its January 2015 meeting, the IFRS IC issued agenda decision not to add the issue to its agenda. The IFRS IC noted that interest resulting from a negative effective interest rate on a financial asset does not meet the definition of interest revenue in IAS 18 Revenue. Consequently, the expense arising on a financial asset because of a negative effective interest rate should not be presented as interest revenue, but in an appropriate expense classification.