19/07/2023 - EFRAG’s Final Comment Letter on the IASB’s ED Amendments to the Classification and Measurement of Financial Instruments

EFRAG has published its Final Comment Letter in response to the IASB's Exposure Draft 2023/2 Amendments to the Classification and Measurement of Financial Instruments (Proposed amendments to IFRS 9 and IFRS 7) (‘the ED’).

In the ED, issued by the IASB on 21 March 2023, the IASB proposed amendments to requirements relating to:

derecognition of financial liabilities settled through electronic transfer;
assessment of contractual cash flow characteristics in classifying financial assets; and
disclosure of information about some financial instruments.

In its letter, EFRAG welcomes the IASB’s efforts to address stakeholders’ concerns raised in the context of the Post-implementation Review of IFRS 9 - Classification and Measurement and a request to the IFRS Interpretations Committee and, in general, agrees with the proposed amendments.

EFRAG considers that the proposed clarifications to the general SPPI requirements provide a good basis for evaluating whether contractual cash flows of financial assets with ESG-linked or similar features meet the SPPI requirements. In its letter, EFRAG points out that the solution is expeditiously needed and welcomes the IASB efforts in this respect. Therefore, EFRAG encourages the IASB to prioritise the publication of these proposed clarifications over the rest of the proposals included in the ED, allowing entities to apply them as early as possible.

Despite a general agreement with the proposed amendments, EFRAG raises some concerns and provides some suggestions to the IASB. In particular, EFRAG suggests:

amending paragraph B3.1.6 of IFRS 9 Financial Instruments to include how an entity should apply settlement date accounting to financial liabilities;
to carefully consider the impact of the proposed requirements about “magnitude” and “contingent event specific to the debtor” on existing financial instruments currently meeting the SPPI requirements; and
either deleting paragraph 20B(b) of the ED (as a preferred solution) or limiting the scope of contingent events to be disclosed to what users of financial statements would deem relevant and useful for their analysis.

More details can be found in EFRAG's Comment Letter here .

Related project: Amendments to the Classification and Measurement of Financial Instruments