Stakeholder letters - Deloitte 28 September 2020

Deadline for completion of this Invitation to Comment Close of business Monday 28 September 2020. Please submit to: [email protected]

Introduction

The objective of this Invitation to Comment is to obtain input from stakeholders on the endorsement and adoption of the IASB's amendment Interest Rate Benchmark Reform—Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) (the Amendments) in the UK.

Interaction with EU endorsement and adoption process

The UK leaves the EU at the end of the Transition Period on 31 December 2020.

Until the end of the Transition Period, the European Commission will continue to endorse IFRS for use in the UK.

If the EU endorses the Amendments before the end of the Transition Period, UK companies will be able to apply them as EU law will still apply.

If the EU does not endorse the Amendments before the end of the Transition Period, UK companies will be required to apply the UK-adopted Amendments. Due to the uncertainty in timing of EU adoption of the Amendments, work is being undertaken to ensure the UK is ready to undertake adoption, in early January 2021, if necessary.

UK endorsement and adoption process

At the end of the Transition Period, UK-adopted international accounting standards will consist of all international accounting standards already adopted in the EU. New and amended standards, not already adopted in the EU will be endorsed and adopted by the UK Endorsement Board.

The requirements for UK endorsement and adoption are set out in the Statutory Instrument 2019/685¹.

The Endorsement Board is currently being established and will be responsible for endorsing and adopting IFRS for use in the UK after the end of the Transition Period. The Endorsement Board will also be responsible for influencing the future direction of IFRS.²

During the establishment of the Endorsement Board, the staff are undertaking endorsement activities with the support of FRC infrastructure and resource.³ The Secretary of State for BEIS will endorse and adopt IFRS from the end of the Transition Period until the Endorsement Board is ready to take on its functions and they have been delegated. The intention is to delegate the functions and powers in early 2021.

The information collected from this Invitation to Comment is intended to help with the endorsement assessment. This will form part of the work necessary for potential UK endorsement and adoption of the Amendments.

Who should respond to this Invitation to Comment?

Stakeholders with an interest in the quality of accounts that apply IFRS.

We estimate it will take no more than 10 minutes to complete.

Privacy and other policies

The data collected through submitting this Invitation to Comment will be stored and processed by the FRC/EB. By submitting this Invitation to Comment, you consent to the FRC/EB processing your data for the purposes of endorsing and adopting the IASB's Amendments for use in the UK. For further information, please see our Privacy Statements and Notices⁴ and other Policies (e.g. Consultation Responses Policy, Data Protection Policy and Freedom of Information Policy)⁵.

The FRC's policy is to publish on its website all responses to formal consultations issued by the FRC unless the respondent explicitly requests otherwise. A standard confidentiality statement in an e-mail message will not be regarded as a request for non-disclosure. The FRC does not edit personal information (such as telephone numbers or postal or e-mail addresses) from submissions; therefore, only information that you wish to be published should be submitted.

Part A: Your details

1. Your details

2. Is your organisation (please select the appropriate box):

Part B: Assessment against technical criteria

Our initial assessment concludes that:

• the Amendments meet the criterion of relevance, reliability, comparability and understandability required of the financial information needed for making economic decisions and assessing the stewardship of management, as required by SI 2019/685 (see Regulation 7(1)(c)); and
• application of the Amendments are not contrary to the principle that an entity's accounts/consolidated accounts must give a true and fair view as required by SI 2019/685 (see Regulation 7(1)(a)).

See sections:

• Section 2: Technical criteria assessment
• Section 3: Key financial reporting issues addressed by the Amendments
• Section 4: Assessment against technical criteria
• Section 5: True and fair view

3. Do you agree with this assessment? (please select one option)

4. Please include any comments you may have in response to question 3:

We believe the section of the endorsement advice titled Modifications of Financial Assets and Financial Liabilities would benefit from an explicit reference to the consequential amendments to IFRS 4. The endorsement of the consequential amendments to IFRS 4 will enhance comparability as it will ensure that those insurers that have chosen not to apply IFRS 9, as so apply IAS 39 instead, apply the same requirements in respect of IBOR reform as those non-insurance entities that apply IFRS 9.

Part C: Assessment against UK long term public good

Our initial assessment concludes that the Amendments:

• will generally improve financial reporting when compared to the unamended requirements of IFRS 9 and IAS 39;
• will lead to benefits that exceed the costs; and
• are not likely to have an adverse effect on the economy of the UK, including on economic growth.

Overall, we conclude that the Amendments are likely to be conducive to the long term public good in the UK as required by SI 2019/685 (see Regulation 7(1)(b)); and

See Section 6: UK long term public good

5. Do you agree with this assessment? (please select one option)

6. Please include any comments you may have in response to question 5:

Given the amendments require entities to continue existing hedge accounting relationships with some updates to hedge documentation and disclosure we expect these costs will be minor relative to the costs that would have to be incurred should the amendment not be endorsed.

Thank you for completing this Invitation to Comment

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