Document ID: chunk:federal_register_of_legislation:F2025C00209:reg:221:p48
Version: federal_register_of_legislation:F2025C00209
Segment Type: reg
Provision Reference: reg 221 (pt 48/73)
Character Range: 295199–298150

environment.

 2.                The Board therefore considered whether the amendments made to AASB 9 Financial Instruments, AASB 4 Insurance Contracts, AASB 16 Leases and AASB 139 Financial Instruments: Recognition and Measurement by AASB 2020-8 will result in significant R&M differences to the IFRS for SMEs Standard.

Differences arising from the practical expedient for particular changes to contractual cash flows

 1.                The Board noted that the IFRS for SMEs Standard does not deal with the impact of interest rate benchmark reform on financial reporting or provide a practical expedient for similar situations. The amendments to AASB 9 mean that the changes made to the basis for determining the contractual cash flows as a result of interest rate benchmark reform are accounted for in the same way as the re-estimation of future interest payments on variable-rate financial assets and financial liabilities. In particular, the rules on accounting for modifications of contractual cash flows in AASB 9 do not apply.

 2.                Paragraph 11.37 of the IFRS for SMEs Standard addresses substantial modifications only in the context of the derecognition of financial liabilities. However, given the IASB concluded that it would be unlikely that the transition to an alternative benchmark rate alone would result in the derecognition of a financial instrument, these requirements are not relevant for the assessment outlined in paragraph BC6. In terms of accounting for other modifications under the IFRS for SMEs Standard, an entity's management would need to apply paragraph 10.4 and use its judgement in developing and applying accounting policies that result in relevant and reliable information. Paragraph 10.6 further states that in making the judgement, management may also consider the requirements and guidance in full IFRS Standards dealing with similar and related issues. The Board considered this could include the practical expedient for the interest rate benchmark reform in AASB 9.

 3.             The Board also noted that AASB 4 is not addressed in AASB 1060 as the majority of the entities applying AASB 4 would have public accountability. In respect of the amendments made to AASB 16 in relation to lease modifications required by interest rate benchmark reform, the Board considered that the IFRS for SMEs Standard does not discuss how to account for lease modifications. For the same reasons as set out in paragraph BC9, the Board concluded that the expedient introduced by the amendments to AASB 16 should not result in a significant R&M difference. In any case, the Board noted that there are no additional disclosures associated with the application of the practical expedient for leases.

 4.             The Board therefore concluded that the modifications arising as a result of interest rate benchmark reform should not result in significant R&M differences between the amended IFRS Standards and