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Deloitte responds to IASB exposure draft ‘Interest Rate Benchmark Reform’

Deloitte has responded to the IASB’s exposure draft, ‘Interest Rate Benchmark Reform — Proposed amendments to IFRS 9 and IAS 39’, saying the firm supports the IASB’s response in proposing amendments to both IFRS 9 and IAS 39 that deal with the immediate need of addressing the effect of the uncertainty arising from changes in benchmark interest rates on the “highly probable” requirement for cash flow hedges and the designated risk for cash flow and fair value hedges.

Given the speed at which market participants are choosing, or being required, to switch to new benchmark interest rates, the firm has suggested that the IASB work on finalizing these amendments and begin the work on its second phase of amendments concurrently. In addition, Deloitte believes there is a lack of clarity in three ares: the application to retrospective hedge effectiveness; the measurement of hedge ineffectiveness; and whether the amounts deferred in the cash flow hedge reserve should be reclassified to profit or loss when the entity ceases applying the amendment.

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