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22 Sep. 2020

Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2

AASB 2020-8 Amendments to Australian Accounting Standards – Interest Rate Benchmark Reform – Phase 2 addresses issues that may affect financial reporting during the interest rate benchmark reform,
including the effect of changes to contractual cash flows or hedging relationships resulting from the replacement of an interest rate benchmark with an alternative benchmark rate.

The amendments complement AASB 2019-3 Amendments to Australian Accounting
Standards – Interest Rate Benchmark

Reform and focus on the effects on financial statements when an entity replaces the existing interest rate benchmark with an alternative benchmark rate as a result of the reform.

The amendments in this final phase relate to:

• changes to contractual cash flows—an entity will not have to derecognise or adjust the carrying amount of financial instruments for changes required by the reform, but will instead update the effective interest rate to reflect the change to the alternative benchmark rate;

• hedge accounting—an entity will not have to discontinue its hedge accounting solely because it makes changes required by the reform, if the hedge meets other hedge accounting criteria; and

• disclosures—an entity will be required to disclose information about new risks arising from the reform and how it manages the transition to alternative benchmark rates.
The amendments apply to annual reporting periods beginning on or after 1 January 2021 but can be adopted early.