IFRS

IASB issues Prepayment Features with Negative Compensation

The International Accounting Standards Board (IASB) has published amendments to IFRS 9 ‘Financial Instruments’ that allow companies to measure particular prepayable financial assets with negative compensation at amortised cost or at fair value through other comprehensive income—instead of measuring those assets at fair value through profit or loss. The amendments also include clarifications to the modification or exchange of a financial liability that does not result in derecognition.

After IFRS 9 was issued, the IFRS Interpretations Committee received a request on how to apply the IFRS 9 requirements for recognising and measuring financial instruments to certain debt instruments where the borrower is permitted to prepay the instrument at an amount that could be less than the unpaid principal and interest owed. Such a prepayment feature is often referred to as including potential 'negative compensation'. 

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