The IFRS Interpretations Committee (the Interpretations Committee) received a submission asking how to classify particular prepayable financial assets applying IFRS 9. The Interpretations Committee members, at its November 2016 meeting, suggested that the Board consider whether using amortised cost measurement could provide useful information about particular financial assets with such prepayment features, and if so, whether the requirements in IFRS 9 should be changed in this respect.
In the light of the Interpretations Committee’s recommendation and similar concerns raised by banks and their representative bodies in response to the Interpretations Committee’s discussion, the Board decided to propose a narrow exception to IFRS 9. The proposed exception will apply to particular financial assets that would otherwise have contractual cash flows that are solely payments of principal and interest but do not meet that condition only as a result of a prepayment feature. Applying the proposals, some such financial assets would be eligible to be measured at amortised cost or at fair value through other comprehensive income, subject to the assessment of the business model in which they are held, if particular conditions are met.