View source for Substantial modification

''Financial reporting - financial assets - financial liabilities - renegotiation - modification - International Financial Reporting Standards (IFRS) - IFRS 9.''

Under IFRS 9 (Appendix B - Application guidance - paragraph 3.3.6) a modification is substantial if there is a difference of more than 10% in the discounted present value of the cash flows under the new terms, compared with the original terms.

A substantial modification is accounted for as an extinguishment.


:<span style="color:#4B0082">'''''Accounting and tax surprises under IFRS 9'''''</span>

:"Corporate borrowers often need to renegotiate their existing loan liabilities, and in many companies this responsibility will fall on the treasurer. 

:Although treasurers may not necessarily be accounting experts, they still need to carefully consider the potential accounting impacts when renegotiating loan terms. 

:Under IFRS 9: Financial Instruments, loan modifications can trigger gains and losses for financial reporting purposes and may even have tax implications."

:''Renegotiating a loan? Get the accounting right - Kern Roberts, managing director, global accounting practice lead Chatham Financial.''


== See also ==
* [[Derecognition]]
* [[Derivative instrument]]
* [[Extinguishment]]
* [[Fair Value Adjustment]]
* [[Financial asset]]
* [[Financial instrument]]
* [[Financial liability]]
* [[Hedge accounting]]
* [[IAS 32]]
* [[IAS 39]]
* [[IFRS 9]]
* [[IFRS 9 hedge accounting reforms: a closer reflection of risk management?]]
* [[IFRS 15]]
* [[Impairment]]
* [[International Financial Reporting Standards]]  (IFRS)
* [[Modification]]
* [[Modification gain or loss]]
* [[Non-substantial modification]]
* [[Recognition]]
* [[Set-off]]


==Other resources==
*[https://www.iasplus.com/en/standards/ifrs/ifrs9 IFRS 9 summary - IAS Plus]
*[https://www.ifrs.org/content/dam/ifrs/publications/pdf-standards/english/2022/issued/part-a/ifrs-9-financial-instruments.pdf?bypass=on IFRS 9 full text - IFRS webpage]
*[https://www.treasurers.org/hub/treasurer-magazine/renegotiating-loan-get-accounting-right-warns-adviser Renegotiating a loan? Get the accounting right - Kern Roberts, managing director, global accounting practice lead Chatham Financial]

[[Category:Accounting,_tax_and_regulation]]
[[Category:Financial_products_and_markets]]
[[Category:The_business_context]]

[[Category:Accounting,_tax_and_regulation]]
[[Category:Financial_products_and_markets]]
[[Category:The_business_context]]