Substantial modification: Difference between revisions

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''Financial reporting - financial assets - financial liabilities - renegotiation - modification - International Financial Reporting Standards (IFRS) - IFRS 9.''
''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.
Under IFRS 9 (Appendix B - Application guidance - paragraph 3.3.6) a modification is substantial if there is a difference of 10% or more 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.
A substantial modification is accounted for as an extinguishment.
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* [[Derecognition]]
* [[Derecognition]]
* [[Derivative instrument]]
* [[Derivative instrument]]
* [[Discounted cash flow]]
* [[Extinguishment]]
* [[Extinguishment]]
* [[Fair Value Adjustment]]
* [[Fair Value Adjustment]]
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* [[Modification gain or loss]]
* [[Modification gain or loss]]
* [[Non-substantial modification]]
* [[Non-substantial modification]]
* [[Present value]]
* [[Recognition]]
* [[Recognition]]
* [[Set-off]]
* [[Set-off]]
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*[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.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]
*[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:Accounting,_tax_and_regulation]]
[[Category:Financial_products_and_markets]]
[[Category:Financial_products_and_markets]]
[[Category:The_business_context]]
[[Category:The_business_context]]

Latest revision as of 22:14, 30 October 2024

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 10% or more 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.


Accounting and tax surprises under IFRS 9
"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


Other resources