CVM Resolution 18 (Revoked) - Approval of Technical Pronouncements Review Document No. 17 — CVM — BR

The PRESIDENT OF THE COMMISSION OF SECURITIES AND MARKETS – CVM makes public that the Collegiate Body, in a meeting held on February 10, 2021, based on §§ 3 and 5 of art. 177 of Law No. 6.404, of December 15, 1976, combined with items II and IV of § 1 of art. 22 of Law No. 6.385, of December 7, 1976, APPROVED the following Resolution:

Art. 1. It makes mandatory for open companies the Revision Document of Technical Pronouncements No. 17 issued by the Technical Pronouncements Committee – CPC, annexed to this Resolution.

Art. 2. This Resolution enters into force on the date of its publication in the Official Gazette of the Union, applying to fiscal years starting on or after January 1, 2021.

Electronically signed by
MARCELO BARBOSA
President

COMMISSION OF SECURITIES AND MARKETS
Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 TECHNICAL PRONOUNCEMENTS COMMITTEE REVISION OF TECHNICAL PRONOUNCEMENTS – NO. 17/2020 This revision document presents amendments to the Technical Pronouncements: CPC 06 (R2), CPC 11, CPC 38, CPC 40 (R1) and CPC 48.

This document establishes amendments to Technical Pronouncements resulting from the definition of the term “Reference Interest Rate Reform - Phase 2”. The validity of these amendments will be established by the regulatory bodies that approve them, and in order to fully comply with international accounting standards, the entity must apply these amendments in annual periods starting on or after January 1, 2021.

Includes items 5.4.5 to 5.4.9, item 6.8.13, items 6.9.1 to 6.9.13, 7.1.9 and items 7.2.43 to 7.2.46, includes a title before item 6.9.1 and includes subtitles before items 5.4.5, 6.9.7, 6.9.9, 6.9.11 and 7.2.43 in CPC 48 – Financial Instruments, which will enter into force with the following wording:

Changes to the basis for determining contractual cash flows as a result of the Reference Interest Rate Reform

5.4.5. The entity shall apply items 5.4.6 to 5.4.9 to a financial asset or financial liability if, and only if, the basis for determining the contractual cash flows of the financial asset or financial liability changes as a result of the reference interest rate reform. For this purpose, the term “Reference Interest Rate Reform” refers to a market-wide reform of a reference interest rate as described in item 6.8.2.

5.4.6. The basis for determining the contractual cash flows of a financial asset or financial liability may change:
(a) by changing the contractual terms specified at initial recognition of the financial instrument (for example, the contractual terms are changed to replace the interest rate reference with an alternative reference rate);

COMMISSION OF SECURITIES AND MARKETS
Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – ZIP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – ZIP: 01333-010 – Brazil - Tel.: (11) 2146-2000 (b) in a manner that was not considered by (or provided for in) contractual terms at initial recognition of the financial instrument, without changing the contractual terms (for example, the method for calculating the reference interest rate is changed without changing the contractual terms); or (c) because of the triggering of an existing contractual term (for example, an existing safeguard (fallback) clause is triggered).

5.4.7. As a practical expedient, the entity shall apply item B5.4.5 to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by the Reference Interest Rate Reform. This practical expedient applies only to such changes and only to the extent that the change is required by the Reference Interest Rate Reform (see also item 5.4.9). For this purpose, a change in the basis for determining contractual cash flows is required by the Reference Interest Rate Reform if, and only if, both of the following conditions are met:
(a) the change is necessary as a direct consequence of the reference interest rate reform; and (b) the new basis for determining the contractual cash flows is economically equivalent to the previous basis (i.e., the basis immediately before the change).

5.4.8. Examples of changes that give rise to a new basis for determining contractual cash flows that are economically equivalent to the previous basis (i.e., the basis immediately before the change) are:
(a) the replacement of an existing interest rate benchmark used to determine the contractual cash flows of a financial asset or financial liability with an alternative reference rate – or the implementation of such a reference interest rate reform, by changing the method used to calculate the interest rate benchmark – with the addition of a fixed spread necessary to compensate for the basis difference between the existing reference rate and the alternative reference rate; (b) changes to the reset period, reset dates or the number of days between coupon payment dates, in order to implement the reference interest rate reform; and

5.4.9. If changes are made to a financial asset or financial liability, in addition to changes to the basis for determining contractual cash flows required by the reference interest rate reform, the entity shall first apply the practical expedient of item 5.4.7 to the changes required by the reference interest rate reform. The entity shall then apply the applicable requirements in this Pronouncement to any additional changes to which the practical expedient does not apply. If the additional change does not result in the derecognition of the financial asset or financial liability, the entity shall apply item 5.4.3 or item B5.4.6, as applicable, to account for that additional change. If the additional change results in the derecognition of the financial asset or financial liability, the entity shall apply the derecognition requirements.

6.8.13 The entity shall prospectively cease to apply items 6.8.7 and 6.8.8, whichever occurs first between:
(a) when the changes required by the Reference Interest Rate Reform are made to the unspecified contractual risk component applying item 6.9.1; or (b) when the hedging relationship in which the unspecified contractual risk component is designated is discontinued.

6.9 Additional temporary exceptions resulting from the Reference Interest Rate Reform

6.9.1 As and when the requirements of items 6.8.4 to 6.8.8 cease to apply to a hedging relationship (see items 6.8.9 to 6.8.13), the entity shall change the formal designation of that hedging relationship, as documented previously, to reflect the changes required by the reference interest rate reform, i.e., the changes are consistent with the requirements of items 5.4.6 to 5.4.8. In this context, the hedging designation shall be changed only to make one or more of these changes:
(a) designating an alternative reference rate (whether or not contractually specified) as a hedged risk;

6.9.2 The entity shall also apply the requirement of item 6.9.1(c) if these three conditions are met:
(a) the entity makes a change required by the reference interest rate reform using a different approach from the change in the basis for determining the contractual cash flows of the hedging instrument (as described in item 5.4.6); (b) the original hedging instrument is not derecognized; and (c) the chosen approach is economically equivalent to changing the basis for determining the contractual cash flows of the original hedging instrument (as described in items 5.4.7 and 5.4.8).

6.9.3 The requirements of items 6.8.4 to 6.8.8 may cease to apply in different situations. Therefore, when applying item 6.9.1, the entity may be required to change the formal designation of its hedging relationships at different times, or it may be necessary to change the formal designation of a hedging relationship more than once. When, and only when, such a change is made to the hedging designation, the entity shall apply items 6.9.7 to 6.9.12 as applicable. The entity shall also apply item 6.5.8 (for a fair value hedge) or item 6.5.11 (for a cash flow hedge) to account for any changes in the fair value of the hedged item or the hedging instrument.

6.9.4 The entity shall change a hedging relationship as required in item 6.9.1 at the end of the period of the financial statement during which a change required by the reference interest rate reform is made to the hedged risk, hedged item or hedging instrument. For the avoidance of doubt, such a change in the formal designation of a hedging relationship does not constitute either the discontinuation of the hedging relationship or the designation of a new hedging relationship.

6.9.5 If changes are made beyond the changes required by the reference interest rate reform to the financial asset or financial liability designated in a hedging relationship (as described in items 5.4.6 to 5.4.8) or to the designation of the hedging relationship (as required by item 6.9.1), the entity shall first apply the requirements provided in this Pronouncement to determine whether these additional changes result in the discontinuation of hedge accounting. If the additional changes do not result in the discontinuation of hedge accounting, the entity shall change the formal designation of the hedging relationship as specified in item 6.9.1.

6.9.6 Items 6.9.7 to 6.9.13 establish exceptions to the requirements specified for these items only. The entity shall apply all other requirements of hedge accounting in this Pronouncement, including the qualification criteria of item 6.4.1, to hedging relationships that have been directly affected by the reference interest rate reform.

Accounting of qualified hedging relationships
Cash flow hedges

6.9.7 For the purpose of applying item 6.5.11, at the time the entity changes the description of a hedged item as required in item 6.9.1 (b), the amount accumulated in the cash flow hedge reserve shall be considered based on the alternative reference rate on which the hedged future cash flows are determined.

6.9.8 For a discontinued hedging relationship, when the reference interest rate on which the hedged future cash flows were based is changed as required by the reference interest rate reform, for the purpose of applying item 6.5.12 to determine whether the hedged future cash flows are expected to occur, the amount accumulated in the cash flow hedge reserve for that hedging relationship shall be attributed based on the alternative reference rate on which the hedged future cash flows will be based.

Groups of items

6.9.9 When the entity applies item 6.9.1 to groups of items designated as hedged items in a fair value hedge or cash flow hedge, the entity shall allocate the hedged items to subgroups based on the reference rate that is being hedged and designate the reference rate as the hedged risk for each subgroup. For example, in a hedging relationship in which a group of items is hedged for changes in a reference interest rate subject to the reference interest rate reform, the hedged cash flows or the fair value of some items in the group could be changed to refer to an alternative reference rate before other items in the group are changed. In this example, when applying item 6.9.1, the entity designates the alternative reference rate as the hedged risk for that relevant subgroup of hedged items. The entity continues to designate the existing reference interest rate as the hedged risk for the other subgroup of hedged items until the hedged cash flows or fair value of those items are changed to refer to the alternative reference rate or the items expire and are replaced by hedged items that refer to the alternative reference rate.

6.9.10 The entity shall evaluate separately whether each subgroup meets the requirements of item 6.6.1 to be an eligible hedged item. If any subgroup ceases to meet the requirements of item 6.6.1, the entity shall discontinue hedge accounting prospectively for the hedging relationship in its entirety. The entity shall also apply the requirements of items 6.5.8 and 6.5.11 to account for the ineffectiveness related to the hedging relationship in its entirety.

Designation of risk components

6.9.11 An alternative reference rate designated as a risk component that is not contractually specified and is not separately identifiable (see items 6.3.7(a) and B6.3.8) at the time it is designated shall be considered to have met this requirement at that time if, and only if, the entity reasonably expects that the alternative reference rate will be separately identifiable within 24 months. The 24-month period applies separately to each alternative reference rate and starts from the date on which the entity designates the alternative reference rate as a risk component that is not contractually specified for the first time (i.e., the 24-month period applies rate by rate).

6.9.12 If subsequently the entity reasonably expects that the alternative reference rate will not be separately identifiable within 24 months from the date on which the entity designated it as a contractually unspecified risk component for the first time, the entity shall cease to apply the requirement of item 6.9.11 to that alternative reference rate and discontinue hedge accounting prospectively from the date of that reassessment for all hedging relationships in which the alternative reference rate was designated as a contractually unspecified risk component.

6.9.13 In addition to those hedging relationships specified in item 6.9.1, the entity shall apply the requirements of items 6.9.11 and 6.9.12 to new hedging relationships in which an alternative reference rate is designated as a contractually unspecified risk component (see items 6.3.7 (a) and B6.3.8) when, due to the reference interest rate reform, this risk component is not separately identifiable at the time it is designated.

7.1.9 CPC Review 17 approved by the CPC on January 8, 2021, amended CPC 48, CPC 38, CPC 40 (R1), CPC 11 and CPC 06 (R2), adding items 5.4.5 to 5.4.9, Section 6.9 and items 7.2.43 to 7.2.46.

The validity of this Review will be established by the regulatory bodies that approve it, and in order to fully comply with international accounting standards, the entity must apply this review for annual periods starting on or after January 1, 2021.

Transition to the Reference Interest Rate Reform - Phase 2

7.2.43 The entity shall apply the changes introduced by the Reference Interest Rate Reform - Phase 2 retrospectively in accordance with CPC 23, except as specified in items 7.2.44 to 7.2.46.

7.2.44 The entity shall designate a new hedging relationship (for example, as described in item 6.9.13) only prospectively (i.e., the entity is prohibited from designating a new hedge accounting relationship in prior periods). However, the entity shall reinstate a discontinued hedging relationship if, and only if, these conditions are met:
(a) the entity had discontinued that hedging relationship solely due to changes required by the reference interest rate reform and it would not have been necessary to discontinue that hedging relationship if those changes had been applied at that time; and (b) at the beginning of the period of the financial statements in which the entity first applies these changes (the initial application date of these changes), that discontinued hedging relationship meets the qualification criteria for hedge accounting (after taking these changes into consideration).

7.2.45 If, when applying item 7.2.44, the entity reinstates a discontinued hedging relationship, the entity shall consider the references in items 6.9.11 and 6.9.12 up to the date on which the alternative reference rate is designated as a contractually unspecified risk component for the first time, referring to the initial application date of these changes (i.e., the 24-month period for that alternative reference rate designated as a contractually unspecified risk component begins from the initial application date of these changes).

7.2.46 The entity is not required to restate prior periods to reflect the application of these changes. The entity may restate prior periods if, and only if, it is possible without the use of hindsight. If the entity does not restate prior periods, the entity shall recognize any difference between the previous carrying amount and the carrying amount at the beginning of the period that includes the initial application date of these changes in the opening balance of retained earnings (or other component of equity, as appropriate) of the annual reporting period that includes the initial application date of these changes.

Amends item 102M, includes items 102O to 102Z3 and 108H to 108K, includes a title before item 102P and includes subtitles before items 102P, 102V, 102Y and 102Z1 in CPC 38 – Financial Instruments: Recognition and Measurement, which will enter into force with the following wording:

102M. The entity shall prospectively cease to apply item 102G to the hedging relationship in whichever occurs first between:
(a) when the uncertainty resulting from the reference interest rate reform is no longer present with respect to the hedged risk and the timing and value of the cash flows based on the reference interest rate of the hedged item and the hedging instrument; and (b) when the hedging relationship to which the exception is applied is discontinued.

102O. The entity shall prospectively cease to apply items 102H and 102I in whichever occurs first between:
(a) when the changes required by the reference interest rate reform are made to the contractually unspecified risk portion applying item 102P; or (b) when the hedging relationship in which the designated portion of contractually unspecified risk is discontinued.

Additional temporary exceptions resulting from reference interest rate reform Hedge accounting

COMMISSION OF SECURITIES AND EXCHANGE
Rua Sete de Setembro, 111/2-5th and 23-34th Floors, Center, Rio de Janeiro/RJ – CEP: 20050-901 – Brazil - Tel.: (21) 3554-8686 Rua Cincinato Braga, 340/2nd, 3rd and 4th Floors, Bela Vista, São Paulo/ SP – CEP: 01333-010 – Brazil - Tel.: (11) 2146-2000

102P. How and when the requirements of items 102D to 102I cease to apply to a hedging relationship (see items 102J to 102O), the entity must change the formal designation of that hedging relationship, as documented previously, to reflect the changes required by the reference interest rate reform, i.e., the changes are consistent with the requirements of items 5.4.6 to 5.4.8 of CPC 48. In this context, the hedge designation must be changed only to make one or more of these changes:
(a) designating an alternative reference rate (contractually or non-contractually specified) as a hedged risk; (b) changing the description of the hedged item, including the description of the designated portion of cash flows or fair value being hedged; (c) changing the description of the hedging instrument; or (d) changing the description of how the entity will assess hedge effectiveness.

102Q. The entity must also apply the requirement of item 102P (c) if these three conditions are met:
(a) the entity makes a change required by the reference interest rate reform using an approach other than changing the basis for determining the contractual cash flows of the hedging instrument (as described in item 5.4.6 of CPC 48); (b) the original hedging instrument is not derecognized; and (c) the chosen approach is economically equivalent to changing the basis for determining the contractual cash flows of the original hedging instrument (as described in items 5.4.7 and 5.4.8 of CPC 48).

102R. The requirements of items 102D to 102I may cease to apply at different times. Therefore, applying item 102P, the entity may be required to change the formal designation of its hedging relationships at different times, or it may be necessary to change the formal designation of a hedging relationship more than once. When, and only when, such a change is made to the hedge designation, the entity must apply items 102V to 102Z2, as applicable. The entity must also apply item 89 (for a fair value hedge) or item 96 (for a cash flow hedge) to recognize any changes in the fair value of the hedged item or the hedging instrument.

102S. The entity must change a hedging relationship as required in item 102P at the end of the reporting period during which a change required by the reference interest rate reform is made to the hedged risk, hedged item, or hedging instrument. For the avoidance of doubt, such a change in the formal designation of a hedging relationship does not constitute either the discontinuation of the hedging relationship or the designation of a new hedging relationship.

102T. If changes are made beyond the changes required by the reference interest rate reform to the financial asset or financial liability designated in a hedging relationship (as described in items 5.4.6 to 5.4.8 of CPC 48) or to the designation of the hedging relationship (as required by item 102P), the entity must first apply the applicable requirements in this pronouncement to determine if these additional changes result in the discontinuation of hedge accounting. If the additional changes do not result in the discontinuation of hedge accounting, the entity must change the formal designation of the hedging relationship as specified in item 102P.

102U. Items 102V to 102Z3 provide exceptions to the requirements specified only in these items. The entity must apply all other hedge accounting requirements in this pronouncement, including the qualification criteria of item 88, to hedging relationships that have been directly affected by the reference interest rate reform.

Accounting for qualified hedging relationships Retrospective effectiveness assessment

102V. For the purpose of assessing the retrospective effectiveness of a hedging relationship on a cumulative basis applying item 88 (e), and only for that purpose, the entity may choose to reset to zero the cumulative changes in fair value of the hedged item and the hedging instrument when the application of item 102G ceases, as required by item 102M. This choice is made separately for each hedging relationship (i.e., on an individual hedging relationship basis).

Cash flow hedges

102W. For purposes of applying item 97, at the point where the entity changes the description of a hedged item as required in item 102P (b), the gain or loss accumulated in other comprehensive income will be considered based on the alternative reference rate on which the future covered cash flows are determined.

102X. For a discontinued hedging relationship, when the reference interest rate on which the future covered cash flows were based is changed as required by the reference interest rate reform, for purposes of applying item 101 (c) to determine if the future protected cash flows are expected to occur, the value accumulated in other comprehensive income for that hedging relationship will be considered based on the alternative reference rate on which the future covered cash flows will be based.

Groups of items

102Y. When the entity applies item 102P to groups of items designated as hedged items in a fair value hedge or cash flow hedge, the entity must allocate the hedged items to subgroups based on the reference rate that is being hedged and designate the reference rate as the hedged risk for each subgroup. For example, in a hedging relationship where a group of items is covered for changes in a reference interest rate subject to the reference interest rate reform, the protected cash flows or the fair value of some items in the group may be changed to refer to an alternative reference rate before other items in the group are changed. In this example, when applying item 102P, the entity designates the alternative reference rate as the hedged risk for that relevant subgroup of hedged items. The entity continues to designate the existing reference interest rate as the hedged risk for the other subgroup of hedged items until the covered cash flows or fair value of these items are changed to reference the alternative reference rate or the items expire and are replaced by hedged items that reference the alternative reference rate.

102Z. The entity must evaluate separately whether each subgroup meets the requirements in items 78 and 83 to be an eligible hedged item. If any subgroup fails to meet the requirements of items 78 and 83, the entity must discontinue hedge accounting prospectively for the hedging relationship in its entirety. The entity must also apply the requirements of items 89 or 96 to recognize ineffectiveness related to the hedging relationship as a whole.

Designating financial items as hedged items

102Z1. An alternative reference rate designated as a portion of the risk not contractually specified that is not identifiable separately (see items 81 and AG99F) at the date it is designated will be considered to have met that requirement on that date, if, and only if, the entity reasonably expects that the alternative reference rate will be identifiable separately within 24 months. The 24-month period applies to each alternative reference rate separately and begins on the date the entity first designates the alternative reference rate as a portion of the risk of the non-contractually specified rate (i.e., the 24-month period applies on a rate-by-rate basis).

102Z2. If subsequently the entity has a reasonable expectation that the alternative reference rate will not be identifiable separately within 24 months from the date the entity designated it as a non-contractually specified risk portion initially, the entity must cease to apply the requirement of item 102Z1 for that alternative reference rate and discontinue hedge accounting prospectively from the date of that reassessment for all hedging relationships in which the alternative reference rate was designated as a non-contractually specified risk portion.

102Z3. In addition to the hedging relationships specified in item 102P, the entity must apply the requirements of items 102Z1 and 102Z2 to new hedging relationships in which an alternative reference rate is designated as a portion of the non-contractually specified risk (see items 81 and AG99F) when, because of the reference interest rate reform, that risk portion is not identifiable separately at the date it is designated.

108H. CPC Revision 17, approved by the CPC on January 8, 2021, amended CPC 48, CPC 38, CPC 40, CPC 11 and CPC 06 (R2), added items 102O to 102Z3 and 108I to 108K, and amended item 102M. The effective date of this Revision will be established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity must apply this revision for annual periods beginning on or after January 1, 2021. The entity must apply these changes retrospectively in accordance with CPC 23, except as specified in items 108I to 108K.

108I. The entity must designate a new hedging relationship (for example, as described in item 102Z3) only prospectively (i.e., the entity is prohibited from designating a new relationship as hedge accounting in prior periods). However, the entity must re-establish a discontinued hedging relationship if, and only if, these conditions are met:
(a) the entity had discontinued that hedging relationship solely due to changes required by the reference interest rate reform and the entity would not have been required to discontinue that hedging relationship if these changes had been applied at that time; and (b) at the beginning of the reporting period in which the entity first applies these changes (the initial application date of these changes), that discontinued hedging relationship meets the qualification criteria for hedge accounting (after taking these changes into consideration).

108J. If, when applying item 108I, the entity re-establishes a discontinued hedging relationship, the entity must read the references in items 102Z1 and 102Z2 up to the date the alternative reference rate is designated as a non-contractually specified risk portion for the first time as referring to the initial application date of these changes (i.e., the 24-month period for that alternative reference rate designated as a portion of the non-contractually specified risk begins on the initial application date of the changes).

108K. The entity is not required to restate prior periods to reflect the application of these changes. The entity may restate prior periods if, and only if, it is possible without the use of hindsight. If the entity does not restate prior periods, the entity must recognize any difference between the carrying amount and the carrying amount at the beginning of the period that includes the initial application date of these changes in opening retained earnings (or another component of equity, as appropriate) of the annual reporting period that includes the initial application date of these changes.

Includes items 24I to 24J and 44GG to 44HH and includes subtitle before item 24I in CPC 40 (R1) – Financial Instruments: Disclosure, which will come into force with the following wordings:

Additional disclosures related to the reference interest rate reform

24I. To enable users of financial statements to understand the effect of the reference interest rate reform on the entity's financial instruments and risk management strategy, the entity must disclose information about:
(a) the nature and extent of the risks to which the entity is exposed arising from financial instruments subject to the reference interest rate reform, and how the entity manages these risks; and (b) the entity's progress in completing the transition to the alternative reference rate and how the entity is managing the transition.

24J. To meet the objectives of item 24I, the entity must disclose:
(a) how the entity is managing the transition to the alternative reference rate, its progress at the reporting date, and the risks to which it is exposed arising from financial instruments because of the transition; (b) information not aggregated by significant reference interest rate subject to the reference interest rate reform, quantitative information about financial instruments that still need to transition to an alternative reference rate at the end of the period of the financial statements, showing separately:
(i) non-derivative financial assets;
(ii) non-derivative financial liabilities; and (iii) derivatives; and (c) if the risks identified in item 24J (a) resulted in changes to the entity's risk management strategy (see item 22A), a description of those changes.

44GG. CPC Revision 17, approved by the CPC on January 8, 2021, amended CPC 48, CPC 38 (R1), CPC 40, CPC 11 and CPC 06 (R2), added items 24I to 24J and 44HH. The entity must apply these changes when applying the changes to CPC 48, CPC 38 (R1), CPC 11 and CPC 06 (R2).

44HH. In the period of the statements in which the entity first applies CPC Revision 17, the entity is not required to disclose the information that would otherwise be required by item 28 (f) of CPC 23.

Includes items 20R, 20S, 50 and 51 and includes subtitle before item 20R in CPC 11 – Insurance Contracts, which will come into force with the following wordings:

Changes in the basis for determining contractual cash flows as a result of the reference interest rate reform

20R. An insurer that applies the temporary exemption of CPC 48 must apply the requirements in items 5.4.6 to 5.4.9 of CPC 48 to a financial asset or financial liability if, and only if, the basis for determining the contractual cash flow of that financial asset or financial liability changes as a result of the reference interest rate reform. For this purpose, the term "reference interest rate reform" refers to the market-wide reform of a reference interest rate as described in item 102B of CPC 38.

20S. For purposes of applying items 5.4.6 to 5.4.9 of the amendments to CPC 48, references to item B5.4.5 of CPC 48 must be read as references to item AG7 of CPC 38. References to items 5.4.3 and B5.4.6 of CPC 48 must be read as referring to item AG8 of CPC 38.

50. CPC Revision 17, approved by the CPC on January 8, 2021, amended CPC 48, CPC 38, CPC 40, CPC 11 and CPC 06 (R2), added items 20R and 20S and item 51. The effective date of this Revision will be established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity must apply this revision for annual periods beginning on or after January 1, 2021. The entity must apply these changes retrospectively in accordance with CPC 23, except as specified in item 51.

51. The entity is not required to restate prior periods to reflect the application of these changes. The entity may restate prior periods if, and only if, it is possible without the use of hindsight. If the entity does not restate prior periods, the entity must recognize any difference between the carrying amount and the carrying amount at the beginning of the reporting period that includes the initial application date of these changes in opening retained earnings (or another component of equity, as appropriate) of the annual reporting period that includes the initial application date of these changes.

5. Includes items 104 to 106, C1B, C20C and C20D, includes title before item 104 and includes subtitle before item C20C in CPC 06 (R2) – Leases, which will come into force with the following wordings:

Temporary exception arising from the Reference Interest Rate Reform

A lessee must apply items 105 and 106 to all lease modifications that change the basis for determining future lease payments as a result of the reference interest rate reform (see items 5.4.6 and 5.4.8 of CPC 48). These items apply only to such lease modifications. For this purpose, the term "reference interest rate reform" refers to the market-wide reform of the reference interest rate, as described in item 6.8.2 of CPC 48.
As a practical expedient, the lessee must apply item 42 to recognize a lease modification required by the reference interest rate reform. This practical expedient applies only to such modifications. For this purpose, a modification in the lease is required by the reference interest rate reform if, and only if, both of the following conditions are met:
(a) the modification is necessary as a direct consequence of the reference interest rate reform; and (b) the new basis for determining lease payments is economically equivalent to the previous basis (i.e., the basis immediately preceding the modification).
However, if lease modifications are made beyond these modifications required by the reference interest rate reform, a lessee must apply the applicable requirements in this Pronouncement to account for all lease modifications made at the same time, including those required by reference interest rate reform interest.

C1B. CPC Revision 17, approved by the CPC on January 8, 2021, amended CPC 48, CPC 38, CPC 40, CPC 11 and CPC 06 (R2), added items 104 to 106 and C20C and C20D. The effective date of this Revision will be established by the regulatory bodies that approve it, and for full compliance with international accounting standards, the entity must apply this revision for annual periods beginning on or after January 1, 2021.

Reference Interest Rate Reform - Phase 2

C20C. The entity must apply these changes retrospectively in accordance with CPC 23, except as specified in item C20D.

C20D. The entity is not required to restate prior periods to reflect the application of these changes. The entity may restate prior periods if, and only if, it is possible without the use of hindsight. If the entity does not restate prior periods, the entity must recognize any difference between the carrying amount and the carrying amount at the beginning of the period that includes the initial application date of these changes in opening retained earnings (or another component of equity, as appropriate) of the annual reporting period that includes the initial application date of these changes.

Lineage: Revoked