CHANGES IN ACCOUNTING POLICIES AND FINANCIAL STATEMENT PRESENTATION CONCEPTUAL FRAMEWORK FOR FINANCIAL REPORTING
In March 2018, the International Accounting Standards Board (IASB) issued a revised version of the Conceptual Framework for Financial Reporting which assists the IASB in developing IFRS standards and serves as an accounting policy guide when no IFRS standard applies. The amendments provide revised definitions and recognition criteria for assets and liabilities, and guidance on different measurement bases. The IASB also issued amendments to IFRS standards to refer to the revised framework. The revisions were effective for CWB’s fiscal year beginning November 1, 2020 and had no significant impact on our consolidated financial statements. INTEREST RATE BENCHMARK REFORM – PHASE 1 AMENDMENTS On November 1, 2020, we adopted Phase 1 amendments to hedge accounting requirements in IFRS 9 Financial Instruments (IFRS 9), IAS 39 Financial Instruments: Recognition and Measurement (IAS 39) and IFRS 7 Financial Instruments: Disclosures (IFRS 7), which modify certain hedge accounting requirements to provide relief from the effect of uncertainties created by Inter-bank Offered Rate (IBOR) reform prior to the transition to alternative interest rates. Adoption of these amendments had no impact on our consolidated financial statements. These amendments will apply until IBOR-based cash flows transition to new risk-free rates or when the applicable hedging relationships are discontinued. At October 31, 2021, we had no hedging relationships that reference IBORs with a maturity date which extends beyond the anticipated date of IBOR reform.
FUTURE CHANGES IN ACCOUNTING POLICIES
A number of standards and amendments have been issued by the IASB, and the following changes may have an impact on our future financial statements.
INTEREST RATE BENCHMARK REFORM – PHASE 2 AMENDMENTS In August 2020, the IASB issued Phase 2 amendments to IFRS 9, IAS 39, and IFRS 7 to address ongoing IBOR and other interest rate benchmark reform. Phase 2 amendments focus on accounting and disclosure matters that will arise once an existing benchmark is replaced with an alternative benchmark rate. The amendments provide practical expedients if contract modifications result directly from IBOR reform and occur on an economic equivalent basis. In these cases, changes may be accounted for by updating the effective interest rate. Existing hedging relationships are not required to be discontinued if changes in hedge documentation are required solely by IBOR reform. Changes to the interest rate of the financial assets or liabilities that are required by IBOR reform may be accounted for by updating the effective interest rate prospectively, to reflect the change in the interest rate benchmark rather than being recognized as an immediate gain or loss. Any other additional changes to the basis for determining the contractual cash flow are determined in accordance with our existing accounting policies for loan modifications. Additionally, the Phase 2 amendments allow for a temporary relief from hedge accounting requirements under IAS 39. Changes in existing hedge relationship that are a direct result of IBOR reform may be reflected in the hedge documentation without the need for discontinuing the hedging relationship. For aspects of hedge accounting not covered by the amendments and hedges that are not directly impacted by IBOR reform, the accounting policies as described in Note 11 of the consolidated financial statements for the year ended October 31, 2021 continue to apply.
Under the amendments, additional disclosures are required in the consolidated financial statements to outline the effect of the reform on our financial instruments and risk management strategy.
The amendments are effective for CWB on November 1, 2021 and apply retrospectively, without restatement of comparative information. There will be no impact on opening shareholders’ equity and the impact on the consolidated financial statements is expected to be limited to the additio nal disclosures required by the amendments.
IFRS 12 INCOME TAXES In May 2021, the IASB issued Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12 Income Taxes) . The amendments narrow the scope of the initial recognition exemption so that it does not apply to transactions that give rise to equal and offsetting temporary differences. As a result, we recognize a deferred tax asset and a deferred tax liability for temporary differences arising on initial recognition of a lease and a decommissioning provision. The amendments are effective for our fiscal year beginning November 1, 2023 and we are assessing the potential impacts on our consolidated financial statements.
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