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EFRAG has issued a draft endorsement advice letter and a separate invitation to comment relating to the endorsement for use in the EU of Prepayment Features with Negative Compensation (Amendments to IFRS 9) ('the Amendments').
The objective of the Amendments is that 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 that may result in negative compensation would be eligible to be measured at amortised cost or fair value through other comprehensive income, subject to an assessment of the business model in which they are held.
The Amendments become effective for annual periods beginning on or after 1 January 2019, with earlier application permitted.
EFRAG's overall preliminary assessment is that the Amendments satisfy the criteria for endorsement for use in the EU and therefore recommends its endorsement.
EFRAG is seeking comments on all aspects of its analyses supporting its preliminary conclusions.
Comments are requested by 2 November 2017.