CapitaLand Integrated Commercial Trust - Annual Report 2021

Notes to the Financial Statements YEAR ENDED 31 DECEMBER 2021 2 BASIS OF PREPARATION (continued) 2.5 Changes in accounting policies (continued) Specific policies applicable from 1 January 2021 for interest rate benchmark reform The Phase 2 amendments provide practical relief from certain requirement in FRS Standards. These reliefs relate to modifications of financial instruments and lease contracts or hedging relationship triggered by a replacement of a benchmark interest rate in a contract with a new alternative benchmark rate. If the basis for determining the contractual cash flows of a financial asset or financial liability measured at amortised cost changes as a result of interest rate benchmark reform, then the Group updates the effective interest rate of the financial asset or financial liability to reflect the change that is required by the reform. A change in the basis for determining the contractual cash flows is required by interest rate benchmark reform if the following conditions are met: • the change is necessary as a direct consequence of the reform; and • the new basis for determining the contractual cash flows is economically equivalent to the previous basis – i.e. the basis immediately before the change. If changes are made to a financial asset or financial liability in addition to changes to the basis for determining the contractual cash flows required by interest rate benchmark reform, then the Group first updates the effective interest rate of the financial asset or financial liability to reflect the change that is required by interest rate benchmark reform. Subsequently, the Group applies the policies on accounting for modifications to the additional changes. The amendments also provide an exception to use a revised discount rate that reflects the change in interest rate when remeasuring a lease liability because of a lease modification that is required by interest rate benchmark reform. Finally, the Phase 2 amendments provide a series of temporary exceptions from certain hedge accounting requirements when a change required by interest rate benchmark reform occurs to a hedged item and/ or hedging instrument that permit the hedge relationship to be continued without interruption. The Group applies the following reliefs as and when uncertainty arising from interest rate benchmark reform is no longer present with respect to the timing and the amount of the interest rate benchmark-based cashflows of the hedged item or hedging instrument: • the Group amends the designation of a hedging relationship to reflect changes that are required by the reform without discontinuing the hedging relationship; and • when a hedged item in a cash flow hedge is amended to reflect the changes that are required by the reform, the amount accumulated in the cash flow hedge reserve is deemed to be based on the alternative benchmark rate on which the hedged future cash flows are determined. Where uncertainty persists in the timing or amount of the interest rate benchmark-based cash flows of hedged item or hedging instrument, the Group continues to apply the existing accounting policies disclosed in Note 3.5(vi). See also Note 29 for related disclosures about risks, financial liabilities indexed to IBOR and hedge accounting. Annual Report 2021 231