IMA FRC comment letter to FASB on definition of a derivative (ESG-linked instruments)

Friday, March 24, 2023

The IMA^® (Institute of Management Accountants) Financial Reporting Committee (FRC or Committee) issued a comment to the Financial Accounting Standards Board (FASB or Board) that endorses a FASB project, Definition of a Derivative, relating to the accounting for financial instruments with environmental, social and governance (ESG)-linked features. Sustainability-linked instruments allow an issuer to use the proceeds for general corporate purposes, but the interest rate adjusts based on ESG measures, such as greenhouse gas emissions, water usage, or diversity in senior leadership.