Changes in accounting policies, comparability and adjustments

12 Months Ended

Dec. 31, 2021

Entity [Table]

Changes in accounting policies, comparability and adjustments

Changes in accounting policies, comparability and other adjustments

Amendments to IAS 1,

Presentation of Financial Statements

, and

IFRS Practice Statement 2,

Making Materiality Judgements

Effective from 1 January 2021, UBS early adopted amendments to

IAS 1,

Presentation of Financial Statements

, and IFRS Practice

Statement 2,

Making Materiality Judgements

, issued by IASB in

February 2021. The disclosure of material accounting policies in

Note 1a has been refined through adopting these amendments.

Amendments to IAS 39, IFRS 9 and IFRS 7 (

Interest Rate

Benchmark Reform – Phase 2

) 

On 1 January 2021, UBS adopted

Interest Rate Benchmark

Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4

and IFRS 16)

, addressing a number of issues in financial reporting

areas that arise when interbank offered rates (IBORs) are reformed

or replaced. The amendments provide a practical expedient that

permits certain changes in the contractual cash flows of debt

instruments attributable to the replacement of IBORs with

alternative reference rates (ARRs) to be accounted for

prospectively by updating a given instrument’s effective interest

rate (EIR), provided (i) the change is necessary as a direct

consequence of IBOR reform and (ii) the new basis for

determining the contractual cash flows is economically equivalent

to the previous basis. UBS has adopted the amendments, which

had no material effect on the Group’s financial statements.

T

he amendments

also

provide various hedge accounting

reliefs, with the following adopted by UBS:

–

D

esignate

an

ARR as a non

-

contractually specified risk

component, even if it is not separately identifiable at the date

when it was designated, provided UBS can reasonably expect

that it will meet the requirements within 24 months of the first

designation and the risk component is reliably measurable. As

of 31 December 2021, the principal ARRs that UBS has

designated as the hedged risk in fair value hedges of interest

rate risk related to debt instruments, mortgages and cash flow

hedges of forecast transactions were the Secured Overnight

Financing Rate (SOFR), the Swiss Average Rate Overnight

(SARON) and the Sterling Overnight Index Average (SONIA).

–

Amend hedge documentation for the fair value hedges of

interest rate risk related to debt instruments for which the

hedged risk changed due to IBOR reform, which allowed UBS

to continue the hedge relationship in accordance with the

requirements of the phase 2 amendment.

–

The cash flow hedges of IBOR forecast transactions in Swiss

francs and pounds sterling were discontinued and replaced

with new ARR designations in December 2021. The amount

accumulated in the cash flow hedge reserve is deemed to be

based on the ARR on which the hedged future cash flows will

be based. Amounts will be released to the income statement

when the forecast ARR cash flows affect the income statement

or are no longer expected to occur.

The amendments also introduced additional disclosure

requirements regarding the Group’s management of the

transition to alternative benchmark rates, its progress as at the

reporting date and the risks to which it is exposed arising from

financial instruments because of the transition.

IFRSs and interpretations to be adopted and other adjustments

International Financial Reporting Standards and Interpretations to be adopted in 2022 and later and other changes

IFRS 17,

 Insurance Contracts

In May 2017, the IASB issued IFRS 17,

Insurance Contracts

, which

sets out the accounting requirements for contractual rights and

obligations that arise from insurance contracts issued and

reinsurance contracts held. IFRS 17 is effective from 1 January

2023. UBS is assessing the standard, but does not expect it to

have a material effect on the Group’s financial statements.

UBS AG

Entity [Table]

Changes in accounting policies, comparability and adjustments

Changes in accounting policies, comparability and other adjustments

Amendments to IAS 1,

Presentation of Financial Statements

, and

IFRS Practice Statement 2,

Making Materiality Judgements

Effective from 1 January 2021, UBS AG early adopted

amendments to IAS 1,

Presentation of Financial Statements

, and

IFRS Practice Statement 2,

Making Materiality Judgements

, issued

by IASB in February 2021. The disclosure of material accounting

policies in Note 1a has been refined through adopting these

amendments.

Amendments to IAS 39, IFRS 9 and IFRS 7 (

Interest Rate

Benchmark Reform – Phase 2

) 

On 1 January 2021, UBS adopted

Interest Rate Benchmark

Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4

and IFRS 16)

, addressing a number of issues in financial reporting

areas that arise when interbank offered rates (IBORs) are reformed

or replaced. The amendments provide a practical expedient that

permits certain changes in the contractual cash flows of debt

instruments attributable to the replacement of IBORs with

alternative reference rates (ARRs) to be accounted for

prospectively by updating a given instrument’s effective interest

rate (EIR), provided (i) the change is necessary as a direct

consequence of IBOR reform and (ii) the new basis for

determining the contractual cash flows is economically equivalent

to the previous basis. UBS AG has adopted the amendments,

which had no material effect on UBS AG’s financial statements.

T

he amendments

also

provide various hedge accounting

reliefs, with the following adopted by UBS AG:

–

D

esignate

an

ARR as a non

-

contractually specified risk

component, even if it is not separately identifiable at the date

when it was designated, provided UBS AG can reasonably

expect that it will meet the requirements within 24 months of

the first designation and the risk component is reliably

measurable. As of 31 December 2021, the principal ARRs that

UBS AG has designated as the hedged risk in fair value hedges

of interest rate risk related to debt instruments, mortgages and

cash flow hedges of forecast transactions were the Secured

Overnight Financing Rate (SOFR),

the

Swiss

Average Rate

Overnight (SARON) and the Sterling Overnight Index Average

(SONIA).

–

Amend hedge documentation for the fair value hedges of

interest rate risk related to debt instruments for which the

hedged risk changed due to IBOR reform, which allowed UBS

AG to continue the hedge relationship in accordance with the

requirements of the phase 2 amendment.

–

The cash flow hedges of IBOR forecast transactions in Swiss

francs and pounds sterling were discontinued and replaced

with new ARR designations in December 2021. The amount

accumulated in the cash flow hedge reserve is deemed to be

based on the ARR on which the hedged future cash flows will

be based. Amounts will be released to the income statement

when the forecast ARR cash flows affect the income statement

or are no longer expected to occur.

The amendments also introduced additional disclosure

requirements regarding UBS AG’s management of the transition

to alternative benchmark rates, its progress as at the reporting

date and the risks to which it is exposed arising from financial

instruments because of the transition.

IFRSs and interpretations to be adopted and other adjustments

International Financial Reporting Standards and Interpretations to be adopted in 2022 and later and other changes

IFRS 17,

 Insurance Contracts

In May 2017, the IASB issued IFRS 17,

Insurance Contracts

, which

sets out the accounting requirements for contractual rights and

obligations that arise from insurance contracts issued and

reinsurance contracts held. IFRS 17 is effective from 1 January

2023. UBS AG is assessing the standard, but does not expect it to

have a material effect on UBS AG’s financial statements.