IASB publishes staff draft of the hedge accounting section of IFRS 9
The International Accounting Standards Board (IASB) has published on its website a staff draft of the general hedge accounting section of IFRS 9 'Financial Instruments'. The staff draft is based on the proposals in Exposure Draft ED/2010/13 'Hedge Accounting' published in December 2010 and the tentative decisions the IASB has made during its redeliberations of the Exposure Draft.
The staff draft published today is the result of the re-deliberations of the IASB. The purpose of a staff draft, which is not an official due process document, is to illustrate the IASB's position while at the same time enabling constituents to familiarise themselves with the document.
When finalised, the proposals will become part of IFRS 9 Financial Instruments and will form the section on hedge accounting. They will replace the corresponding requirements in IAS 39 Financial Instruments: Recognition and Measurement, except for the section on portfolio hedge accounting for interest rate risk as noted below.
The related topic of macro hedge accounting does not form part of the staff draft. The IASB has decided to publish a separate Discussion Paper on macro hedge accounting (expected in the third or fourth quarter of 2012). Therefore, the current requirements in IAS 39 on portfolio fair value hedges of interest rate risk remain applicable.
The key areas of change are:
- Closer alignment of the hedge accounting model with risk management
- Increased eligibility of hedged items
- Increased eligibility of hedging instruments
- A revocable fair value option when hedging particular credit risks
- New qualification and effectiveness requirements
- New concept of rebalancing hedging relationships
- New rules for discontinuing hedging relationships
- Increased disclosures
The intended effective date of the hedge accounting chapter are annual periods beginning on or after 1 January 2015 with earlier application permitted. The requirements are to be applied prospectively (with some 'grandfathering' allowed) but not to items that have already been derecognised at the date of initial application.
The following documents are available on the IASB website:
Click for more analysis:
- The Bruce Column — Towards a better understanding of risk.
- Deloitte IFRS podcast – IASB's draft IFRS on general hedge accounting.
- IFRS in Focus — Hedge accounting draft: A closer reflection of risk management.
- A Closer Look — Hedge accounting with financial options and structured derivatives.
- Deloitte (United Kingdom) Industry accounting alerts publication series on hedge accounting.