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Financial instruments — General hedge accounting

Background

This project forms part of the IASB's comprehensive project on financial instruments. The existing hedge accounting requirements in IAS 39 Financial Instruments: Recognition and Measurement are often considered by users and preparers of financial statements to be complex and not reflective of an entity’s risk management activities, nor to what extent those activities are successful in meeting the entity's risk management objectives. Many also find the requirements in IAS 39 excessively rule-based, resulting in arbitrary outcomes.

The project involves a comprehensive review of hedge accounting requirements, to establish a more objective-based approach to hedge accounting and align it with an entity's risk management processes.

This project is split into two phases: general hedge accounting (discussed on this page) and macro hedge accounting (see our separate project page).

 

Current status of the project

IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) was issued on 19 November 2013. 

 

Project milestones

DateDevelopmentComments
9 December 2010 Exposure Draft ED/2010/13 Hedge Accounting published Comment deadline 9 March 2011
7 September 2012 'Review draft' of the hedge accounting section of IFRS 9 published
19 November 2013 IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) issued The amendment removed the mandatory effective date for IFRS 9 which will be set once the standard is complete with a new impairment model and finalisation of any limited amendments to classification and measurement

Related Discussions

  • IASB activities update

  • Feb 24, 2014

  • IASB Chairman Hans Hoogervorst and others from the IASB provided an update on recent IASB activities.

  • IASB Chairman and Senior Technical Directors’ reports

  • Oct 17, 2013

  • The IFRS Foundation Trustees received a report from Mr Hoogervorst (IASB Chair) and senior technical directors. An update on the operation of the Accounting Standards Advisory Forum (ASAF) was received, and various IASB projects were discussed.

  • Hedge accounting

  • Apr 25, 2013

  • The Board discussed the scope and interaction with macro hedging activities and due process considerations.

  • Financial instruments — Hedge accounting (IASB only)

  • Jan 30, 2013

  • The Board discussed feedback received on the Review Draft on hedge accounting. Specifically, the Board discussed three topics: the measurement of a hedge item through the use of 'hypothetical derivatives'; transition requirements for the designation of ‘own use’ contracts as FVTPL; and the scope and interaction of the draft requirements with macro hedging activities.

  • Financial instruments – Hedge accounting

  • Sep 20, 2011

  • The IASB considered: (1) application of the proposed disclosure requirements to dynamic hedging strategies (2) hedging using credit derivatives (3) the effective date and transition of the hedge accounting standard and (4) next steps.

  • Financial instruments – Hedge accounting

  • Jul 28, 2011

  • The IASB discussed the following topics: (1) designation of risk components, (2) use of credit derivatives (3) redeliberation of the proposed disclosure requirements (4) whether to permit linked presentation for fair value hedges (5) constituent feedback on the 'own use' proposals.

  • Financial instruments – Hedge accounting

  • Jul 20, 2011

  • The IASB considered (1) a staff recommendation to permit the recognition of forward points that exist at inception of a hedging relationship in profit or loss over time on a rational basis and accumulate subsequent fair value changes in accumulated other comprehensive income, and (2) consider outreach activities for the exposure draft regarding aggregated exposures.

  • IASB-EFRAG meeting

  • Jun 14, 2011

  • Multiple Board members of the IASB, its staff and the incoming vice-chairman of the IASB met with members of the European Financial Reporting Advisory Group (EFRAG) to discuss (1) the state of the major projects (2) new standards on consolidation, joint arrangements and disclosures (3) the timeline for completion of major projects.

  • Financial instruments – Hedge accounting

  • Jun 02, 2011

  • The IASB and FASB debated the following topics as part of their redeliberations on the hedge accounting exposure draft: (1) rebalancing the hedging relationship (2) discontinuing the hedging relationship (3) options as hedging instruments (4) net written options.

  • Hedge accounting

  • May 12, 2011

  • The IASB and FASB considered feedback provided during the Board's outreach activities and comments received from the hedge accounting exposure in relation to hedge effectiveness assessment.

  • Financial instruments – Hedge accounting

  • Apr 27, 2011

  • The IASB deliberated on the following topics: (1) accounting for the time value of options for 'zero-cost' collars (2) designation of nominal components (3) accounting for fair value hedges.

  • Financial instruments – Hedge accounting

  • Apr 15, 2011

  • The IASB and FASB (1) discussed the designation of portions of items that are larger than the cash flows of the hedged item (commonly referred to as the 'sub-LIBOR issue') (2) considered certain issues raised by respondents related to cash instruments as hedging instruments (3) held an education session on the forthcoming macro hedge accounting project.

  • Technical plan

  • Nov 17, 2010

  • The IASB and FASB briefly discussed the timing of each of the Memorandum of Understanding (MOU) joint projects in preparation for the intended issue of an updated technical plan. Three projects were discussed in detail: financial instruments, discontinued operations and the Conceptual Framework.

  • Financial instruments — Hedge accounting

  • Oct 27, 2010

  • The IASB discussed the following topics as part of phase one of the hedge accounting project: (1) use of intragroup nonderivative financial instruments as hedging instruments (2) eligible hedged items - non-contractually specified risk components (3) time value of options (4) cash instruments as eligible hedging instruments (5) transition (6) drafting of the exposure draft.

  • Financial instruments — Hedge accounting

  • Oct 21, 2010

  • The IASB discussed: (1) use of credit derivatives (2) discontinuation of hedge accounting (3) rebalancing and reassessment of the hedge ratio (4) eligibility of hedged items — groups and net positions

  • Financial instruments – Hedge accounting

  • Oct 19, 2010

  • The IASB discussed three topics related to the ongoing hedge accounting project: (1) scope - own use exception (2) risk components - hedging items with a negative spread to LIBOR (3) disclosures

  • Financial instruments — Hedge accounting

  • Oct 05, 2010

  • The IASB discussed three topics related to the eligibility of certain items as hedging instruments within a hedge accounting relationship: (1) embedded derivatives (2) cash instruments (3) internal derivatives.

  • Financial instruments — Hedge accounting

  • Sep 16, 2010

  • The IASB discussed the following topics: (1) Group hedge accounting (2) Portfolio hedging (3) Hedge ineffectiveness measurement (4) Scope of disclosure (5) Hedge accounting presentation

  • Financial instruments — Hedge accounting

  • Aug 24, 2010

  • The IASB (1) continued its previous discussions on the development of a hedge effectiveness assessment method to qualify for hedge accounting (2) continued its previous discussions regarding designating a portion of an item (rather than a proportion) in a hedging relationship (3) considered whether (and how) an entity would be permitted to apply hedge accounting to certain equity investments measured at fair value with gains and losses recognised permanently in other comprehensive income (OCI).

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