Financial instruments – 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.

 

Current status of the project

The IASB expects to publish a 'review draft' of the hedge accounting section of IFRS 9 Financial Instruments during the second quarter of 2012, dealing with general hedge accounting. The finalised requirements are expected to be issued in the second half of 2012.

The IASB has begun in-depth deliberations on macro hedge accounting and a discussion paper or exposure draft is expected in the third or fourth quarter of 2012.

 

Project milestones

DateDevelopmentComments
9 December 2010 Exposure Draft ED/2010/13 Hedge Accounting published Comment deadline 9 March 2011

Related Discussions

  • Financial instruments — Macro hedge accounting

  • Mar 20, 2012

  • The IASB continued their discussion on development of a net valuation approach macro hedge accounting model. Similar to previous meetings, this session was an educational session where no decisions were made.

  • Financial instruments — Macro hedge accounting

  • Jan 26, 2012

  • The Board continued its discussions on development of a macro hedge accounting model. At the November 2011 Board meeting, the staff introduced eleven steps that will be considered for alternatives in the valuation of the risk position in a macro hedge accounting model.

  • Financial instruments - Hedge accounting: Macro hedge accounting

  • Nov 16, 2011

  • The staff presented the Board with two agenda papers on the topic of macro-hedging: (1) alternatives for developing a business oriented macro-hedging mode and (2) the use of non-GAAP information in the financial reporting of 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

  • Sep 20, 2011

  • The IASB considered three papers related to macro hedge accounting: (1) an example of a common interest rate risk management strategy (2) conceptual differences between the risk management approach described in the example and the current hedge accounting requirements and (3) potential alternatives for an accounting solution to address the conceptual differences.

  • 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

  • Nov 16, 2010

  • The IASB discussed portfolio hedge accounting (also referred to as macro hedge accounting), considering common bank strategies for economically hedging interest rate risk and two possible approaches how to deal with inconsistency between applying a fair value hedge accounting model and a bank's risk management policy.

  • 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

All Related