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Dynamic Risk Management - International Accounting Standards Board

Date recorded:

At its meeting on March 22, 2018, the International Accounting Standards Board (the Board) discussed the role of the target profile within the dynamic risk management model. In particular, the Board discussed what is a target profile, how it is determined, consistency of the asset profile and target profile, and the time horizon of the target profile. The paper also briefly discussed laddering strategies along with other matters that will be relevant regarding the target profile in future Board discussions.

The Board tentatively decided the staff should continue developing the model based on the following:

  1. the target profile represents management’s objective for a given asset profile;
  2. the entity’s risk management strategy should define the target profile considering: the contractual terms of financial liabilities; and the entity’s approach to core deposits where present;
  3. the notionals of the asset profile and the target profile are required to be the same but not the tenors; and
  4. the time horizon of the target profile is the period of time over which the entity is managing interest rate risk.

In April, the staff plan to discuss the qualifying criteria for items within the target profile and the dynamic nature of the model.

Review the IASB® Update and podcast on the Board's Web site.

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