Related Discussions

• Dynamic Risk Management – International Accounting Standards Board

• Jul 23, 2024

• On July 23, 2024, the IASB met to discuss the Dynamic Risk Management (DRM) model, focusing on which risk management activities would qualify and whether its application should be mandatory or optional. They decided that entities can apply the DRM model if they meet criteria related to interest rate repricing risk, dynamic risk management strategies, systematic risk exposure processes, and access to liquid markets. The IASB also decided to gather more information from insurers about their risk management strategies. Ultimately, the board made the DRM model application optional for qualifying entities. The IASB will discuss additional topics, including proposed disclosure requirements, in the upcoming DRM exposure draft.

• Dynamic Risk Management – International Accounting Standards Board

• Jun 19, 2024

• The IASB met on June 19, 2024, to advance its discussions on the Dynamic Risk Management (DRM) model and reviewed a summary of its tentative decisions and defined terms related to the project. During the meeting, the IASB addressed the capacity assessment requirements, deciding that entities must measure the maximum future economic benefit of their current net open risk positions at the reporting date based on the present value and recognize any capacity shortfalls systematically over the risk management time horizon without the possibility of reversing recognized shortfalls. All 14 IASB members unanimously agreed upon these decisions. Additionally, the IASB outlined presentation requirements for the DRM model, requiring entities to show the unwinding of DRM adjustments as a net amount in a separate line item in the profit or loss statement and any misalignments along with fair value gains or losses from derivatives. The DRM adjustment must also be presented as a net amount in the statement of financial position at the end of the reporting period. Lastly, the IASB discussed potential disclosure requirements based on the information needs of financial statement users but has not made any decisions at this time. The next steps include continuing discussions on identified topics according to the project plan.

• Dynamic Risk Management – International Accounting Standards Board

• Jul 25, 2023

• The IASB met on July 25, 2023 to continue its discussion on the Dynamic Risk Management (DRM) model. The IASB discussed the qualifying criteria for determining an entity’s current net open risk position and whether financial assets and financial liabilities denominated in more than one currency could be designated in the same DRM model. The IASB also discussed whether non-linear derivatives (such as interest rate options) and ‘off-market’ derivatives (derivatives that have a non-zero fair value on initial designation) would be eligible to be designated derivatives in the DRM model. The IASB tentatively decided that non-linear derivatives, except for net written options, would be eligible to be designated derivatives when their use is consistent with an entity’s risk management strategy. Finally, the IASB tentatively decided that off-market derivatives would be eligible to be designated derivatives when their use is consistent with an entity’s risk management strategy. However, only the fair value changes that arise after the date of initial designation are considered when measuring the DRM adjustment.

• Dynamic Risk Management – International Accounting Standards Board.

• May 24, 2023

• At its meeting on May 22-24, 2023, the IASB continued its discussions on the Dynamic Risk Management (DRM) model, with a set of illustrative examples intended to demonstrate the designation and application of the DRM model.

• Dynamic Risk Management – International Accounting Standards Board

• Apr 25, 2023

• At its meeting on April 25-27, 2023, the IASB discussed the proposed requirements for determining the risk mitigation intention (RMI), specifically considering how an entity would define managed risk and construct benchmark derivatives. The IASB tentatively decided that (i) the managed risk is the specified interest rate risk an entity manages consistent with its risk management strategy and is therefore the risk an entity’s risk limits are based on; and (ii) the benchmark derivative is calibrated to current market rates of the managed risk to achieve a fair value of zero based on the RMI by repricing period. The IASB also reconsidered and reconfirmed two tentative decisions from previous meetings (i) the RMI is evidenced by the actual amount of interest rate risk by repricing period transferred to a party external to the reporting entity (for example, external to the group or individual entity that is being reported on); and (ii) the repricing periods of the available risk to mitigate are aligned with an entity’s risk management strategy. The IASB considered further a qualifying criterion for determining the current net open risk position (CNOP)—that future transactions can only be designated in the DRM model when they are highly probable. The IASB tentatively decided (i) to require future transactions that are the reinvestment or refinancing of existing financial assets or financial liabilities at the prevailing market interest rate to be included in the CNOP when they are expected to occur; and (ii) all other future transactions must be highly probable to occur in order to qualify for inclusion in the CNOP.

• Dynamic Risk Management – International Accounting Standards Board

• Feb 20, 2023

• At its meeting on February 20-23, 2023, the IASB continued its discussions on the development of the Dynamic Risk Management (DRM) model. The IASB discussed: (i) whether financial assets measured at fair value through other comprehensive income (FVOCI) or fair value through profit or loss (FVPL) are eligible for inclusion in the determination of an entity’s current net open risk position; and (ii) whether it is necessary to refine the requirements for the assessment of the performance of the DRM model, including how to reflect in financial statements the effects of any unexpected changes in the model. Following a discussion, the IASB made tentative decisions with respect to both (i) and (ii). The IASB will continue its discussions on the topics identified in the project plan at a future meeting.

• Dynamic Risk Management – International Accounting Standards Board

• Nov 22, 2022

• At its meeting on November 22-24, 2022, the IASB met to begin discussions on the next phase in the development of the Dynamic Risk Management (DRM) model. The IASB discussed: (i) whether equity is eligible for inclusion in determining an entity’s current net open risk position; and (ii) whether a previous tentative decision to require notional alignment between the asset profile and the target profile in the DRM core model is still necessary following the recent refinements to the DRM model. Following a discussion the IASB made tentative decisions in respect of both of these items. The IASB will continue its discussions on the topics identified in the project plan at future meetings.

• Dynamic Risk Management – International Accounting Standards Board

• Jul 18, 2022

• At its meeting on July 18-21, 2022, the IASB met to discuss the proposed project plan for the Dynamic Risk Management project. In particular, the IASB discussed topics to consider further as part of its development of the DRM model and the order in which to consider the topics. The IASB was not asked to make any decisions. The IASB will begin deliberations on the topics identified in the project plan.

• Dynamic Risk Management – International Accounting Standards Board

• May 23, 2022

• At its meeting on May 23-27, 2022, the IASB met for final deliberations on the key challenges identified during meetings with preparers. The DRM model is intended to enable an entity to better reflect its dynamic risk management strategy in its financial statements and provide useful information to users of financial statements. The IASB tentatively decided to change the mechanics of the DRM model to require: (i) designated derivatives to be measured at fair value in the statement of financial position; (ii) the DRM adjustment to be recognized in the statement of financial position, as the lower of (in absolute amounts): (a) the cumulative gain or loss on the designated derivatives from the inception of the DRM model; and (b) the cumulative change in the fair value of the risk mitigation intention attributable to the repricing risk from inception of the DRM model (which would be calculated using the benchmark derivatives as a proxy); and (iii) the net gain or loss from the designated derivatives calculated in accordance with (i) and the DRM adjustment calculated in accordance with (ii) to be recognized in the statement of profit or loss. The IASB decided to add the Dynamic Risk Management project to its standard-setting program; and continue using the expertise of advisory bodies instead of establishing a dedicated consultative group for the project. At a future meeting, the IASB will discuss the detailed project proposal, setting out the specific areas for deliberation and potential time line.

• Dynamic Risk Management – International Accounting Standards Board

• Feb 21, 2022

• At its meeting on February 21-24, 2022, the IASB met to discuss feedback on and an initial analysis of the mechanics of the Dynamic Risk Management model (DRM model)—which amounts to recognize and where to recognize them in financial statements. Preparers have identified the mechanics of the DRM model as the main remaining challenge. The IASB was not asked to make any decisions. The IASB will continue its discussion about the mechanics of the DRM model that would provide more useful information.

• Dynamic Risk Management – International Accounting Standards Board

• Nov 15, 2021

• At its meeting on November 15-19, 2021, the IASB met and discussed refinements to the Dynamic Risk Management model (DRM model) to address challenges identified during meetings with preparers. Tentative decisions were made by the Board with respect to: (a) refinements to the DRM—Risk Limits; (b) designation of a portion of prepayable assets in the DRM model. The IASB will consider whether to take further action in relation to other topics identified from outreach feedback.

• Dynamic Risk Management – International Accounting Standards Board

• Sep 20, 2021

• At its meeting on September 20-24, 2021, 2021, the IASB met to discuss potential refinements to the Dynamic Risk Management model (DRM model). The potential refinements address one of the challenges identified during meetings with preparers—incorporating risk limits in the DRM model. The Board was not asked to make any decisions. At its future meetings, the Board will continue to discuss potential refinements to address the key challenges identified during meetings with preparers.

• Dynamic Risk Management – International Accounting Standards Board

• May 24, 2021

• At its meeting on May 24-27, 2021, the IASB met to discuss the Dynamic Risk Management project plan. The Board discussed a timetable for considering the main challenges identified during outreach. The Board was not asked to make any decisions. At future meetings, the Board will consider whether it can solve the main challenges identified during outreach, starting with how risk limits and the target profile relate to each other.

• Dynamic Risk Management – International Accounting Standards Board

• Apr 27, 2021

• At its meeting on April 27-28, 2021, the IASB met to hear a summary of feedback gathered between October 2020 and February 2021 from banks that use dynamic risk management to manage interest rate risk. The Board discussed feedback on topics that significantly affect the viability and operability of the accounting model for dynamic risk management, including: interest rate risk management strategies; target profile; designation of expected cash flows and impact on imperfect alignment; and recognition of fair value changes in other comprehensive income. The Board was not asked to make any decisions. The Board will discuss plans for redeliberating the significant topics at the next meeting.

• Dynamic Risk Management – International Accounting Standards Board

• Oct 27, 2020

• At its meeting on October 27-29, 2020, the IASB received an update on its stakeholder consultation on the core elements of the DRM accounting model, which started in October 2020. The Board was not asked to make any decisions. The Board will consider the feedback from its consultation on the core elements of the DRM accounting model during the first half of 2021.

• Dynamic Risk Management – International Accounting Standards Board

• Oct 23, 2019

• At its meeting on October 23, 2019, the IASB met to discuss its plan to consult stakeholders on the core elements of the DRM accounting model. After that consultation, the Board will decide how best to pursue the next phase of the project, which is to develop the DRM accounting model further. The Board was not asked to make any decisions. The Board will consider at a future meeting the feedback from its consultation on the core elements of the DRM accounting model.

• Dynamic Risk Management – International Accounting Standards Board

• Jul 22, 2019

• At its meeting on July 22-25, 2019, the Board continued its discussions of the DRM model, including: (i) a demonstration of the core model; (ii) operational simplifications; and (iii) optional application and areas of focus for disclosure. In future meetings, the Board plans to discuss its approach to gathering stakeholders’ views about the core model.

• Dynamic Risk Management - International Standards Board

• Apr 09, 2019

• At its meeting on April 9-11, 2019, the Board continued its discussions of the DRM model, including (i) whether the DRM model should preclude an entity from designating specific types of strategies within the target profile; (ii) how derivatives designated within the DRM model should be presented in financial statements. The Board made a number of tentative decisions with respect to both categories of discussion items.

• Dynamic Risk Management – International Accounting Standards Board

• Dec 12, 2018

• At its meeting on December 12, 2018, the Board discussed how the minimum performance requirements discussed at the September 2018 Board meeting would be applied in the context of the DRM accounting model. The Board tentatively decided that an entity can apply the DRM model if designation of the asset profile, target profile and designated derivatives does not reflect an imbalance that would create misalignment that could result in an accounting outcome inconsistent with the purpose of the DRM model. The Board also tentatively decided that, subject to further articulation, there must be an economic relationship between the target profile and the combination of the asset profile and designated derivatives. The Board emphasized its previous tentative decision not to define a quantitative threshold. In addition, the Board instructed the staff to seek feedback on the articulation of the strength of the economic relationship during outreach on the Core Model. The Board will continue its deliberations on the DRM model at future meetings.

• Dynamic Risk Management – International Accounting Standards Board

• Sep 19, 2018

• At its meeting on September 19 and 20, 2018, the International Accounting Standards Board (the Board) discussed the information that should be provided in situations of imperfect alignment. Board members unanimously agreed that, for items designated in the DRM model, measuring imperfect alignment provides information about the extent to which an entity has achieved its risk management strategy and therefore quantifies the resulting potential impact on the entity’s future economic resources. Also, the Board tentatively decided that when a change in risk management strategy requires a change in the entity’s target profile, the accumulated balance recognized in other comprehensive income should be reclassified to profit or loss over the life of the target profile as defined prior to the change in risk management strategy.

• Dynamic Risk Management – International Accounting Standards Board

• Jun 20, 2018

• At its meeting on June 20-21, 2018, the International Accounting Standards Board (the Board) discussed the derivative financial instruments that will be addressed in the first phase of the Dynamic Risk Management (DRM) project. The IASB also discussed designation and de-designation of derivatives. The IASB tentatively decided: the DRM model (a) should permit the use of interest rate swaps, including basis swaps and forward starting swaps, in addition to forward rate agreements; (b) options would be considered in the second phase of the model depending on the feedback received; (c) the DRM model should require formal designation and documentation of derivatives; and (d) the DRM model should require all designated derivatives to have a counterparty external to the reporting entity. The Board also started the discussion of financial performance in the context of the DRM accounting model and will continue these discussions in future meetings.

• Dynamic Risk Management - International Accounting Standards Board

• Apr 25, 2018

• At its meeting on April 25, 2018, the Board discussed the application of qualifying criteria to the target profile, as well as designation of items within the target profile and the documentation requirements. Regarding core demand deposits, the staff proposed that financial liabilities can be treated as demand deposits within the model when the following qualifying criteria are met: (i) they have a demand feature; and (ii) they will not reprice with a change in market interest rates. The Board discussed how the dynamic nature of portfolios will affect both the asset and target profiles in the dynamic risk management accounting model. The Board also discussed how the dynamic nature of portfolios will affect the interaction between the asset and target profiles. At future meetings, the staff plan to discuss derivative instruments used for dynamic risk management purposes and begin the discussions on performance assessment.

• Dynamic Risk Management - International Accounting Standards Board

• Mar 22, 2018

• 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: (i) the target profile represents management’s objective for a given asset profile; (ii) 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; (iii) the notionals of the asset profile and the target profile are required to be the same but not the tenors; and (iv) 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.

• Dynamic Risk Management - IASB

• Feb 22, 2018

• At its meeting on February 22, 2018, the Board discussed the role of the asset profile within the dynamic risk management model. In particular, the Board discussed the application of qualifying criteria to the asset profile, as well as designation of items within the asset profile and documentation requirements. The Board decided the staff should continue developing the model as follows: (a) to set qualifying criteria for items within the asset profile; (b) to allow for designation on a portfolio basis; (c) to allow for designation of a percentage of a portfolio, provided conditions are met; (d) to preclude voluntary de-designation; (e) to require de-designation when certain events take place; and (f) to require formal documentation. At a future meeting, the Board will discuss the target profile as described in the model.

• Dynamic Risk Management - IASB

• Dec 14, 2017

• At its meeting on December 14, 2017, the IASB discussed the proposed project plan to develop a dynamic risk management accounting model. Specifically, the Board decided: (i) to focus first on developing a core model for the most important issues; (ii) to seek feedback on the feasibility of the core model. The manner in which feedback is obtained will be determined at a later date; and (iii) to address the non-core issues as a final step. The Board will begin technical deliberations by discussing the dynamic risk management asset profile.