Deloitte comment letters on acceptable methods of depreciation and novation of derivatives EDs

  • Deloitte Comment Letter Image

02 Apr, 2013

Deloitte's IFRS Global Office has submitted letters of comment responding to the IASB exposure drafts 'Novation of Derivatives and Continuation of Hedge Accounting' (ED/2013/2) and 'Clarification of Acceptable Methods of Depreciation and Amortisation' (ED/2012/5).

In the comment letter for ED/2013/2,  we agree that an amendment to IAS 39 and to IFRS 9 is necessary to address the effects on hedge accounting relationships of regulations in major capital markets including the U.S. and the European Union and, potentially, future regulations elsewhere leading to novation of derivatives to a central clearing function. We do not, however, agree that the scope of the amendment should be limited to novations required by such regulations as that would not capture the many novations that are likely to be heavily encouraged or incentivised by governments or regulators without being formally required. We do not believe that entities that novate contracts in anticipation of such legislation becoming effective should be disadvantaged.

More information and the full Deloitte comment letter can be found here.

The comment letter for ED/2012/5, we agree with the general prohibition of a revenue-based method of depreciation or amortisation for the reasons expressed in the exposure draft. However, we recommend that the Board provide additional clarity on circumstances in which a revenue figure might form part of the calculation of depreciation or amortisation under the diminishing balance or units of production method.

More information and the full Deloitte comment letter can be found here.

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