The Board discussed an issue that had been referred to the Board from the IFRIC. The issue is whether risks associated with a specific portion of cash flows or fair value can be designated as hedged portions and qualify for hedge accounting under IAS 39.

The IFRIC has received several submissions regarding this issue, but has been unable to define a principle for identifying what is a portion with regards to the requirements in IAS 39 on hedge accounting. The IFRIC has noted that this issue is widespread and has resulted in diversity in practise.

Board members identified three possible approaches:

a. The IFRIC could decline to address the issue and allow practice to develop. This approach would be consistent with the approach taken by the Board in 2004.

b. Guidance could be developed which sets out a principle for identifying portions that can be hedged under IAS 39. This guidance could take the form of an amendment to IAS 39 that would be produced by the Board.

c. Get rid of portions. This would be done by the Board amending IAS 39 to not allow hedge accounting for portions.

The Board was strongly opposed to proposal b. As the Board indicated that it did not want to consume too much staff time, the staff was asked to go back and look at the different proposals. However, it was made clear that this issue had to be addressed in the current financial instruments project.