Replacement of IAS 39: Hedge Accounting

Date recorded:

The Boards considered the objective of hedge accounting. The Board members expressed a variety of preferences. Some Board members supported the objective proposed by the staff as a compromise between the two views discussed at the January meeting; others were concerned that the objective was very ambiguous as it represented the combination of the two. Consequently, the Boards agreed not to develop an objective of the hedge accounting for the time being and to re-discuss the question when the initial decisions on more detailed level were made.

The Boards continued their discussion with the designation of risk components ('bifurcation by risk'). The IASB in principle agreed that bifurcation-by-risk should be permitted on the basis of proper identification and measurement of risk components. Some IASB members were concerned whether a principle based on identification and measurement of risk components could be operational, but they supported it from a conceptual point of view as a basis for exploring the approach.

The FASB members engaged in a long discussion that reflected the FASB members' opinions on the FASB ED: Accounting for Hedging Activities. Some FASB members argued against permitting bifurcation-by-risk. They believed that their model of financial instruments accounting based on fair value would accommodate some of the hedge accounting issues. Other FASB members disagreed. Finally both Boards agreed in principle to explore the bifurcation-by-risk accounting considering both models of accounting for financial instruments (IFRS 9 and the FASB proposals respectively).

The Boards also initially agreed that they would first consider the financial items related bifurcation-by-risk before proceeding to explore the application to non-financial items. From the discussion it seemed that the issue of basis risk was more important for the IASB than for the FASB.

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