We comment on the IASB discussion paper on macro hedging

  • Deloitte Comment Letter Image

20 Oct 2014

We have published our comment letter on the IASB’s Discussion Paper DP 2014/1 'Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging'.

We are supportive of the IASB in the development of an approach to account for dynamic risk management activities; however, we do not support the Portfolio Revaluation Approach as stated in the discussion paper because it will (1) conflicts with the accounting principles in the conceptual framework, (2) require risk management activities to be defined in order to determine what is in or out of the revaluation model, and (3) not build on the classification, measurement and general hedge accounting concepts already established in IFRS 9. In addition, we believe that a portfolio hedging solution should be examined for insurers and other non-financial entities.

We also believe that an approach that combines existing thinking in IFRS 9 with the ability to behaviouralise cash flows on a portfolio basis (including core deposits) and allowing bottom layers to be designated has the potential to be more relevant than the existing portfolio fair value hedge accounting model in IAS 39.

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