IASB Issues Draft Related to IFRS 9 Hedge Accounting Section

Saturday, September 8, 2012 Print Email

The IASB has released a staff related draft report that contains the general hedge accounting section included in the International Financial Reporting Standards 9 ‘Financial Instruments’. The draft revolves around the proposals included in the Exposure draft ED 2010/13 ‘Hedge Accounting’, which was published during the month of December 2010 and the decisions that were taken by the International Accounting Standards Board on a tentative basis during reconsidering the Exposure Draft.

The draft that has been issued by the IASB has been prepared after IASB resolved to reconsider the draft all over again. The primary aim of the draft is to demonstrate the position of IAB as well as to provide the constituents with an opportunity to understand the document.

Once the draft has been finalized, all the proposals included in it will form a part of the International Financial Reporting Standards 9 Financial Instruments and will hence become a specific section on hedge accounting. These proposals will also replace the requirements in International Accounting Standards 39 Financial Instruments: Recognition and Measurement.

However, the topic that is related to macro hedge accounting will not form a part of the staff related draft. The International Accounting Standard Board has resolved to issue a completely different Discussion related Paper on macro hedge accounting (likely to be discussed in the 4th or 3rd quarter of 2012). Hence, the existing requirements in International Accounting Standard 39, based on the portfolio fair value hedges of interest rate risk will still be applicable.

The primary changes that have been made include, closely aligning the hedge related accounting framework with management of risk, enhanced eligibility of hedge related items, enhanced eligibility of hedge related instruments, new effectiveness and qualification requirements, a fair value option, which is revocable at the time of hedging specific credit related risks, new and fresh concept of rebalancing hedge related relationships, increase in the number of disclosures and new and fresh rules pertaining to discounting of hedge related relationships.

The date by which the hedge related accounting section will come into effect is on or even after 1st of January 2015. More information pertaining to draft related requirements can be gathered at the website of IASB. 

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