ASCG’s IFRS Committee Analyses IASB’s Hedge Accounting Draft
The ASCG’s IFRS committee has done an analysis of the International Accounting Standards Board review related draft ‘Hedge Accounting’ released in the month of September in 2012. The examination was carried out in association with the Accounting Standards Committee of Germany’s Financial Instruments Working Group. The analysis brought forth several matters that require further amendment or clarification. One of the points highlighted via the analysis suggested that the European Union carve-out is most likely to be enforced on International Financial Reporting Standard 9 too. The outcome of the analysis has been forwarded to the International Accounting Standards Board.
The International Accounting Standards Board released the review related draft on the 7th of September 2012 with an intention to help constituents to get familiar with the draft and also to identify potential discrepancies. This further motivated the IFRS committee to carry out an analysis as well as to put forth the results of the analysis before the International Accounting Standards Board and make them available for public viewing on the Accounting Standards Committee of Germany’s web portal.
The results of the analysis also highlight four major issues, which according to the IFRS committee are important. These 4 issues include, Accounting for Credit related Risk, Sub-LIBOR-hedges accounting, effectiveness when hedging basis risks and co-existence of hedge accounting requirements in International Financial Reporting Standard 9 and International Accounting Standard 39.
As far as the hedge accounting related exposure draft that was released in the month of December 2011 was concerned, it restricted hedge accounting for credit related risk. But as a respondent to the exposure draft stated that the hedging of the credit related risk is a common strategy for managing risk utilizing the fair value option.
On the other hand, as far as Sub-LIBOR-hedges accounting is concerned, their analysis stated that hedge accounting isn’t allowed for sub-LIBOR related to risk even though it is a common strategy for managing risk that is practiced by many banks. Apart from the important matters identified in the Accounting Standards Committee of Germany’s letter, many other matters have also been highlighted, which the board feels is equally important.