Hedge accounting moves closer to risk management

in Audit, Financial Services, 25.11.2013

On November 19, 2013  the IASB finalised the new IFRS standard IFRS 9 Financial Instruments (Hedge Accounting and amendments to IFRS 9, IFRS 7 and IAS 39) that revises hedge accounting, and several other important financial instruments matters.

  • The new standard is expected to provide more flexibility for companies to apply hedge accounting that aligns to risk management, but with the trade off of more disclosure.
  • Companies that are interested in early adoption of the Hedge Accounting standard should keep in mind that this would also require them to adopt the other parts of IFRS 9 currently in issue.

In addition, other IASB decisions have been formalised:

  • Companies may elect to early adopt changes relating to “own credit risk” of its financial liabilities accounted for under the fair value option. Once this election is made, gains or losses arising from changes in a company’s own credit quality would be recorded directly in other comprehensive income rather than in profit or loss.
  • Change to effective date of IFRS 9 – The previous mandatory effective date of IFRS 9 (1 January 2015) has been removed; a new mandatory effective date will be determined once the IASB completes the other IFRS 9 phases (classification and measurement, impairment).

Further information

The KPMG bulletin “In the Headlines” provides additional information about the new IFRS standard.