IASB published exposure draft on hedge accounting
09 December 2010
The exposure draft on the accounting for hedging activities published by the IASB proposes requirements that will enable companies to reflect their risk management activities better in their financial statements and help investors to understand the effect of those activities on future cash flows.
The proposed model is principle-based, and will more closely align hedge accounting with risk management activities undertaken by companies when hedging their financial and non-financial risk exposures. The proposals also include enhanced presentation and new disclosure requirements.
Commenting on the proposals, Sir David Tweedie, Chairman of the IASB, said: "These proposals sweep away the existing rule-based, complex and inflexible hedge accounting requirements and replace them with a simple, principle-based approach."
The result, if adopted, will be a much simpler model that better reflects risk management practices whilst providing more useful information to investors. A summary of the proposals (IASB Snapshot) is available to download from the Snapshot library.
The exposure draft builds on proposals contained in the IASB’s discussion paper Reducing Complexity when Reporting Financial Instruments published in March 2008. The exposure draft forms part of the IASB’s project to replace IAS 39 Financial Instruments: Recognition and Measurement, and when its proposals are confirmed they will be incorporated into IFRS 9 Financial Instruments.
The exposure draft Hedge Accounting is open for comment until 9 March 2011. During the consultation period, the IASB will undertake further outreach to seek views on the proposals. The IASB will redeliberate the proposals with a view to completing the new hedge accounting requirements in the first half of 2011. In addition to the general hedge accounting proposals in the exposure draft, the IASB is continuing to discuss portfolio macro hedge accounting.
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