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FEE issued its comments on the IASB Exposure Draft of Proposed Amendments to IAS 39 - Recognition and Measurement Exposures Qualifying for Hedge Accounting. FEE shares EFRAG reservation on whether it is appropriate to amend the main body of IAS 39 by defining the items eligible to hedge accounting on the basis of a limited list of risks and portions.
FEE believes it would appear preferable that the standard be amended to set out the principles to be applied in assessing whether a risk is eligible for hedge accounting of financial instruments, for example on the basis of the main criteria established in the standard on what constitutes a qualified hedging relationship.
FEE, therefore, does not support the proposed amendments, which add more rules to IAS 39. According to the FEE IAS 39 is already too rules-based and we strongly believe a principle based solution to this key issue based on the requirements of predictability and separate measurability can be found, since the rules-based approach will hardly form an effective solution in the current rapidly developing diversity of financial instruments and hedging practices.
Like EFRAG, the FEE is of the opinion that the guidance provided in AG99E-amended is unclear. “It seems that the IASB considers that hedging a portion of cash-flows of a financial instrument and hedging only certain risks such as the downside or the upside risk are part of the same issue, without taking into consideration the specificities of one side risk hedging strategies”, FEE notes.