The IASB published ED/2010/13 Hedge Accounting (the ED) in December 2010. This is the first installment of the final phase to replace the existing standard on financial instruments, IAS 39 Financial Instruments: Recognition and measurement. The ED proposes significant changes to the current general hedge accounting requirements. The proposals contained in the second installment expected during the second quarter of 2011, are intended to address portfolio or macro hedging.
In response to significant criticisms of the complexity and burden of hedge accounting, the IASB issued this ED with the main objective to address the artificial mismatch between risk management and hedge accounting strategies under the current requirements. The proposals alleviate some of the more operationally onerous requirements, such as the quantitative threshold and retrospective assessment for hedge effectiveness testing. It will also allow entities to rebalance and continue certain existing hedging relationships which have fallen out of alignment instead of having to restart the hedge in a new relationship.
The briefing will focus on the following areas:
• An overview of the new general hedge accounting requirements
• A brief assessment of the impact from a risk management perspective