Financial Reporting Update Issue 74 – December 2013

New Amendment to HKFRS 9: Hedge Accounting and deferral of effective date from 2015

23 December 2013

On 19th November 2013, the IASB issued amendments to IFRS 9 to become IFRS 9 Financial Instruments (2013).  The HKICPA has now endorsed these amendments into HKFRS as HKFRS 9 Financial Instruments (2013), available for early adoption.


First Impressions – Hedge accounting and transition


In the headlines 2013/19



HKFRS 9 (2013)



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This revised standard contains three amendments:

·         a new general hedge accounting standard,

·         a revision to the accounting for financial liabilities for which the fair value option has been elected, and

·         a revision to the effective date of the entire HKFRS 9.


New General Hedge Accounting Standard


The majority of the amendments to HKFRS 9 provides a new general hedge accounting standard which will align hedge accounting more closely with risk management.  The new standard does not fundamentally change the types of hedging relationships or the requirement to measure and recognise ineffectiveness; however, under the new standard more hedging strategies that are used for risk management will qualify for hedge accounting.  In addition the effectiveness testing, whilst requiring a higher degree of judgment, is less prescriptive in nature and more closely aligned with the defined risk management strategy of the hedge than the existing requirements of HKAS 39. 


Accounting for Financial Liabilities


Also as part of the amendments, entities can change the accounting for liabilities that they have elected to measure at fair value by allowing gains or losses caused by changes in an entity’s own credit risk to be recognized in reserves rather than profit or loss.  These changes to liability accounting can early adopted immediately in isolation to the rest of HKFRS 9. 


Effective date and transition:


The new standard removes the 1 January 2015 effective date of HKFRS 9.  The new mandatory effective date will be determined once the classification and measurement and impairment phases of IFRS 9 are finalized. 


Early application of the new general hedging model is permitted only if all existing HKFRS 9 requirements are applied at the same time or have already been applied.  Alternatively, when an entity adopts HKFRS 9 (2013), it may choose as its accounting policy to defer application of the new general hedging model until the standard resulting from the IASB’s project on macros hedging is effective.


The new standard allows an entity to apply early the amendments to accounting for financial liabilities without applying any of the other requirements in HKFRS 9.


Further details of the amendments can be found in our In the Headlines publication (Issue 2013/19) while our First Impressions publication provides a more comprehensive guide to the new requirements and their practical implications. Copies of these publications, issued by KPMG International, are available on our website,, by following the links in the information column to the right. If you would like further assistance on the matters discussed, please talk with your usual KPMG contact.


KPMG China's Financial Reporting Updates are produced regularly to highlight developments in Hong Kong Financial Reporting Standards. If at any time you would like further information on the matters discussed in the Updates, please talk to your usual KPMG contact. An archive of recent issues of Financial Reporting Update can be found at







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