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  • Service: Audit, IFRS
  • Type: Business and industry issue
  • Date: 6/28/2013

Derivative Novations (2013/13) 

Laws and regulations on over-the-counter (OTC) derivatives are changing in several jurisdictions, requiring or providing incentives for entities to novate many OTC derivatives to a clearing counterparty.
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In response to this, the IASB has published Novation of Derivatives and Continuation of Hedge Accounting (Amendments to IAS 39), providing relief from discontinuing an existing hedging relationship when a novation that was not contemplated in the original hedging documentation meets specific criteria.

 

If you anticipate novating derivatives from the original counterparty to a clearing counterparty, then pay careful attention to the amendments, to see whether you would be eligible for relief from discontinuing hedge accounting.

 

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