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  • Service: Audit, IFRS
  • Date: 6/28/2013

Continuing hedge accounting after novation 

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.


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.

Derivative Novations (2013/13)

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The IASB provides relief from discontinuing an existing hedging relationship when a novation meets specific criteria.

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