The objective of hedge accounting is to represent in the financial statements the effect of an entity’s risk management activities when they use financial instruments to manage exposures arising from particular risks and those risks could affect profit or loss (or other comprehensive income).
Hedge accounting under IAS 39 Financial Instruments: Recognition and Measurement is often criticized as being complex and rule-based. The new standard removes the rigid ‘bright line’ for assessing hedge effectiveness, which allow for a more flexible, principle-based approach to hedge accounting.
IFRS 9 also allows for more hedging instruments and hedged items to qualify for hedge accounting. As a consequence, more hedging strategies that are used to manage risk will be eligible for hedge accounting.
Our hedge accounting experts will provide you with the necessary expertise and skills to be able to transition smoothly to the new requirements. This will take the form of policies and toolkits that can help you implement the new rules.