RiskTech Forum

Reval: IFRS 9 Hedge Accounting: Time is Running Out for Compliance

Posted: 3 July 2017  |  Source: Reval


IFRS 9: Financial Instruments is replacing International Accounting Standard (IAS) 39: Financial Instruments - Recognition and Measurement. The new standard was issued in its entirety in July 2014 and will come into effect for periods beginning on or after 1 January 2018. With early adoption having taken place in jurisdictions where permitted, finance teams can now take advantage of lessons learnt from early adopters. Additionally, they can use an IFRS 9 compliance project as an opportunity to understand how to better manage their financial risk and deliver ROI.

This white paper tackles IFRS 9 implementation in two parts. First, the top lessons learnt by companies that have forged ahead with early adoption:

  1. IFRS 9 implementation projects take time
  2. Not all treasury management systems support the new standard equally
  3. The ROI of new hedging strategies and updated risk management programs can be significant

The second part of this white paper examines more deeply the following key advantages embedded in IFRS 9:

  1. Hedging instruments – option time value
  2. Hedging instruments – currency basis on CCIRS
  3. Hedged item – component hedging of commodity risk
  4. Hedged item – derivatives as hedged items

Compared to the incumbent IAS 39 accounting standard, the changes in IFRS 9 are vast and significant. They were devised primarily in response to criticism of the current rules and feedback on how they could be improved. Given the IASB have followed through with many of the suggestions of their constituents, the accounting will be much more aligned with risk management and the economic activities of organizations.

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