Impact Analysis of IFRS 9: Assessment of the Impact of the IFRS 9 Standard on Hedge Accounting

Chatham Financial White Papers – June 2017

 

Companies adopting IFRSs have historically been applying the hedge accounting provisions under IAS 39 РFinancial Instruments: Recognition and Measurement which was issued back in 2001. However, many companies felt that IAS 39 was difficult to apply due to some of its onerous provisions. Some of these include restrictions on the types of hedging relationships that can qualify for hedge accounting and the need to perform periodic quantitative effectiveness assessments that evaluate how well the hedge has performed at hedging the intended risk. The IASB heard the criticisms of IAS 39 and drafted a new standard, IFRS 9, which includes provisions that are aimed at simplifying the application of hedge accounting and bringing it more in line with a company’s risk management activities. The hedge accounting provisions in IFRS 9 were published in November 2013, and companies need to assess its impact on
their hedging programs, including what changes, if any, they will need to make in order to apply the new standard. Companies adopting IFRSs issued by the IASB or IFRSs endorsed by the EU will have a mandatory effective date of IFRS 9 beginning 1 January 2018 and have the choice of either early adopting the standard, if permitted in their jurisdiction, or waiting until the mandatory effective date in 2018. This whitepaper provides practical insight to help companies evaluate the impact of adopting IFRS 9 and assist them with evaluating whether early adopting the standard is a wise decision.

 

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