Impact Analysis of IFRS 9, November Update

Chatham Financial White Papers – November 2017

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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 designated risk. The IASB heard the criticisms of IAS 39 and drafted a new standard, IFRS 9 published in November 2013, 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. Companies applying IFRSs issued by the IASB or IFRSs endorsed by the EU have a mandatory effective date for IFRS 9 for periods beginning on or after 1 January 2018 though they have the choice of deferring the application of the hedge accounting provisions contained in Chapter 6 of IFRS 9 until the IASB finalises its macro hedging project. This bulletin provides practical insight to help companies evaluate the impact of adopting Chapter 6 of IFRS 9. The transition provisions for those companies adopting Chapter 6 of IFRS 9 will be discussed in the last bulletin of this series.