IASB to Release Hedge Accounting Proposals in November

Jack Humphrey, Regulatory journalist
September 21, 2010 /

Hedge accounting, which is the third and final chapter of IASB’s (International Accounting Standards Board) financial instruments project, is expected to be released in November this year.

If the proposals get released in November, the board will be 9 months late in doing so. According to sources within the board, the proposals will be just in time for the June 2011 convergence deadline with US accounting rules.

IASB expects all eyes to be on the proposals that are due, as this is what led to a potential clash between IASB and Europe in the year 2005. Under tremendous pressure from banks, European leaders had to take steps to carve out 9 paragraphs from the present accounting rules being followed.

The IASB is hoping that the new standards will actually result in Europe utilizing international accounting rules as the proposals offer a much more attractive option to bankers and financiers.

The hedging rules at the present are generally viewed as being very restrictive and it is not uncommon for a number of companies to decide to ignore the requirements altogether. Instead their hedging strategy is communicated to the investors directly.

With the new proposals, it is being widely expected in the industry that IASB is going to discard their unpopular “bright line rule” which makes company’s having to meet specific effectiveness tests before they can engage themselves in hedge accounting with investors.

Pauline Wallace, who is head of public policy and regulatory affairs at Pricewaterhouse Coopers, has reportedly said that the new proposals that are due to be put set forth by the IASB , should reflect a company’s risk management strategy better.

Wallace has also said that simple rules and regulations would ensure that different business models are benefited more.


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