The IASB has published Chapter 6 ‘Hedge Accounting’ of IFRS 9 ‘Financial Instruments’ (the new Standard). The new requirements look to align hedge accounting more closely with entities’ risk management activities by:

  • increasing the eligibility of both hedged items and hedging instruments
  • introducing a more principles-based approach to assessing hedge effectiveness.

As a result, the new requirements should serve to reduce profit or loss volatility. The increased flexibility of the new requirements are however partly offset by entities being prohibited from voluntarily discontinuing hedge accounting and also by enhanced disclosure requirements.

This special edition of IFRS News informs you about the new Standard, and the benefits and challenges that adopting it will bring.