IASB makes concession on IAS39 hedge accounting rules
The International Accounting Standards Board (IASB) today issued an amendment to the hedge accounting provisions of IAS 39 Financial Instruments: Recognition and Measurement.
The IASB developed this amendment after constituents raised concerns that it was common risk management practice for entities to designate the foreign currency risk of a forecast intragroup transaction as the hedged item and that IAS 39 (as revised in 2003) did not permit hedge accounting for this. Furthermore, IAS 39 (as revised in 2003) created a difference from US accounting requirements on this point.
Following publication of an Exposure Draft and extensive consultation with constituents, the IASB has decided to allow the foreign currency risk of a highly probable forecast intragroup transaction to qualify as a hedged item in consolidated financial statements. This is consistent with the provisions of the international accounting standard on foreign currency, IAS 21 The Effects of Changes in Foreign Exchange Rates.
Introducing the amendment, Sir David Tweedie, IASB Chairman, said: "The amendment issued today allows many entities to use hedge accounting for foreign currency risk in a way that matches current risk management practice. The amendment follows extensive consultation with many of our constituents."