Hedge accounting, the third and final chapter of the International Accounting
Standards Board (IASB) financial instruments project, is set to be released in
The board expects to release its hedge accounting proposals in November,
almost nine months late, but just in time to make the June 2011 convergence
deadline with US accounting rules, according to sources within the body.
All eyes will be on the proposals which controversially led to a clash
between Europe and the IASB in 2005. European leaders, under pressure from
banks, carved out nine paragraphs from the current rules. The IASB hopes its new
standard will offer a much more attractive option for European banks and finally
result in Europe using full international rules.
Current hedging rules are widely seen as too restrictive, with many companies
deciding to ignore the requirements, and instead communicate their hedging
strategy directly to investors.
The IASB wants to discard their unpopular “bright line rule”, which forces
company’s to meet specific effectiveness tests before engaging in hedge
Pauline Wallace, head of public policy and regulatory affairs at PwC, said
new rules should better reflect a company’s risk management.
“If you had something that was simple and reflected what companies did the
fact that you had a diff business model would have had as big an impact,” she
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