IAS 39 Financial Instruments - Recognition and Measurement - Whether Inflation Risks Qualify as Separable Components for Hedging Purposes
Status
In July 2006, the IFRIC asked for the Board’s views on the principles to be applied in identifying a portion of a hedged item’s cash flows or fair value that is eligible for hedge accounting. The Board acknowledged that further guidance on what qualifies as a hedged portion under IAS 39 was needed and, in December 2006, decided that an amendment to IAS 39 should be developed. The Board agreed that this amendment should be developed by the Board rather than the IFRIC. This issue is therefore no longer considered to be part of the IFRIC’s active agenda. Further details on the Board’s work on portions can be obtained by clicking here.
Summary of the issue:
Paragraph 81 of IAS 39 permits financial assets and financial liabilities to be designated as a hedged item with respect to the risks associated with only a portion of their cash flows or fair value provided that effectiveness can be measured.
The IFRIC has been asked whether inflation risk could qualify as a hedged portion of an interest bearing asset or liability.
Latest progress on the issue:
The IFRIC has received a number of submissions asking whether the risks associated with a specific portion of an exposure might qualify for hedge accounting. Consequently, the IFRIC explored this issue together with two other related questions (Hedging of Future Cash Flows with an Option and Hedging Forecast Transactions with Derivatives of Shorter Maturity).
At its meeting in July 2006, the IFRIC asked the staff to refer these issues to the Board. At its October meeting, the Board decided to amend IAS 39 to provide additional guidance on what can be designated as a hedged portion of a financial instrument under IAS 39.
Discussed by the IFRIC :
Discussed by the Board:
Staff contact: