Practical guide on general hedge accounting Dec 2013 | Page 27
Practical guide
8. Effective date and transition
Entities have an accounting policy choice to apply IFRS 9 hedge accounting or to continue applying IAS 39
hedge accounting (refer to section 1.2 above).
For entities electing to apply IFRS 9, the recent amendments to IFRS 9 have removed the mandatory effective
date. However, the standard continues to be available for immediate application.
Entities can elect to apply IFRS 9 for any of the following (*):
1
The own credit risk requirements for financial liabilities – Entities can early adopt the requirement to
recognise in OCI the changes in fair value attributable to changes in an entity’s own credit risk in financial
liabilities that are designated under the fair value option.
2
Classification and measurement requirements for financial assets only (IFRS 9 2009 version).
3
Classification and measurement requirements for financial assets and financial liabilities
(IFRS 9 2010 version).
4
The full current version of IFRS 9 (that is, classification and measurement requirements for financial
assets and financial liabilities and hedge accounting).
(*) These transitional provisions are likely to change once the Board completes all phases of IFRS 9.
To apply hedge accounting from the date of adoption of IFRS 9, all qualifying criteria must be met as at
that date.
Hedging relationships that qualified for hedge accounting in accordance with IAS 39, that also qualify for hedge
accounting in accordance with IFRS 9 (after taking into account any rebalancing of the hedging relationship on
transition), are regarded as continuing hedging relationships. Any gain or loss from such rebalancing must be
recognised in P&L.
IFRS 9 requires prospective application of its hedge accounting requirements for all hedging relationships
(except as described in the following paragraph). This means that, on the date of transition, all existing hedging
relationships should be moved from the existing model under IAS 39 into the new model in IFRS 9. However,
there will be no restatement of comparatives.
By way of exception to the above paragraph, retrospective application is required for:
The accounting for time value of options if only the change in an option’s intrinsic value was designated as
a hedging instrument.
The accounting requirements for novation of derivatives as a consequence of laws or regulations.
In addition, retrospective application is permitted, but not required, for:
The accounting for the forward element of forward contracts if only the change in the spot element of the
forward contract was designated as a hedging instrument.
The accounting for foreign currency basis spreads.
Regarding the fair value through P&L election for ‘own use’ contracts, an entity will need to make this
designation consistently for each group of similar contracts existing on the effective date of the IAS 39
amendment (refer to section 6.1 above).
Currently the European Union has not endorsed any aspects of IFRS 9 (nor the consequential amendments to
other standards). As a result, European entities are not currently allowed to adopt the new accounting and
disclosure requirements.
General hedge accounting
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