The International Accounting Standards Board (IASB) has issued a request for information as part of its review into existing hedge accounting requirements.
Through this review, the IASB Board aims to determine whether current rules are functioning as originally intended and whether they are providing the anticipated value to investors and other parties that rely on financial statements.
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Alongside this, the IASB will examine whether the expense involved in complying with these requirements aligns reasonably well with what the board had initially projected.
Hedge accounting allows financial statements to capture the impact of a company’s risk management strategies, particularly where financial instruments are used to address specific risk exposures.
The scope of this review spans two separate IFRS Accounting Standards, namely the hedge accounting provisions found within IFRS 9 Financial Instruments and the related disclosure obligations set out in IFRS 7 Financial Instruments: Disclosures.
The board is inviting input from a broad range of parties with a stake in the matter, including investors, corporate entities, audit professionals, regulatory bodies and other standard-setting organisations.
IASB acting chair Linda Mezon-Hutter said: “Hedge accounting is intended to give a clearer picture of the effects of a company’s risk management activities in its financial statements.
“We want to know whether our requirements are actually supporting that aim in practice.”
Reviews conducted after a standard has been put into practice form a core component of the IASB’s established due process.
The board carries out such an assessment several years after a standard’s implementation, allowing it to gauge the actual, practical consequences the standard has had once applied in real-world settings.
