The European Financial Reporting Advisory Group (EFRAG) has launched a consultation on the back of the International Accounting Standards Board’s (IASB) proposed amendments to IAS 39 and IFRS 9 in relation to hedge accounting.

EFRAG said it supports the proposals the IASB issued in its exposure draft, Novation of Derivatives and Continuation of Hedge Accounting: Proposed amendments to IAS 39 and IFRS 9, because the discontinuation of "hedge relationships in this specific situation would not provide useful information."

However, EFRAG called for the IASB to clarify that novations that take place to meet the requirements of certain enacted laws or regulations – but that are voluntary only in the sense that they take place before the legal novation deadline – would also fall within the scope of the proposed amendment.

It also suggested early application should be permitted so entities can "apply the requirements to novations that take place prior to the finalisation of the amendments".

Deadline for comment is 25 March 2013 and will form the basis of EFRAG’s comment letter to the IASB on this issue.

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European Financial Reporting Advisory Group