Financial Instruments: Update of IPSAS 28-30

Transcription

1 Financial Instruments: Update f IPSAS Lucy Qi Manager, Standards Develpment and Technical Prjects, IPSASB IPSASB Meeting: Educatin Sessin n IFRS 9 Part B September 20-23, 2016 Trnt, Canada Page 1 Prprietary and Cpyrighted Infrmatin

2 IFRS 9: Financial Instruments Phase III: Hedge Accunting Page 2 Prprietary and Cpyrighted Infrmatin

3 IFRS 9: Hedge Accunting Hedging Basics under IAS 39 What is hedge accunting? Hedged item Hedged risk Hedging instrument Types f hedges Fair value hedge Cash flw hedge Net investment hedge Page 3 Prprietary and Cpyrighted Infrmatin

4 IFRS 9: Hedge Accunting New General Hedge Accunting Mdel IAS 39 hedge accunting mdel T stringent - cmplex and difficult t apply Nt reflective f risk management practices Hedge Accunting under IFRS 9 Widens the range f situatins fr applying hedge accunting Replaces nerus rules with principle based guidance Overall: The new mdel is mre practical, flexible, and principle based, and better reflects the risk management practices Page 4 Prprietary and Cpyrighted Infrmatin

5 IFRS 9: Hedge Accunting Majr Changes Eligibility f Hedging Instruments Mre inclusive, nt limited t derivative instruments Example: T hedge the fair value f a large inventry f crude il, yu invest int a fund with a prtfli f cmmdity- linked instruments. Previusly under IAS 39, cannt apply hedge accunting (derivatives nly as hedging instruments in a fair value hedge) Nw under IFRS 9, can apply hedge accunting (designatin f nnderivative instruments measured at FVTPL allwed) Page 5 Prprietary and Cpyrighted Infrmatin

6 IFRS 9: Hedge Accunting Majr Changes Eligibility f Hedged Items Allws a risk cmpnent f a nn- financial item if separately identifiable and measureable Example: Airline faces price risk in jet fuel. Price f jet fuel changes due t inflatin, changing crude il prices, freign currency risk and ther factrs. Airline decides t hedge nly the crude il price cmpnent by purchasing frward cntracts n crude il. Previusly under IAS 39, cannt apply hedge accunting (IAS 39 allws hedging nn-financial items nly in entirety) Nw under IFRS 9, can apply hedge accunting (designatin f a separate risk cmpnent f a nn-financial item as a hedged item allwed) Expands range f eligible hedged items (net psitins, synthetic psitins) Page 6 Prprietary and Cpyrighted Infrmatin

7 IFRS 9: Hedge Accunting Majr Changes Hedge Effectiveness Testing IAS 39: Prescriptive effectiveness test Effectiveness can be reliably measured Effective nly if the test result fall in the range f 80% -125% Testing required bth prspectively and retrspectively IFRS 9: Principle-based criteria with n specific numerical threshlds Ecnmic relatinship exists Credit risk des nt dminate value changes Designated rati cnsistent with risk management strategy Tests t nly be perfrmed prspectively Overall: Less nerus, and allw use f infrmatin prduced fr internal risk management. Page 7 Prprietary and Cpyrighted Infrmatin

8 IFRS 9: Hedge Accunting Majr Changes Rebalancing Allws mdificatins withut terminating the hedge Accunting fr ptins, frwards, and freign currency derivatives Reduces prfit r lss vlatility when cmpared with IAS 39 Discntinuing hedge accunting Des nt allw terminating a hedging relatinship vluntarily Page 8 Prprietary and Cpyrighted Infrmatin

9 IFRS 9: Hedge Accunting Key Elements that Remained the Same Types f Hedges Optinal Applicatin Terminlgy Requirement fr hedge dcumentatin Hedge ineffectiveness recgnitin in P&L Page 9 Prprietary and Cpyrighted Infrmatin

10 Questins? Page 10 Prprietary and Cpyrighted Infrmatin