For-profit Discussion Paper Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging

The International Accounting Standards Board (IASB) has published Discussion Paper DP/2014/1 Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging.  A Snapshot of DP/2014/1 is also available.

DP/2014/1 explores a possible approach to accounting for an entity’s dynamic risk management activities.  The portfolio revaluation approach (PRA) is intended to better reflect an entity’s dynamic risk management activities in its financial statements (otherwise known as macro hedging).

When applying this approach, exposures within open portfolios would be revalued with respect to the managed risk. This revaluation would offset the effect of measuring any derivative instruments that are used to manage those risks at fair value.

The New Zealand Accounting Standards Board (NZASB) encourages you to read the discussion paper and comment on the proposed approach. The proposed approach in IASB DP/2014/1 is relevant for Tier 1 and Tier 2 for-profit entities that manage risks in open portfolios on a dynamic basis. If the preliminary views in DP/2014/1 became a final Standard, this would replace the current ‘fair value hedge accounting for a portfolio hedge of interest risk’ in IAS 39 Financial Instruments: Recognition and Measurement (see paragraphs AG114–AG132).

Comments on the preliminary views are due to the NZASB by 5 September 2014 and to the IASB by 17 October 2014.

Comments, both formal and informal, can be made to the New Zealand Accounting Standards Board (NZASB) addressed to the Chief Executive, External Reporting Board, PO Box 11250, Manners Street Central, Wellington 6142, or by email to

Respondents are also encouraged to send comments directly to the IASB, with a copy to the NZASB.  Comments can also be made electronically to the IASB website (, using the “Comment on a proposal” page.

We would appreciate receiving a copy of your submission in electronic form (preferably Microsoft Word format) as that helps us to efficiently collate and analyse comments. The comments should also specify the discussion paper number and title.

Please note in your submission on whose behalf the submission is being made (for example, own behalf, a group of people, or an entity).

We intend publishing all submissions on the XRB website (, unless the submission may be defamatory.  If you have any objection to publication of your submission, we will not publish it on the internet.  However, it will remain subject to the Official Information Act 1982 and, therefore, it may be released in part or in full.  The Privacy Act 1993 also applies.

If you have an objection to the release of any information contained in your submission, we would appreciate you identifying the parts of your submission to be withheld, and the grounds under the Official Information Act 1982 for doing so (for example, that it would be likely to unfairly prejudice the commercial position of the person providing the information).

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