IASB publishes proposals for amendments to IAS 39 Financial Instruments: Recognition and Measurement Novation of derivatives and continuation of hedge accounting

The New Zealand Accounting Standards Board (NZASB) advises constituents that the IASB has published for public comments proposals for limited changes to the classification and measurement requirements for financial instruments under IFRS 9: Financial Instruments.

The IASB website announcement states:

The International Accounting Standards Board (IASB) published on 28th February 2013 for public comment an Exposure Draft of proposed amendments to IAS 39 Financial Instruments: Recognition and Measurement. Corresponding requirements are proposed to be included in the forthcoming hedge accounting chapter in IFRS 9 Financial Instruments.

The objective of the proposed amendments is to introduce a narrow scope exception to the requirement for the discontinuation of hedge accounting in IAS 39. Specifically, they propose an exception when a derivative that has been designated as a hedging instrument, is novated from one counterparty to a central counterparty (CCP), as a consequence of new laws or regulations if specific conditions are met (in this context, novation of the derivative contract is the substitution of the original counterparty to the contract for a new counterparty, being a CCP).

The IASB considered the fact that the legislative changes that would require such novation of derivatives would be widespread across jurisdictions. These legislative changes were prompted by a G20 commitment to improve transparency and regulatory oversight of over-the-counter derivatives in an internationally consistent and non-discriminatory way.

The IASB is aware that these new laws or regulations could come into effect in some jurisdictions very soon. Consequently the IASB has published this Exposure Draft with a short (30-day) comment period.

Comments 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 submissions@xrb.govt.nz. Comments can also be made electronically to the IASB through its website (www.ifrs.org), using the ‘Comment on a proposal’ page. If you comment directly to the IASB, please send a copy to the XRB.

Comments are due to the NZASB by 27 March 2013 and to the IASB by 2 April 2013.

Click here for exposure draft ED/2013/2

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