EFRAG: Draft Comment Letter on novation of derivatives and continuation of hedge accounting

11 March 2013

EFRAG published its draft comment letter on the IASB's ED/2013/2 Novation of Derivatives and Continuation of Hedge Accounting, Proposed amendments to IAS 39 and IFRS 9. Comments on the letter are invited by 25 March, 2013.

In February 2013, the IASB issued Exposure Draft ED/2013/2 'Novation of Derivatives and Continuation of Hedge Accounting, Proposed amendments to IAS 39 and IFRS 9' (the ED).

EFRAG welcomes the IASB’s responsiveness in addressing this issue in a quick and pragmatic manner.

EFRAG supports the proposals as discontinuation of hedge relationships in this specific situation would not provide useful information. However:

• EFRAG believes the IASB should clarify that novations that take place to meet the requirements of (substantially) 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;
• Early application should be permitted so that entities can apply the requirements to novations that take place prior to the finalisation of these amendments.

Press release

Draft comment letter

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