14 April 2005

IASB amendment to hedge accounting provisions of financial instruments standard

The International Accounting Standards Board (IASB) issued an amendment to the hedge accounting provisions of IAS 39 Financial Instruments: Recognition and Measurement. The IASB developed this amendment after constituents raised concerns that it was common risk management practice for entities to designate the foreign currency risk of a forecast intragroup transaction as the hedged item and that IAS 39 did not permit hedge accounting for this. Furthermore, IAS 39 created a difference from US accounting requirements on this point.

Following publication of an Exposure Draft and extensive consultation with constituents, the IASB has decided to allow the foreign currency risk of a highly probable forecast intragroup transaction to qualify as a hedged item in consolidated financial statements. This is consistent with the provisions of the international accounting standard on foreign currency, IAS 21 The Effects of Changes in Foreign Exchange Rates.

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