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Get Ahead of the Game… Hedge Accounting is About to Get Easier

Olga Cileckovaby Olga Cileckova, Director in the Corporate Treasury and Commodity team at PwC in London

The new hedge accounting rules – IFRS 9 – are highly welcome to the majority of corporate treasurers. They were finalised in 2013 with an effective date in 2018 and early adoption was allowed and exercised by some non-EU entities. However, early adoption was not open to EU entities as the standard was not endorsed by the EU; and the timeline for EU endorsement was unclear.

The great – and hot off the press – news is that the EU endorsement process was escalated and endorsement is expected in the second half of 2015. If this proceeds as expected, the earliest date of early adoption could be 1 January 2016 or even earlier. In any case, it’s very likely that entities will be allowed to early adopt IFRS 9 earlier than 2018 – as originally expected – and they should kick off the transition project now.

Should your entity early adopt IFRS 9?

The new rules are both easier to apply and more aligned with risk management. The accounting should no longer drive the economics.

Our experience with early adopters – mostly from Australia and Hong Kong – shows that entities with the following hedging strategies were mostly those who opted for early adoption: