by Dipak Khot, Thought Leadership, Global Markets Corporate Services, EMEA and Michael Anthony, Global Head, Thought Leadership, Global Markets Corporate Services, HSBC
Fulfilling hedge accounting requirements under IAS 39 has been a major headache for treasurers since it took effect in 2005, often requiring complex hedge designation, documentation and new processes to assess hedge effectiveness and measure ineffectiveness.
In many cases, HSBC has observed that treasurers found that accounting considerations have become more important in defining risk management policy than the risks themselves, creating an inevitable tension. Whilst IFRS 9 hedge accounting still involves complexity and detailed requirements, the alignment to risk management activities could offer a variety of advantages for treasurers.
This article highlights the potential benefits of adopting IFRS 9 hedge accounting, specifically for corporates. As with any such internal accounting replacement programmes, in order to achieve the full benefits there is likely to be cost involved due to operational changes that will be required. It might also expose corporates to a potential for increased accounting risk due to complexity.