IAS 39 / IFRS 9
HedgeStar Provides IAS 39 / IFRS 9 Hedge Accounting Services
Since 2004 HedgeStar (formerly DerivActiv) has been providing tailored accounting solutions to companies that elect to utilize the hedging provisions of IAS 39 / IFRS 9 to record their derivative transactions. Services provided to our clients include preparation of hedge documentation, testing of initial effectiveness, periodic evaluations of ongoing effectiveness, preparation of ledger entries to record the derivative in the client’s financial records, de-designation/re-designation analysis and documentation services, and IFRS 9 adoption assessments.
International Accounting Standard 39 (IAS 39) became effective in 2005 and deals with the recognition and measurement of financial instruments. Like ASC 815 (FAS 133) it is an optional accounting treatment that bestows favorable accounting treatment upon derivatives. IAS 39 allows clients to define the hedging instrument and link that instrument to a hedged item. Hedge documentation is prepared at the start of the hedging relationship that outlines the objectives and strategy for using the hedge, defines the hedging relationship and describes the methods to be used to evaluate the relationship. However, IAS 39 is very complicated and contains many exceptions and inconsistencies, thus leading to the new IFRS 9 accounting standard.
International Financial Reporting Standards 9 (IFRS 9) became effective in 2014 and deals with disclosures of financial instruments. IFRS 9 requires disclosures about the significance of financial instruments and how they affect the financial position and performance of an entity. IFRS 9 was adopted in an effort to make it easier for the users of financial statements to evaluate the nature and extent of risks arising from financial instruments and understand how the entity manages those risks. IFRS 9 applies to all entities that have financial instruments on their balance sheet no matter the size and quantity.
The mandatory effective date of IFRS 9 is 1 January 2018. Until then entities can choose to apply either IAS 39 or IFRS 9.
However, entities applying IFRS 9 must present comparative information. For example, if applying IFRS 9 on 1 January 2018, it is necessary to restate financial instruments for the comparative period starting 1 January 2017.
IFRS 9 assessment service - the right choice for...
Financial Officers & Controllers
seeking to assess the impact of IFRS 9 adoption on their hedging strategies, portfolios, methodologies, and financial statements.
migrating from US GAAP to IFRS and needing an expert evaluation of their IFRS 9 adoption issues.
that lack expertise in IFRS 9 but are helping clients adopt IFRS.
Understand the Impact of IFRS 9 Hedge Accounting Adoption
HedgeStar provides an IFRS 9 Assessment service that allows companies to evaluate the impact of adopting IFRS 9 hedge accounting for existing or potential hedge relationships. HedgeStar tailors the IFRS 9 Assessment for each client’s unique needs and hedging program, existing or planned. The result is a comprehensive understanding of the impact of IFRS 9 hedge accounting adoption on hedging strategies, portfolios, methodologies, and financial statements.
Risk management memo
HedgeStar’s Risk Management Memorandum articulates the risk management objective, eligibility of hedging instruments and hedged items, methods for satisfying hedge effectiveness requirements and the qualification for hedge accounting.
HedgeStar’s Quantitative Analysis demonstrates the economic relationship between the hedged item(s) and hedging instrument(s) and identifies any sources of ineffectiveness. This also includes a determination of a hedge ratio that is consistent with the risk management objective.
HedgeStar’s Reporting Preview is generated using our hedge accounting system of record. It provides companies with clarity regarding the deliverables they will receive on a recurring basis after subscribing to our hedge accounting services.
» Fair Value Report – Shows the mark-to-market value(s) for hedging instrument(s) and hedged item(s) along with any credit adjustment and settlements as of the measurement date.
» Effectiveness Report – Shows the results of the tests for hedge ineffectiveness based on the hedge relationship(s) as of the measurement date.
» General Ledger (GL) Balances – Shows the balances impacted by the hedge relationship in the statement of financial position and statement of comprehensive income as of the measurement date.
Our experts have developed a number of resources to help you through the IFRS 9 rollout