Agenda Paper 4A: Portfolio revaluation approach though Other Comprehensive Income (OCI)
The IASB met to discuss a variation on the portfolio revaluation approach that had previously been presented. This alternative was considered as a consequence of the debate at the May 2013 meeting on the appropriate scope of application of the portfolio revaluation approach. The May 2013 debate raised a question about whether recognition in profit or loss of the effect of unhedged positions provided useful information about holistic dynamic risk management. The alternative approach discussed at the July 2013 meeting was a portfolio revaluation approach but with the revaluation effect recognised in Other Comprehensive Income (OCI), rather than in profit or loss.
Under this alternative approach, there would be no change to the presentation of net interest income or the measurement in the statement of financial position as previously discussed by the IASB. However, the revaluation effect from the fair value of risk management instruments and revaluation of managed exposures would be recognised in OCI. The IASB noted that the proposed use of OCI would need to be considered within the context of the Conceptual Framework project. It also noted that there would be a number of practical consequences of using OCI in this way that would need to be solved. The IASB expressed some concern about the significantly increased operational complexity that would result from this approach.
The IASB decided that this approach should be set out in the Discussion Paper in order to facilitate feedback. However, the IASB noted that its concerns about the approach should be clearly set out in the Discussion Paper.
Agenda Paper 4B Disclosures
The IASB discussed disclosures related to the accounting for macro hedging. The staff had identified four disclosures themes for inclusion in the Discussion Paper to encourage feedback on disclosures:
• from users of financial statements, on the usefulness of the proposed information; and
• from preparers on the feasibility and cost of the obtaining the proposed information, and on how to best balance the needs of transparency with commercial sensitivities.
In addition, the IASB discussed the scope of disclosures. In particular, the IASB discussed whether the scope of the disclosures should match the scope of application of the accounting for macro hedging, or whether the disclosures should be holistic even if the accounting for macro hedge accounting was applied on a more narrow basis.
The IASB was not asked to make any decisions about the appropriate disclosures or their scope. However, the IASB decided that the Discussion Paper should address these disclosure issues.
The staff will continue drafting the Discussion Paper. At this stage no further meetings about accounting for macro hedge accounting are expected before publication of the Discussion Paper.