Stage 1: Setting the agenda
The Board considered whether to amend IAS 39 to specify the risks that qualify for designation as a hedged risk under IAS 39. The Board then discussed possible approaches to providing guidance on what can be designated as an "other portion" under IAS 39.
At its meeting in December 2006, the Board decided to propose amendments to IAS 39 to specify:
(a) the risks that qualify for designation as a hedged item for a financial instrument
(b) the portions of the cash flows that qualify for designation as a hedged item for a financial instrument
The Board concluded that specifying eligible risks would help clarify its original intentions about what can be designated as a hedged item. Moreover, it decided to amend IAS 39 to restrict the use of "other portions" to specified situations, concluding that the risks eligible for designation as a hedged item would form the basis for the identification of "other portions".
Stage 2: Project planning
Because of its limited scope, the project did not have a specific working group. However, the Financial Instruments Working Group (FIWG) discussed this project at its meeting in April 2007. The project was conducted by the IASB only.
Stage 3: Development and publication of an exposure draft
In September 2007, the IASB published an exposure draft Exposures Qualifying for Hedge Accounting (proposed amendments to IAS 39). To view the exposure draft click here. The exposure draft was open for public comment until 11 January 2008.
Stage 4: Development and publication of an amendment to the Standard
The Board reviewed an analysis of the 75 comment letters received in March 2008. To view the comment letters received on the exposure draft click here.
Many respondents raised concerns about the rule-based approach proposed in the exposure draft. The responses also indicated that there was little diversity in practice regarding the designation of hedged items. However, the comments demonstrated that diversity in practice existed, or was likely to occur in two particular situations:
- the designation of a one-sided risk in a hedged item
- the designation of inflation in particular situations
After considering the responses, the Board decided to focus on those two situations. Rather than specifying eligible risks and portions as proposed in the exposure draft, the Board decided to address those situations by adding application guidance to illustrate how the principles underlying hedge accounting should be applied.
In June 2008, the Board instructed the staff to prepare a ballot draft of the proposed amendments. The Board approved the ballot draft of the amendments in July 2008. The amendment was published on 31 July 2008. Entities shall apply the amendment retrospectively for annual periods beginning on or after 1 July 2009. Earlier application is permitted.