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Current stage

The IASB developed and refined ‘core areas’ that are central to an accounting model (core model) that might enable investors to understand the effect of a company’s dynamic risk management. The model’s development reflects information gathered at meeting with banks that use dynamic risk management for repricing risk due to changes in interest rate.

The project was added to the standard-setting programme in May 2022, and the IASB is now working towards publishing an exposure draft.

IASB® Update July 2024

The IASB met on 23 July 2024 to continue its discussions on the Dynamic Risk Management (DRM) model, in particular on:

  • which risk management activities would be applicable to the DRM model (Agenda Paper 4A); and
  • whether to make applying the DRM model mandatory or optional for entities with applicable risk management activities (Agenda Paper 4B).

Applicable risk management activities for the DRM model (Agenda Paper 4A)

The IASB discussed which risk management activities would be applicable to the DRM model. The IASB also considered initial feedback from targeted discussions with insurers on their risk management strategies and activities.

The IASB tentatively decided that an entity would only be able to apply the DRM model if it:

  1. has business activities that expose it to interest rate repricing risk arising from financial assets and financial liabilities;
  2. adopts a dynamic risk management strategy with a dual objective that aims to mitigate the variability of both the net interest income and the economic value of equity, based on an aggregated (combined or net) repricing risk over a predetermined period;
  3. uses a systematic process to determine the net repricing risk exposure based on a specified managed rate and frequently adjusts its risk mitigation activities; and
  4. has free access to a liquid market that enables it to raise funding or invest excess cash at the prevailing benchmark interest rate.

The IASB also tentatively decided to include a specific question for insurers in the prospective DRM exposure draft to collect more information about their risk management strategies and activities.

All 14 IASB members agreed with these decisions.  

Optional application of the DRM model (Agenda Paper 4B)

The IASB redeliberated whether to make applying the DRM model mandatory or optional for entities with applicable risk management activities.

The IASB tentatively decided to make applying the DRM model optional for such entities.

Thirteen of 14 IASB members agreed with this decision.

Next milestone

Exposure Draft