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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 will discuss detailed project proposals at a future IASB meeting.

IASB® Update May 2022

The IASB met on 23 May 2022 for final deliberations on three key challenges identified during meetings with preparers. The IASB:

  • discussed refinements to the mechanics of the Dynamic Risk Management (DRM) model, namely, which amounts to recognise and where to recognise them in financial statements (Agenda Paper 4A).
  • discussed whether to move the Dynamic Risk Management project from the research programme to the standard-setting programme (Agenda Paper 4B).

Mechanics of the DRM model (Agenda Paper 4A)

The DRM model is intended to enable an entity to better reflect its dynamic risk management strategy in its financial statements and provide useful information to users of financial statements. The IASB tentatively decided to change the mechanics of the DRM model to require:

  1. designated derivatives to be measured at fair value in the statement of financial position.
  2. the DRM adjustment to be recognised in the statement of financial position, as the lower of (in absolute amounts):
    1. the cumulative gain or loss on the designated derivatives from the inception of the DRM model; and
    2. the cumulative change in the fair value of the risk mitigation intention attributable to the repricing risk from inception of the DRM model (which would be calculated using the benchmark derivatives as a proxy).
  3. the net gain or loss from the designated derivatives calculated in accordance with (a) and the DRM adjustment calculated in accordance with (b) to be recognised in the statement of profit or loss.

All 10 IASB members agreed with these decisions.

Project Direction (Agenda Paper 4B)

The IASB decided to:

  1. add the Dynamic Risk Management project to its standard-setting programme; and
  2. continue using the expertise of advisory bodies instead of establishing a dedicated consultative group for the project.

All 10 IASB members agreed with these decisions.