5 IASB Post-implementation Review of IFRS 9—Hedge Accounting

17 September 2026
Agenda Paper 5
OFFICIAL - PUBLIC

Executive Summary

Project Type: Influencing
Project Scope: Moderate

Purpose of the Paper

The purpose of this paper is to:

1. Obtain the Board’s feedback on the proposed Project Initiation Plan (PIP) for the project to influence the IASB’s Post-implementation Review (PIR) of IFRS 9—Hedge Accounting.
2. Request the Board’s approval to publish the PIP.
3. Request the Board’s approval of the research proposal on hedge accounting.

Summary of the Issue

At its July 2026 meeting the IASB shared its plan to publish the Request for Information (RFI) in September 2026.

PIP

The PIP (see Appendix A) covers the influencing work proposed for this project to inform the UKEB’s response to the IASB. The workplan in the PIP proposes a moderate scope of this project. Therefore, targeted research and outreach are appropriate to ensure a proportionate approach to the project. This reflects both the context of the project and feedback received to date from UK stakeholders. The timeline in the PIP is based on the estimated date of publication of the IASB RFI by the end of September 2026. It may need to be flexed if the expected publication is delayed beyond that date.

Outreach is expected to include discussion with UKEB Advisory Groups and follow up one-to-one interviews, to gather information on the ongoing costs and benefits of applying IFRS 9 hedge accounting requirements.

Research Proposal

The Secretariat is also recommending some descriptive research work (see Appendix B), aimed at providing evidence on the nature and prevalence of hedge accounting in the UK.

The preliminary findings will be incorporated in the Final Comment Letter, and the final research report will support UKEB’s ongoing influencing work with the IASB.

Decisions for the Board

1. Subject to any suggested amendments, does the Board approve the PIP for this project for publication?
2. Does the Board agree with the proposed research proposal?

Recommendation

We recommend the Board approves the PIP.

We recommend the Board approves the research proposal.

Appendices

• Appendix A: Project Initiation Plan: IASB Post-implementation Review of IFRS 9—Hedge Accounting
• Appendix B: Research Proposal

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Appendix A: Project Initiation Plan IASB Post-implementation Review of IFRS 9—Hedge Accounting

Purpose

A1 This paper sets out the plan to influence the Post-implementation Review (PIR) of IFRS 9—Hedge Accounting. The associated IASB Request for Information (RFI) is expected to be published in September 2026¹.

Background

A2 In July 2014 the IASB issued IFRS 9 Financial Instruments. The Standard was effective for annual periods commencing on or after 1 January 2018. Insurers could defer the effective date until 1 January 2023 to align with the implementation of IFRS 17 Insurance Contracts if certain conditions were met.

A3 IFRS 9 replaced IAS 39 Financial Instruments: Recognition and Measurement. It changed accounting requirements in three main areas for financial instruments: classification and measurement, impairment (introduction of the Expected Credit Loss model) and hedge accounting.

A4 The IASB split its PIR of IFRS 9 into three parts². This part of the review focuses only on the hedge accounting requirements of IFRS 9, together with the related disclosure requirements in IFRS 7 Financial Instruments: Disclosures.

A5 The objective of the hedge accounting requirements in IFRS 9 is to represent, in the financial statements, the effect of an entity’s risk management activities that use financial instruments to manage exposures arising from particular risks that could affect profit or loss (or other comprehensive income, in the case of investments in equity instruments for which an entity has elected to present changes in fair value in other comprehensive income).

A6 An entity may, as an accounting policy choice:

1. continue to apply IAS 39 to all hedge relationships; or
2. apply IFRS 9, either to:
   1. all hedge relationships; or
   2. all hedge relationships except for fair value hedges of the interest rate exposure of a portfolio of financial assets or financial liabilities (macro hedge accounting), for which it may apply the specific requirements in IAS 39.

A7 The hedge accounting disclosure requirements set out in IFRS 7 apply regardless of the accounting policy choice for hedge accounting³.

Summary of Request for Information

A8 The IASB has said it plans to publish the RFI in September 2026. The Secretariat expects the comment deadline to be in late January 2027.

A9 Tentative decisions from the July 2026 IASB meeting suggest the RFI will include separate questions about the hedge accounting requirements in IFRS 9 and related disclosure requirements in IFRS 7 to assess whether:

1. those requirements are meeting their objectives;
2. the benefits to users of the information arising from applying those requirements are as expected; and
3. the costs of applying those requirements, and auditing and enforcing their application, are as expected.

Project Plan

Proportionality Assessment

Significance and Size

IASB Project Scope

A10 The IASB has established a high threshold for initiating amendments following a PIR. The IASB’s objective of a PIR is “to assess whether the effects of applying new requirements on users, preparers, auditors and regulators of financial statements are as intended when the IASB developed those new requirements”⁴. This ensures that only significant issues or widespread concerns prompt additional action, thereby maintaining the integrity and stability of the standards.

UK context and complexity

A11 Preliminary feedback from the UKEB’s Financial Instruments Working Group (FIWG) in April 2025 and Accounting Firms and Institutes Advisory Group (AFIAG) in June 2025 indicates that the IFRS 9 hedge accounting requirements are working well and no fatal flaws have been identified.

A12 Desk-based research carried out by the UKEB Secretariat indicates that the majority of UK banks, who are typically the most significant users of hedge accounting, continue to apply the hedge accounting requirements of IAS 39. This may impact their ability to provide detailed feedback on IFRS 9 hedge accounting requirements which will restrict the evidence base from UK entities to a degree. However, as noted above, the hedge accounting disclosure requirements in IFRS 7 apply to all entities, regardless of whether they apply the hedge accounting model in IAS 39 or IFRS 9.

A13 Across all industries (including banks), the Secretariat reviewed 68 listed UK entities applying hedge accounting. This preliminary research indicates that 72% of those entities apply IFRS 9 hedge accounting and 22% continue to use IAS 39. However, in a number of cases it was not clear which standard was being applied. Also, it is not clear how significant hedge accounting was for a number of entities.

Expected Timeline / Urgency

A14 There is no indication of any need for urgent resolution or accelerated timeline in the UK.

Expected Interest / Sensitivity

A15 There is no indication of wider UK concerns in relation to this project.

A16 However, there is likely to be interest amongst financial institutions, in particular banks and building societies. The extensive use of IAS 39 hedge accounting by these entities will be impacted by the IASB’s stated plan to withdraw IAS 39 once the Risk Mitigation Accounting project is concluded.

Feedback from Initial Outreach

A17 As noted above, preliminary feedback from UK stakeholders indicates no fatal flaws with the hedge accounting requirements. However, some technical points have been raised which suggest potential issues with applying the requirements. The following substantive issues have been identified from initial outreach with stakeholders (UKEB advisory groups):

1. Variable notional—allowing entities to designate a variable amount as the hedged item, similar to the exception for contracts referencing nature-dependent electricity. This would improve the alignment of accounting with risk management.
2. Foreign exchange cost of hedging—complexity in assessing effectiveness which is burdensome.
3. Deal contingent hedging—the challenge in meeting the “highly probable” criterion.

Connectivity

A18 No connectivity implications have been identified.

Recommended UKEB Project Scope

A19 Based on the proportionality assessment above we recommend a ‘Moderate’ project scope, and the approach described in this document reflects this. The project will:

1. Publish a Draft Comment Letter (DCL), which will be primarily based on a high-level overview of the findings from desk-based research and feedback from initial outreach with stakeholders.
2. Include an Invitation to Comment (ITC) accompanying the DCL.
3. Allow for a slightly longer consultation period on the DCL to mitigate the fact that this period overlaps with end-of-year holiday period for a significant number of UK stakeholders.
4. Undertake descriptive research, aimed at providing evidence on the nature and prevalence of hedge accounting in the UK to incorporate into the FCL and inform future influencing activities.

Project milestones and activities

A20 The table below summarises the key project milestones as set out in the UKEB’s Due Process Handbook (DPH) as well as the activities planned.

Table 1: Project milestones and activities

Resources Allocated

A21 To undertake the activities described in this project plan, a project team has been assigned, consisting of a Project Director supported by a Project Manager. The required resources are allowed for in the 2026/27 UKEB plan and budget.

A22 In addition, some input from the economics team has been allocated.

Setting up an Ad Hoc Advisory Body

A23 Existing UKEB advisory groups have the necessary skills and expertise to support this project and will be consulted, as outlined in the project plan.

Project Initiation Plan: Post-implementation Review of IFRS 9—Hedge Accounting - Project Timeline

A24 The diagram below is a graphical view of the mandatory milestone activities described in Table 1 above. This provides a best estimate based on information known at this time. If necessary, a revised PIP will be presented to the Board, to reflect any major changes, as the project progresses.

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Appendix B: Research Proposal: Hedge accounting in UK listed companies

Purpose

B1 To inform UKEB’s position in the comment letter on the IASB’s RFI for IFRS 9 Financial Instruments: Hedge Accounting, the Secretariat proposes research into the prevalence, significance and reporting of hedge accounting among UK listed companies.

B2 The research will provide preliminary findings in time for incorporation into the Final Comment Letter on the RFI. A final research report would be published in March 2027 and will support both ongoing influencing work with the IASB regarding this project and the Risk Mitigation Accounting project.

Areas to be addressed by the research

B3 The research will address the following areas:

1. the prevalence of hedge accounting across UK listed entities;
2. the extent to which entities continue to apply the IAS 39: Financial Instruments: Recognition and Measurement hedge accounting requirements rather than those introduced by IFRS 9;
3. the types of hedging relationships that are being designated;
4. the significance and materiality of hedge accounting activities relative to audit materiality thresholds disclosed by auditors in annual reports;
5. whether users of financial statements consider the disclosures provided under IFRS 7 Financial Instruments: Disclosures to provide useful information about entities' risk management activities and the effects of hedge accounting; and
6. the volume of hedge accounting disclosures relative to the overall annual reports.

Major elements of the research

Desk-Based Research

B4 A literature review, with a focus on UK literature to the extent possible, covering:

1. IFRS Accounting Standards relevant to hedge accounting;
2. previous accounting and academic research;
3. regulatory publications and guidance; and
4. investor and user perspectives.

B5 Deliverable: A concise review of existing evidence and identification of key themes.

Financial Statement Analysis

B6 A sample of annual reports of UK listed companies would be analysed to assess:

1. prevalence of hedge accounting;
2. accounting policies adopted;
3. significance and materiality; and
4. disclosures provided including volume.

Stakeholder Engagement

B7 A limited number of targeted one-to-one interviews with investors, analysts and other users of financial statements would be conducted.

B8 The objective would be to understand the usefulness of the current IFRS 7 disclosures.

B9 The hedge accounting disclosure requirements in IFRS 7 apply to all entities, regardless of whether they apply the hedge accounting model in IAS 39 or IFRS 9.

Deliverable

B10 The research report analysing hedge accounting practices among UK listed companies across all major industry sectors will include:

1. quantitative analysis of the prevalence and materiality of hedge accounting;
2. analysis of the types of hedging relationships designated and the use of IFRS 9 and IAS 39 hedge accounting requirements;
3. assessment of the nature and informativeness of hedge accounting disclosures;
4. quantitative analysis of the volume of hedge accounting disclosures relative to the overall annual reports;
5. the usefulness of current IFRS 7 disclosures based on one-to-one interviews with users; and
6. findings, conclusions and recommendations relevant to the IASB's PIR of IFRS 9: Hedge Accounting.

Resources Allocated

B11 The UKEB currently has limited Secretariat capacity and continues to prioritise ongoing technical projects and stakeholder engagement activities, leaving limited capacity to undertake a research exercise of this nature. However, given the importance of obtaining this evidence we propose outsourcing to a third party.

B12 Outsourcing is appropriate in this context as:

1. the project requires dedicated research capacity;
2. the work is largely self-contained and suitable for external delivery; and
3. academic researchers can provide specialist expertise in accounting research methodologies.

B13 The preferred approach is to commission a UK academic institution or individual academic researchers with expertise in:

1. financial reporting;
2. capital markets research;
3. financial statement analysis; and
4. hedge accounting.

B14 The work would be overseen by the PD responsible for the PIR project, supported by an SPD. The required resources and funds are allowed for in the 2026/27 UKEB plan and budget.

Research Timeline

B15 The proposed high-level project timeline is shown below. This provides a best estimate based on information known at this time.

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