Risk Mitigation Accounting

The implementation of IFRS 9 Financial Instruments aimed to introduce improved hedge accounting requirements. However, this did not provide a solution for complex risk management situations where risks are managed dynamically. In such cases entities were permitted to continue applying IAS 39 Financial Instruments: Recognition and Measurement. The IASB have noted that entities continue to find it challenging to account for their dynamic risk management activities in this manner, as the requirements are not designed for such situations, and the constraints make it difficult for entities to faithfully represent the economic effect of such risk management activities.

The scope of the Exposure Draft is limited to interest rate repricing risk, in instances where entities meet the criteria to demonstrate that this risk is being managed dynamically. The Exposure Draft aims to provide a more faithful representation of the entity’s understanding of its economic position for such risk management activities.

Consistent with the existing hedge accounting requirements of IFRS 9, the proposed requirements are voluntary. It is proposed that IAS 39 be withdrawn once the proposed amendments are available for use.​

Alongside the Exposure Draft, the IASB published a snapshot of the proposed amendments as well as a request for fieldwork with preliminary and final results required by 31 July 2026 and 30 November 2026 respectively.

The UKEB outreach plan includes discussions with stakeholders and public consultation on the UKEB’s Draft Comment Letter (DCL).