Exposure Draft Hedge Accounting

Given below is the extract from IASB on Hedge Accounting inviting comments on the Exposure Draft before the same is released as a Standard. It is a good opportunity, possibly the last, to look at the corrective steps needed in this field that has played havoc to the detriment of World and US Economy. Please download the given Exposure Draft and please send your comments directly.

Jayaraman Rajah Iyer

About the project

This is the third phase of the project to replace IAS 39 Financial Instruments: Recognition and Measurement. The objective of this phase is to improve the decision-usefulness of financial statements for users by fundamentally reconsidering the current hedge accounting requirements.

The Board is considering hedge accounting of both financial and non-financial hedged items.

Exposure draft and Comment letters

On 9 December 2010 the IASB published for public comment an exposure draft on the accounting for hedging activities. The exposure draft proposes requirements that will enable companies to reflect their risk management activities better in their financial statements, and, in turn, help investors to understand the effect of those activities on future cash flows.

Comment letter deadline

The exposure draft is open for comment until 9 March 2011.

Click here to read or submit a comment letter.

Due process document Accompanying material
Exposure draft: Hedge Accounting [PDF] Basis for Conclusions and Illustrative Examples: Hedge Accounting [PDF]

PS: Please do visit IASB site and comment upon the Exposure Draft on Hedge Accounting. I have analyzed in my book referred below IAS 38 Intangible Asset as an oxymoron. I am an advocate of reversing IAS 38 to its original avatar of IAS 9 where Balance Sheet does not offer an asylum to  exploit the financial system to the detriment of funding to speculative enterprises that are vulnerable to risks. To quote from the book: Timothy Geithner the then President and CEO of Fed. Reserve Bank of New York: “The scale of long-term risky and relatively illiquid assets financed by very short-term liabilities made many of the vehicles and institutions in this parallel financial system vulnerable to a classic type of run, but without the protections such as deposit insurance that the banking system has in place to reduce such risks. This crisis exposed very significant problems in the financial systems of the United States and some other major economies. Innovation got too far out in front of the knowledge of risk.” Intangible assets had played a major role based on which the parallel financial system made itself vulnerable and collapsed taking with it the banking system as a whole.”

All because of the definition that IASB had forgotten to add to IAS 38 of ‘Intangible’ and never taken up for discussion during the Exposure Draft stage. They had provided a platform for Corporate shenanigans to exploit.

Hence Exposure Draft on Hedge Accounting must be seen in this context. The standard when issued will account for Accounting purposes only and not on Governance. Balance Sheets are window dressed so much that Governance of Hedge Accounting is side tracked. Therefore it is imperative Hedge Accounting discusses the Governance aspects of it before a Standard is issued. Please do comment upon the Exposure Draft on ‘Governance’ basis how it would deal with the ‘Cost Consequence’ of Hedge Accounting misuse. Should you miss this opportunity the Hedge Accounting will compete Intangible Asset as another with a hidden agenda with more Madoffs and Nick Leesons.

Jayaraman Rajah Iyer

eBook: http://www.smashwords.com/books/view/24530

Printed Version: https://www.createspace.com/3488434

Kindle Amazon: http://www.amazon.com/dp/B003Z9JQWQ

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