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Home > Resources > Derivatives Regulations > Derivatives and Hedging

Accounting Standards for Derivatives & Hedging

IFRS 9 and Topic 815 (FAS 133)

An overview of the financial accounting standards for derivatives and hedging are outlined below for companies that follow International, US, or Canadian accounting standards. For a more complete and detailed description of each standard, it is recommended to visit the respective issuer’s website.

	IFRS 9	Topic 815 (Replacement of FAS 133)
Title	Financial Instruments	Accounting for Derivative Instruments and Hedging Activities
Issuer	International Accounting Standards Board (IASB)	Financial Accounting Standards Board (FASB)
Region	International	USA
Effective	TBD	Topic 815: TBD FAS 133: June 1998
Overview	IFRS 9 is a new standard with the hedge accounting component currently being reviewed by the IASB in an effort to replace IAS 39 in mid- to late-2011. IFRS 9/IAS 39 establishes principles for recognizing and measuring financial assets and liabilities. With respect to derivatives, IFRS 9/IAS 39 requires companies to initially recognize their derivatives at fair value; fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. Derivatives that are designated as hedged items are subject to measurements under the hedge accounting requirements IFRS 9/IAS 39. In December 2011, the IASB issued a press release stating that the new hedge accounting standards under IFRS 9 would not be effective until January 2015.	Topic 815 states that all derivatives must be recorded at fair value as an asset or liability. The ability to apply hedge accounting is optional. If a derivative qualifies as a hedge, the gains or losses from the derivative will match or offset the gains or losses from the value of the underlying transaction. To qualify for hedge accounting, Topic 815 provides rules and procedures for hedge effectiveness testing. If the derivative is ineffective, it is marked-to-market (MTM) in the companies’ earnings.
How FINCAD can help	FINCAD solutions can provide the fair value or mark-to-market (MTM) measurements of derivatives and fixed income instruments for inputs into a company’s hedge effectiveness testing. Applicable FINCAD solutions: Insight Solutions F3 FINCAD Analytics Suite Request a free trial of one of the above solutions.

*"In Canada, for fiscal years commencing in 2011 and thereafter, Canadian GAAP for publicly accountable enterprises (PAEs) will convert to IFRSs. The Canadian Accounting Standards Board and the Public Sector Accounting Board will continue to issue and maintain separate accounting standards for private enterprises, not-for-profit organizations, and public sector organizations." – Source: The IFRS Changeover, A Guide for Users of Financial Reports, A Canadian Performance Reporting Board Publication. For more information, visit www.cica.ca.

We hope that such information will assist you, but it should not be used or relied upon as a substitute for your own independent research. For a more comprehensive view of the standards/requirements, please visit the respective issuer's website.