Derivatives & Hedging

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Accounting Standards for Derivatives & Hedging

IFRS 9 and Topic 815 (FAS 161)

An overview of the financial accounting standards for derivatives and hedging are outlined below for companies that follow International or US 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 161)
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 January 1, 2015 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. IFRS 9 establishes principles for recognizing and measuring financial assets and liabilities. With respect to derivatives, IFRS 9 requires companies to initially recognize their derivatives at fair value. Derivatives that are designated as hedged items are subject to measurements under the hedge accounting requirements IFRS 9/IAS 39. 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:

We hope that this 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.

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