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Discussion Paper [April 2014]

Discussion Paper [April 2014]

Discussion Paper and Comment letters

On 17 April 2014 the International Accounting Standards Board (IASB) published for public comment a Discussion Paper exploring an approach to better reflect entities’ dynamic risk management activities in their financial statements, otherwise known as macro hedging.

Many financial institutions and other entities manage risks, such as interest rate risk, dynamically on a portfolio basis rather than on an individual contract basis.  Dynamic risk management is a continuous process because the risks that such entities face evolve over time, as does their approach to managing those risks.  However, the existing accounting requirements of IAS 39 Financial Instruments are generally considered to be difficult to apply when accounting for such transactions.

As part of its comprehensive response to the global financial crisis, the IASB is replacing IAS 39 with an entirely new financial instruments accounting Standard, known as IFRS 9 Financial Instruments.  That project is in the final stages of completion.  However, the IASB decided to treat as a separate project the macro hedging component of these reforms in order to elicit views from a broader range of constituents.  The Discussion Paper published today represents the first stage in this project, by seeking public comment on a possible approach to accounting for an entity’s dynamic risk management activities, the portfolio revaluation approach (PRA).  Under the PRA:

  • Exposures that are risk-managed dynamically would be revalued for changes in the managed risk through profit or loss.
  • Fair value changes arising from risk management instruments that are used to manage this risk (derivatives) would also be recognised in profit or loss.
  • The success of an entity’s dynamic risk management is captured by the net effect of the above measurements in profit or loss.
  • Fair valuation of the risk exposures that are dynamically managed is not required.

The PRA also addresses the needs of users by providing a more comprehensive set of disclosures concerning an entity’s dynamic risk management activities.

Comment letter deadline

The comment period for this Discussion Paper closed 17 October 2014.

Please note: when submitting a comment letter or when communicating with the IFRS Foundation, the IASB or any of its constituent bodies, you acknowledge and accept the IFRS Foundation Written Communication policy which details how we use and process your data.

View the Comment letters.


Due process documents
Discussion Paper: Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging [PDF]
(Japanese) [PDF]





Yuji Yamashita
Visiting Fellow


Mariela Isern
Senior Technical