The ACT has responded to The International Accounting Standards Board (IASB) on their proposals in Reducing Complexity in reporting financial instruments - IASB Discussion Paper (1 July 2008). IAS 39 is undoubtedly a complex standard so moves to reduce complexity are welcome, but the ACT believes it is essential to preserve the concept of hedge accounting and to make it more generally applicable to all true economic hedges.
The ACT response proposes a significantly different approach which would hold own debt at cost, would replace fair value hedging with a treatment similar to cashflow hedging and make the criteron for hedge accounting be based on hedging activity that achieved an economic hedge. Further proposals are included to increase the circumstances where hedge accounting can be applied.
