Their discussion paper Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging explores a possible approach to accounting for an entity’s dynamic risk management activities. The ACT has issued a short comment letter responding to the discussion paper. The IASB’s proposed model is based on fair value hedge accounting and although not written solely for banks it is more relevant to them as their interest rate risk management is generally carried out on a portfolio basis. The ACT has recommended that for an accounting standard on macro hedging to be more relevant for corporates that a model is developed for cash flow hedge accounting which could be applied to forecast foreign exchange transactions.
