The Association of Corporate Treasurers has in general been a supporter of the introduction of IAS 39 and the concept of fair value accounting for financial instruments.
During its development we have submitted our views on certain elements and have been pleased that the IASB has been receptive to many of our comments eg the hedging of intra group forecast cash flows, the availability of the fair value option and very recently, in the related area of IAS 21, the treatment of foreign currency difference on quasi equity loans.
On the other hand our previous comments on the use of treasury centres and the netting of foreign currency exposures remain an issue.
From our members’ feedback we found that the main issue is where normal commercial treasury transactions and practices give rise to accounting results that do not seem to follow the true economics of what is being undertaken. The stringent rules on what constitutes a hedge in accounting terms, cause most of the anomalies in this respect.
For example a transaction to create a fixed rate borrowing in a company’s home currency will have a different accounting treatment if it is effected by a direct home currency fixed rate borrowing as compared to borrowing in a foreign currency and swapping the deal into the home currency with a subsequent swap into fixed rates. This is not a sensible outcome.
