Does IFRS 9 make hedge accounting more complex?

Applying hedge accounting for cross currency (xccy) swaps under the new framework for IFRS 9 Financial Instruments throws up a number of challenges compared with the current IAS 39 treatment. Zwi Sacho FCA, director of the corporate accounting advisory practice at Chatham Financial Europe, assesses the options

Companies applying IFRS 9 Financial Instruments for the first time might be surprised to learn that there are some areas where the new standard will make hedge accounting more complex to apply.

One such area in which the guidance is more challenging is the application of hedge accounting to situations involving cross currency (xccy) swaps. This is because IFRS 9 introduces the new concepts of ‘cost of hedging’ and ‘currency basis’ which change the way companies can apply hedge accounting to xccy swaps.

Many

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