PwC comments on the IASB's discussion paper on accounting for macro hedging
PwC does not support an accounting model with a scope focused on Dynamic Risk Management as explored in the IASB paper.
Overview
The PwC global network of firms submitted comments on the IASB's discussion paper, Accounting for Dynamic Risk Management: a Portfolio Revaluation Approach to Macro Hedging. We do not support an accounting model with a scope focused on Dynamic Risk Management. We support an accounting model for hedges of open portfolios that has all of the following characteristics:
- It is based on a scope focused on risk mitigation through hedging.
- It is applied on an optional basis, similar to the general hedge accounting model.
- It allows designation of risk exposures of open portfolios on a net basis if that is consistent with the entity's risk management strategy and objectives.
- It allows designation of layer components, if that is consistent with the entity's risk management strategy and objectives.
- It appropriately reflects ineffectiveness arising from risk mitigation through hedging.
- It expands the risk exposures qualifying for hedges of open portfolios to include risk exposures measured on a behavioralized basis.
We also encourage the board to consider exploring other accounting models to address alternative risk management approaches of open portfolios.
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