Hedge accounting for Corporates
IFRS 13 defines the standards for fair-value measurements of derivatives used in hedge accounting.
From 1 jan 2013 fair-value calculations must include Credit Valuation Adjustments (CVA and DVA valuations adjustments) to account for nonperformance risk.
IFRS 9 (replacement for IAS 39), with initial start date of 1 Jan 2015 specifies hedge accounting rules.
You can simplify youw hedge accounting calculations with the use of PriceTools for fair value (mark-to-market) measurements for OTC derivatives (interest rate swaps, fx forward, and other financial instruments).
IFRS 13 requires account for exit-price i.e. price of liquidating the derivatives positions with the counterparty.as conterparty is usaully a bank , and banks best-practice models use multi-curve frameworks (using different curves for discounting cashflows and projecting future Euribor or Libor linked payments).
IFRS 13:
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date.
New methodologies include
- Ois-discounting
- Multi-curve framework
- CVA/DVA calculations
Also you can perform Hedge effectiveness tests for interest rate swaps.
In case of adoption of IFRS 9 framework by corporate there are some major differences with IAS 39 concerning hedge effectiveness testings:
- there’s no threshold of 80%-125% rule
References:
IFRS 13 fair value technical summary