new-changes-to-ifrs
DESCRIPTION
TRANSCRIPT
![Page 1: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/1.jpg)
Treasury Hot Topic New changes to IFRS - The legacy of IAS 39 and now IFRS9 - Are you ready?
www.pwc.com
Kristof De Smedt, PwC
![Page 2: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/2.jpg)
PwC 2
Agenda
1/ Introduction
2/ Hedge accounting
3/ What new opportunities / challenges will this bring ?
4/ Next steps
February 2011
![Page 3: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/3.jpg)
3PwC
Introduction
February 2011
![Page 4: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/4.jpg)
PwC 4
Background to IFRS 9
Replacing IAS 39
February 2011
* Application is subject to EU endorsement** This will be “re-exposed” via workshops or a partial ED or both
Overall timeline
Effective date should beginning on or after 1 January 2013, with earlier application permitted
![Page 5: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/5.jpg)
PwC 5
Background to IFRS 9
IASB Objectives
versus
Users Preparers
February 2011
![Page 6: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/6.jpg)
6PwC
Hedge accounting
February 2011
![Page 7: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/7.jpg)
PwC 7
Hedge accounting - overview
Macro
Separate ED 2011
Groups
Eligibility
Presentation/ Accounting mechanics
Micro
February 2011
Hedging instrument
Hedged item
Qualification
Presentation/ Accounting mechanics
Rebalancing/ Discontinuation Disclo
sure
s
![Page 8: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/8.jpg)
PwC 8
Hedge accounting
•80 – 125 rule
February 2011
•Risk components of non-financial items
![Page 9: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/9.jpg)
PwC
Hedging of risk components
9
Variable element
Benchmark(e.g. commodity
price)
Benchmark(e.g. commodity
price)
Fixed element
IA
S 3
9 H
edga
ble
Exp
osur
e
ED
Hed
ge
avai
labl
e
Alignment of risk management with hedge accounting
![Page 10: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/10.jpg)
PwC 10
Hedge accounting
•80 – 125 rule
February 2011
•Synthetic exposure
•Risk components of non-financial items
•Options
•Rebalancing
![Page 11: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/11.jpg)
PwC 11
Rebalancing
February 2011
One (continuing) risk management and hedge accounting relationship
![Page 12: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/12.jpg)
PwC 12
Hedge accounting
•80 – 125 rule
February 2011
•Synthetic exposure
•Risk components of non-financial items
•CFH: basis adjustment
•FVH: mechanics
•Options
•Rebalancing
•De-designation
![Page 13: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/13.jpg)
PwC
FV hedge accounting
•
Profit and lossIAS 39 ED
Interest expense 11 10
Hedge ineffectiveness - 1
Loss after tax 11 11
Other comprehensive income
Hedging instrument gains
- 20
Hedged item losses - (21)
Ineffectiveness transferred to P/L
- 1
Total Comprehensive Income - gain / (loss)
11 11
Balance sheetIAS 39 ED
Assets
Derivative 20 20
Liabilities
Hedged item 121 100
FV of hedged risk - 21
![Page 14: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/14.jpg)
PwC 14
Hedge accounting
•80 – 125 rule
February 2011
•Synthetic exposure
•Risk components of non-financial items
•CFH: basis adjustment
•FVH: mechanics
•Options
•Rebalancing
•De-designation
•Disclosure
![Page 15: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/15.jpg)
PwC 15
Hedge accounting
•Gross group
February 2011
•P&L presentation
•Net positions
![Page 16: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/16.jpg)
16PwC
What next opportunities / challenges will this bring ?
Increased risk management alignmentversus
increased transparency
February 2011
![Page 17: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/17.jpg)
PwC 17
Hedging of risk components
February 2011
Metal price = LME price + (floating) natural gas surcharge + producer’s fixed premium
![Page 18: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/18.jpg)
PwC 18
Hedging with options
February 2011
Transaction related Time period relatedvs.
![Page 19: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/19.jpg)
PwC
Net position hedging
• Foreign currency sales of 100 and expenses of 80
• Forward contract for 20 taken out at a rate of 1.33
• Margin locked in at 15
• Spot rate at settlement of 1.25 resulting in loss on the forward of 1
19
Translated at forward rate
IAS 39 accounting
ED accounting
Sales 75 79 80
Expenses (60) (64) (64)
Hedge result - - (1)
Operating profit 15 15 15
![Page 20: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/20.jpg)
PwC 20
Disclosure
February 2011
![Page 21: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/21.jpg)
PwC
Disclosure
21
![Page 22: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/22.jpg)
22PwC
Next steps
February 2011
![Page 23: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/23.jpg)
PwC 23
Next steps
Raise awareness of proposals
February 2011
Perform high level impact analysis
Comment letter period ends on 9 March 2011
Revisit your risk management strategies
![Page 24: new-changes-to-ifrs](https://reader035.vdocuments.net/reader035/viewer/2022062617/54bb22df4a7959143c8b4571/html5/thumbnails/24.jpg)
Together we can move mountains…
© 2011 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.
PricewaterhousecoopersWoluwedal 181932 St-Stevens-WoluweDirect Phone +32 2710 9628Mobile +32 478 [email protected]
Kristof De SmedtSenior ManagerTreasury Consulting