Corporate Risk Management and Hedge Accounting under the scope of IFRS 9

Yves Rannou and Pascal Barneto ()
Additional contact information
Pascal Barneto: IRGO - Institut de Recherche en Gestion des Organisations - UB - Université de Bordeaux - Institut d'Administration des Entreprises (IAE) - Bordeaux

Post-Print from HAL

Abstract: Accounting for derivatives has stirred important debate among academics, international standard setters and practitioners over the past decade. On the one hand, standard accounting with fair value measurement makes the use of derivatives more transparent, giving clear insights of the firm's underlying risk exposure. On the other hand, if derivatives qualify for the hedge accounting treatment, the timings mismatch associated with standard accounting is alleviated, so that the temporary income statement volatility may be significantly reduced, and the firm's risk management policy will be better reflected in financial statements. Under IFRS, hedge accounting has been covered by IFRS 9 from January 1, 2018. In this chapter, we study the implications of IFRS 9 hedge accounting requirements from the perspective of non-financial firms that use commodity derivatives. After describing the main advances of IFRS 9, we present appropriate methods to estimate hedge ratios and measure hedge effectiveness. We show that time-varying hedge ratios could be used to rebalance hedges and maximize the benefits of hedge accounting. Finally, we use an illustrative case study to explain how a power firm can report carbon hedges in respect of IFRS 7 disclosure requirements to provide transparent and relevant information in financial statements.

Keywords: Risk Management; Hedge accounting; IFRS 9; Hedge effectiveness; Carbon derivatives. (search for similar items in EconPapers)
Date: 2021-09-01
Note: View the original document on HAL open archive server: https://hal.science/hal-02457864v1
References: Add references at CitEc
Citations:

Published in Constantin Zopounidis Ramzi Benkraiem Iordanis Kalaitzoglou. Risk Management and Modeling, ed. Springer, Risk, Systems and Decisions series., Springer, 2021, Risk, Systems and Decisions, 978-3-030-66693-4. ⟨10.1007/978-3-030-66691-0_1⟩

Downloads: (external link)
https://hal.science/hal-02457864v1/document (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02457864

DOI: 10.1007/978-3-030-66691-0_1

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().