Treasury Hot Topic New changes to IFRS - The legacy of IAS 39 and now IFRS9 - Are you ready?<br />www.pwc.com<br />Kristof...
Agenda<br />1/ Introduction<br />2/ Hedge accounting<br />3/ What new opportunities / challenges will this bring ?<br />4/...
Introduction<br />3<br />February 2011<br />
Background to IFRS 9<br />Replacing IAS 39<br />February 2011<br />4<br />Overall timeline<br />*   Application is subject...
Background to IFRS 9<br />IASB Objectives<br />			         versus<br />	         Users			        Preparers<br />February 2...
Hedge accounting<br />6<br />February 2011<br />
Hedge accounting - overview<br />February 2011<br />7<br />Rebalancing/ Discontinuation<br />Presentation/ Accounting mech...
Hedge accounting <br /><ul><li>80 – 125 rule</li></ul>February 2011<br />8<br /><ul><li>Risk components of non-financial i...
Hedge accounting <br /><ul><li>80 – 125 rule</li></ul>February 2011<br />10<br /><ul><li>Risk components of non-financial ...
Synthetic  exposure
Options
Rebalancing</li></li></ul><li>Rebalancing<br />February 2011<br />11<br />One (continuing) risk management and hedge <br /...
Hedge accounting <br /><ul><li>80 – 125 rule</li></ul>February 2011<br />12<br /><ul><li>Risk components of non-financial ...
Synthetic  exposure
Options
Rebalancing
De-designation
CFH: basis adjustment
FVH: mechanics </li></li></ul><li>FV hedge accounting<br />
Hedge accounting <br /><ul><li>80 – 125 rule</li></ul>February 2011<br />14<br /><ul><li>Risk components of non-financial ...
Synthetic  exposure
Options
Rebalancing
De-designation
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  1. 1. Treasury Hot Topic New changes to IFRS - The legacy of IAS 39 and now IFRS9 - Are you ready?<br />www.pwc.com<br />Kristof De Smedt, PwC<br />
  2. 2. Agenda<br />1/ Introduction<br />2/ Hedge accounting<br />3/ What new opportunities / challenges will this bring ?<br />4/ Next steps<br />February 2011<br />2<br />
  3. 3. Introduction<br />3<br />February 2011<br />
  4. 4. Background to IFRS 9<br />Replacing IAS 39<br />February 2011<br />4<br />Overall timeline<br />* Application is subject to EU endorsement<br />** This will be “re-exposed” via workshops or a partial ED or both<br />Effective date should beginning on or after 1 January 2013, with earlier application permitted<br />
  5. 5. Background to IFRS 9<br />IASB Objectives<br /> versus<br /> Users Preparers<br />February 2011<br />5<br />
  6. 6. Hedge accounting<br />6<br />February 2011<br />
  7. 7. Hedge accounting - overview<br />February 2011<br />7<br />Rebalancing/ Discontinuation<br />Presentation/ Accounting mechanics<br />Disclosures<br />Qualification<br />Hedging instrument<br />Hedged item<br />
  8. 8. Hedge accounting <br /><ul><li>80 – 125 rule</li></ul>February 2011<br />8<br /><ul><li>Risk components of non-financial items</li></li></ul><li>Hedging of risk components<br />9<br /> IAS 39 Hedgable Exposure <br />Fixed element <br />Variable element <br />ED Hedge available<br />Benchmark<br />(e.g. commodity price)<br />Benchmark<br />(e.g. commodity price)<br />Alignment of risk management with hedge accounting<br />
  9. 9. Hedge accounting <br /><ul><li>80 – 125 rule</li></ul>February 2011<br />10<br /><ul><li>Risk components of non-financial items
  10. 10. Synthetic exposure
  11. 11. Options
  12. 12. Rebalancing</li></li></ul><li>Rebalancing<br />February 2011<br />11<br />One (continuing) risk management and hedge <br />accounting relationship<br />
  13. 13. Hedge accounting <br /><ul><li>80 – 125 rule</li></ul>February 2011<br />12<br /><ul><li>Risk components of non-financial items
  14. 14. Synthetic exposure
  15. 15. Options
  16. 16. Rebalancing
  17. 17. De-designation
  18. 18. CFH: basis adjustment
  19. 19. FVH: mechanics </li></li></ul><li>FV hedge accounting<br />
  20. 20. Hedge accounting <br /><ul><li>80 – 125 rule</li></ul>February 2011<br />14<br /><ul><li>Risk components of non-financial items
  21. 21. Synthetic exposure
  22. 22. Options
  23. 23. Rebalancing
  24. 24. De-designation
  25. 25. CFH: basis adjustment
  26. 26. FVH: mechanics
  27. 27. Disclosure</li></li></ul><li>Hedge accounting <br /><ul><li>Gross group</li></ul>February 2011<br />15<br /><ul><li>Net positions
  28. 28. P&L presentation</li></li></ul><li>What next opportunities / challenges will this bring ?<br />Increased risk management alignment<br />versus<br />increased transparency<br />16<br />February 2011<br />
  29. 29. Hedging of risk components<br />February 2011<br />17<br />Metal price = LME price + (floating) natural gas surcharge + producer’s fixed premium<br />
  30. 30. Hedging with options<br />February 2011<br />18<br />Transaction related<br />vs.<br />Time period related<br />
  31. 31. Net position hedging<br />Foreign currency sales of 100 and expenses of 80<br />Forward contract for 20 taken out at a rate of 1.33<br />Margin locked in at 15<br />Spot rate at settlement of 1.25 resulting in loss on the forward of 1<br />19<br />
  32. 32. Disclosure<br />February 2011<br />20<br />
  33. 33. Disclosure<br />21<br />
  34. 34. Next steps<br />22<br />February 2011<br />
  35. 35. Next steps<br />Raise awareness of proposals<br />February 2011<br />23<br />Perform high level impact analysis<br />Comment letter period ends on 9 March 2011<br />Revisit your risk management strategies<br />
  36. 36. Together we can move mountains…<br />© 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.<br />Pricewaterhousecoopers<br />Woluwedal 18<br />1932 St-Stevens-Woluwe<br />Direct Phone +32 2710 9628<br />Mobile +32 478 591664<br />kristof.de.smedt@pwc.be<br />www.pwc.be<br />Kristof De Smedt<br />Senior Manager<br />Treasury Consulting<br />
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