Risk Mitigation Accounting

The IASB met on 22 October 2024 to discuss:

• the transition requirements and consequential amendments to IFRS Accounting Standards to be proposed in the Dynamic Risk Management (DRM) exposure draft; and
• the due process steps—including permission to begin the balloting process—for the DRM exposure draft.

Transition requirements and consequential amendments to IFRS Accounting Standards (Agenda Paper 4A)

The IASB tentatively decided to propose that:

1. an entity be required to apply the DRM model prospectively and be permitted to apply it early together with the required disclosure.
2. an entity making the transition from hedging relationships in accordance with IFRS 9 Financial Instruments be permitted to discontinue its existing hedging relationships on the date of initial application, which is the beginning of the annual reporting period in which the entity first applies the proposed requirements. The entity would then be required to designate the underlying financial assets and financial liabilities in a DRM model at that date.
3. an entity making the transition from hedging relationships in accordance with IAS 39 Financial Instruments: Recognition and Measurement be required to apply paragraphs 6.5.10 and 6.5.12 of IFRS 9 to the hedge adjustments related to those relationships.
4. an entity making the transition to the DRM model be permitted to prospectively revoke, at the date of initial application, the designation of financial assets or financial liabilities under the fair value option in IFRS 9. The entity would then be required to designate those financial assets and financial liabilities in a DRM relationship at that date.
5. an entity making the transition to the DRM model not be required to provide the disclosures described in paragraph 28(f) of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
6. an entity making the transition to the DRM model be required to provide specific transition disclosures in the financial statements about the effects of:
   1. making the transition to the DRM model; and
   2. revoking financial assets or financial liabilities previously designated under the fair value option in IFRS 9.

The IASB also tentatively decided to propose:

1. adding the DRM requirements to a new chapter in IFRS 9;
2. requiring first-time adopters that opt to apply the DRM model to apply it prospectively; and
3. not including reduced disclosure requirements for the DRM model in IFRS 19 Subsidiaries without Public Accountability at this stage.

All 14 IASB members agreed with these decisions.

Due process and permission to begin the balloting process (Agenda Paper 4B)

The IASB discussed the due process steps and decided to set a comment period of 240 days for the DRM exposure draft.

All 14 IASB members confirmed they were satisfied the IASB has complied with the applicable due process requirements and has undertaken sufficient consultation and analysis to begin the process for balloting the DRM exposure draft.

No IASB members indicated an intention to dissent from the proposals in the DRM exposure draft.