Dynamic Risk Management

The IASB met on 19 June 2024 to continue its discussions on the Dynamic Risk Management (DRM) model. The IASB was also provided with a summary of its tentative decisions and a list of defined terms related to the project.

Capacity assessment (Agenda Paper 4A)

The IASB discussed potential requirements related to the capacity assessment. This assessment would require an entity to evaluate whether its current net open risk position at the end of the DRM assessment period could realise the expected benefits represented by the DRM adjustment.

The IASB tentatively decided that:

1. an entity be required to measure the maximum future economic benefit of its current net open risk position at the reporting date based on the present value of that position.
2. an entity that has recognised a capacity shortfall in the DRM adjustment in profit or loss be required to recognise the unwinding of that shortfall in future periods on either a straight-line basis or on another systematic and rational basis over the risk-management time horizon.
3. an entity not be permitted to reverse any capacity shortfalls it has previously recognised in profit or loss.

All 14 IASB members agreed with these decisions.

Presentation requirements (Agenda Paper 4B)

The IASB discussed the presentation requirements of the DRM model. The IASB tentatively decided that an entity be required:

1. to present the unwinding of the DRM adjustment recognised during the reporting period as a net amount in a separate line item in the statement of profit or loss;
2. to present any misalignment (between the net gains or losses from designated derivatives and the DRM adjustment) recognised during the reporting period together with the fair value gains or losses from other derivatives; and
3. to present the DRM adjustment as a net amount in a separate line item in the statement of financial position at the end of the reporting period.

All 14 IASB members agreed with these decisions.

Disclosure requirements (Agenda Paper 4C)

The IASB discussed the information needs of users of financial statements and an initial analysis of the potential disclosure requirements of the DRM model.

The IASB was not asked to make any decisions.