Are weather derivatives covered by IAS 39 or are they insurance contracts?

Contracts that require payment only if a particular level of the underlying climatic, geological or other physical variables adversely affects the contract holder are insurance contracts and as such are outside the scope of IAS 39.

However contracts that require a payment based on a climatic, geological or other physical variable that is not specific to a party to the contract are commonly described as weather derivatives and by virtue of IFRS 4 these contracts are not insurance contract. Hence the weather derivatives are within the scope of IAS 39.

As per US GAAP, Cash flow hedge accounting for a foreign currency debt is permissible using a FX forward contract to cover the Foreign Exchange risk . Section 815-20-25-28 is quoted below:

“If the hedged item is denominated in a foreign currency, an entity may designate any of the following types of hedges of foreign currency exposure:
a. A fair value hedge of an unrecognized firm commitment or a recognized asset or liability (including an available-for-sale security)
b. A cash flow hedge of any of the following:
1. A forecasted transaction
2. An unrecognized firm commitment
3. The forecasted functional-currency-equivalent cash flows associated with a recognized asset or liability
4. A forecasted intra-entity transaction.
c. A hedge of a net investment in a foreign operation.”

Such a cash flow hedge is specifically permitted by virtue of Section 815-20-25-29 which is quoted below:

“The recognition in earnings of the foreign currency transaction gain or loss on a foreign-currency-denominated asset or liability based on changes in the foreign currency spot rate is not considered to be the remeasurement of that asset or liability with changes in fair value attributable to foreign exchange risk recognized in earnings, which is discussed in the criteria in paragraphs 815-20-25-15(d) and 815-20-25-43(c).

Thus, those criteria are not impediments to either of the following:
a. A foreign currency fair value or cash flow hedge of such a foreign-currency- denominated asset or liability
b. A foreign currency cash flow hedge of the forecasted acquisition or incurrence of a foreign currency-denominated asset or liability whose carrying amount will be remeasured at spot exchange rates under paragraph 830-20-35-1.

Is this type of a transaction eligible as a Cash Flow hedge under IAS 39 of IFRS? …read more on Forum

Product Description

From the Back Cover

The Ultimate Accountants’ Reference offers a single-source tool of best practices and control systems related to accounting regulations for all aspects of financial statements, accounting management reports, and management of the accounting department. The perfect daily answer book for the practicing accountant, it also addresses financing options, risk management, mergers and acquisitions, and taxation topics.

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Accountants, accounting managers, and finance personnel will turn to The Ultimate Accountants’ Reference time and again for quick, reliable answers to everyday issues. –This text refers to an out of print or unavailable edition of this title.

Product Details

• Hardcover: 816 pages
• Publisher: Wiley; 3 edition (March 8, 2010)
• Language: English
• ISBN-10: 047057254X
• ISBN-13: 978-0470572542
• Product Dimensions: 10 x 7.1 x 1.7 inches

Product Details

• Paperback: 1328 pages
• Publisher: Wiley; Pap/Cdr edition (March 22, 2010)
• Language: English
• ISBN-10: 0470453249
• ISBN-13: 978-0470453247
• Product Dimensions: 9.4 x 7.4 x 3 inches
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Product Description

Your one-stop resource for understanding current International Financial Reporting Standards

With widespread acceptance and use of the IASB standards around the globe, the need to understand the IASB standards greatly increases. Wiley IFRS 2010 provides the necessary tools for understanding the IASB standards and offers practical guidance and expertise on how to use and implement them. The Wiley IFRS 2010 Book and CD-ROM set covers the most recent International Financial Reporting Standards (IFRS) and IFRIC interpretations. In addition, it is an indispensable guide to IFRS compliance.

• Detailed coverage of all previously issued IAS and IFRS standards and Standing Interpretations Committee (SIC) and International Financial Reporting Interpretations Committee (IFRIC)
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While the SEC approved a statement supporting the adoption of global accounting standards for U.S. companies, the Chairman Mary Schapiro cautioned that, “Incorporating International Financial Reporting Standards (IFRS) into our financial reporting system would involve a significant undertaking. We must carefully consider and deliberate whether such a change is in the best interest of U.S. investors and markets.

“The Commission also voted to approve a Work Plan developed by SEC staff that would gather information to aid the Commission as it evaluates the impact that the use of IFRS by U.S. companies would have on our securities market,” Schapiro said. The Work Plan will be completed in 2011, the target date set by the 2008 Proposed Roadmap.

Schapiro said, however, that no decision had been made about the timing of a possible conversion to IFRS. “We must still determine what this means for U.S. companies and markets; should we incorporate IFRS into our reporting system and, if so, when and how?

Source: http://www.accountingweb.com/topic/cfo/sec-approves-work-plan-assess-us-adoption-global-accounting-standards

The much-anticipated International Financial Reporting Standards (IFRS) is likely to be rolled out only partially in India from April 1, 2011.That’s because a core group on IFRS implementation, set up by the ministry of company affairs and headed by renowned chartered accountant Y H Malegam, is set to recommend that it be made mandatory only for big corporates in the first phase.

Source: DNA India

Central Board of Direct Taxes (CBDT) and accounting rule-maker Institute of Chartered Accountants of India (ICAI) have jointly constituted a study group to identify and address direct tax issues that will affect convergence of India’s accounting standards with International Financial Reporting Standards (IFRS).With IFRS convergence due for April 2011 and the government coming up with the new Direct Taxes Code (DTC), the suggestions of the study group finds relevance.

Source: Economic Times

There is a new course on IFRS 9 and you can take the course here: Accounting for Investments

On 12 November 2009, IASB published IFRS 9 Financial Instruments on the classification and measurement of financial assets. The present IAS 39 is proposed to be replaced in three phases as follows by International Accounting Standards Board (IASB):
Phase 1: Classification and measurement. This is presently published as IFRS 9 Financial Instruments on the classification and measurement of financial assets.
Phase 2: Impairment methodology. On 25 June IASB published a Request for Information on the feasibility of an expected loss model for the impairment of financial assets. The exposure draft published in November 2009.
Phase 3: Hedge accounting. IASB is currently conducting outreach with its constituents and intends to issue an exposure draft on hedge accounting in the first quarter of 2010.

On 12 November 2009, the International Accounting Standards Board (IASB) issued IFRS 9 Financial Instruments.

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R. Venkata Subramani