IFRS 9 and 15 implementation - how did it go?
A panel of experts discuss their views on how first-time implementation went, and for those yet to report, the challenges to watch out for.
With many implementing IFRS 9 Financial Instruments and IFRS 15 Revenue from Contracts with Customers in the 2018/19 reporting season for the first time, we asked a panel of experts for their views on how it went and, for those yet to report, the challenges to watch out for. The panel included Helen Shaw of Deloitte, Moses Serfaty of BDO, Danielle Stewart OBE of RSM and Phil Barden of Deloitte.
IFRS 9 allows entities to apply hedge accounting in a wider range of circumstances than IAS 39. However, it can be easy to miss the impact of the new standard on existing hedges. In particular, where an entity hedges foreign exchange risk with a derivative they will now need to consider foreign currency basis spreads. Foreign currency basis spreads are an unavoidable cost of hedging with foreign currency derivatives which, under IFRS 9, may be excluded from a hedge relationship. Irrespective of whether they are excluded, their effect will need to be quantified which will require additional time and expertise to update valuation methodologies.