Cross-currency flap leaves cloud over IFRS 9

Firms used to be able to throw anything they liked into the hypothetical derivative that is used to test cashflow hedge accounting, but standard-setters are embracing a purer approach. It has already caused a furore over cross-currency basis spreads, but the implications run much deeper. Lukas Becker reports

At the end of 2012, Martin Friedhoff, an associate director at the International Accounting Standards Board (IASB) who focused on hedge accounting issues, switched jobs – moving to Ernst & Young and relocating to Auckland in New Zealand. It was probably a smart move to put some distance between himself and the world’s main financial centres, because one of his final acts prior to emigrating was to spearhead a controversial staff paper suggesting banks, corporates and other derivatives users had