IASB eases fears over hedge accounting for CCP novations
Standard-setter decides trades can still qualify for hedge accounting when voluntarily novated to a CCP, but experts warn wider stance on novation could cause trouble
Derivatives users should be able to clear trades without losing hedge accounting treatment after the International Accounting Standards Board (IASB) tentatively agreed on May 22 to widen the scope of guidance it sketched out in February – a decision that has been welcomed by the industry.
The original guidance stated that hedge accounting would be lost in the event of a novation – in which a new counterparty steps into an existing trade – with an exception granted for trades required by law or
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