Comment

There seems to be a single thread entwining virtually every quarter of Australia’s derivatives and risk management businesses at the moment. This single threadis the country’s convergence towards International Accounting Standards(IAS), and more specifically, the adoption of IAS 39 scheduled for January 2005.Indeed, the changes for the country’s firms are likely to be enormous,and the effects are being felt across the whole derivatives spectrum. In simpleterms, IAS 39 will put derivatives transactions slap bang on to the balance sheet.If the transaction is not classed as an effective hedge, the derivative willhave to be marked-to-market, potentially introducing a greater level of volatilityinto company results.

In the corporate world, the scheduled implementation of IAS 39 is being toutedas one of the reasons for a decline in the use of complex derivatives for hedgingpurposes. With treasurers required to fair value their derivatives exposures – anarea in which many have little or no training – some corporate treasurersare erring on the side of vanilla products (seepages 2–3).

Meanwhile, IAS is also proving to be a sticky issue in Australia’s bustlingsecuritisation market. Market participants are