The Accounting Standards Board (ASB) has today issued an amendment to FRS 26 (IAS 39) ‘Financial Instruments: Recognition and Measurement – Eligible Hedged Items’. This follows the same amendment issued in July 2008 by the International Accounting Standards Board (IASB).

The amendment clarifies how the existing principles underlying hedge accounting should be applied in two particular situations, namely the designation of (a) a one-sided risk in a hedged item, and (b) inflation in a financial hedged item. The amendment has been made in the light of responses to an exposure draft of proposed guidance (published in September 2007 by the IASB and October 2007 by the ASB), which indicated that diversity in practice existed, or was likely to exist, in these two situations.

The amendment provides additional application guidance to illustrate how the principles underlying hedge accounting should be applied in the above two situations.

Entities are required to apply the amendment retrospectively for annual periods beginning on or after 1 July 2009, with earlier application permitted. The amendment ensures that FRS 26 remains in line with International Accounting Standard (IAS) 39.

1. The ASB is an operating body of the Financial Reporting Council (FRC), the UK’s independent regulator responsible for promoting confidence in corporate reporting and governance. Its functions are exercised principally by its operating bodies (the Accounting Standards Board, the Auditing Practices Board, the Board for Actuarial Standards, the Financial Reporting Review Panel, the Professional Oversight Board and the Accountancy and Actuarial Discipline Board) and by the FRC Board. The Committee on Corporate Governance assists the Board in its work on corporate governance.
2. The main role of the ASB is to contribute to the establishment and improvement of standards for financial reporting. The ASB collaborates with accounting standard-setters from other countries and the International Accounting Standards Board (IASB) both in order to influence the development of international standards and in order to ensure that its standards are developed with due regard to international developments.
3. The ASB has eleven Board members, of whom two (the Chairman and the Technical Director) are full-time, and the remainder, who represent a variety of backgrounds, are part-time.
4. Hard copies of the amendment to FRS 26 (IAS 39) ‘Eligible Hedged Items’ can be obtained at a cost of £10.00 (the same price as charged by the IASCF), post-free, from FRC Publications, 145 London Road, Kingston upon Thames, Surrey KT2 6SR (020 8247 1264). Web: www.frcpublications.com.
5. The IASB amendments can be obtained from the IASCF Publications Department – e-mail: publications@iasb.org. Website: www.iasb.org.
6. Press enquiries should be addressed to Ian Mackintosh (Chairman) on 020 7492 2434, David Loweth (Technical Director) on 020 7492 2420 or Peter Godsall (Project Director) 020 7492 2426.