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As January 1st 2018, IAS 39 is officially replaced by IFRS 9 ‘Financial Instruments’. It is interesting to stop on that subject because that transition began in 2009 and is occurring now officially in 2018. It concerns all companies respecting IFRS rules and particularly applying hedge accounting. The objective is to summarise the objectives and requirements of the new hedge accounting rules and understand the opportunities and challenges that its implementation will involve for corporates.
The first part of this work the theoretical approach of the IFRS 9. The approach is done step by step and made as simple as possible to let any reader understand fully and clearly the whole thesis. What is hedging? What is hedge accounting? Why Corporates apply it? Why the transition from IAS 39 to IFRS 9? What do the two norms have in common? What differences between the two norms? What is new in IFRS 9? Answers are given to all these questions. The main benefits of IFRS 9 hedge accounting are the removal of retrospective hedge effectiveness test (80-125% rule), the introduction of ‘cost of hedging’ approach and the extended possibilities of hedging application, considered the biggest opportunity for Corporates, as well as new opportunities like the exception for ‘own use’ contracts. Thanks to the new norm, accounting treatments are better aligned with risk management activities. The biggest challenge of the new norm is its implementation within companies. Current processes have to be adapted, transition has to be measured, calculated and prepared. At first companies can be negatively impacted at financial levels.
In the second part, I approach the different opportunities and challenges that non-financial companies encountered when implementing hedge accounting under the new norm. I aim to find out what IFRS 9 application involved, through the analysis of financial statements and a market survey with BEL20 non-financial companies.
After analysing the financial reports of companies, and with the information currently accessible, I discovered that, at the very end, BEL20 non-financial companies are not significantly impacted by the new norm when it comes to hedge accounting because the existing relationship qualifying under IAS 39 still qualify and be effective under IFRS 9. It seems that until now, non-financial companies have seen the new norm as a ‘compliance constraint’, processes being adapted from previous IAS 39 norm, and not the financial opportunity IFRS 9 hedge accounting really is.

IFRS 9 --- Hedge Accounting --- Sciences économiques & de gestion > Comptabilité & audit

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In the context of cross-border corporate acquisitions, the acquirer is exposed to numerous market price risks, which are often hedged with derivative financial instruments in practice. Unfortunately, based on the use of derivatives undesirable volatilities of the period result arise as a consequence of recognition, measurement and disclosure differences between the hedged transaction and the derivative financial instrument. This pose a severe problem area for corporate acquisitions due to regularly high required volumes of derivatives. A tool to tackle this problem can be the hedge accounting’s modified accounting principles. Therefore, the hedge accounting application criteria are not only applied to different acquisition currencies, various purchase price components and their adjustment procedures, but also to the ensuing net investments in foreign operations. Thereby, the paper illustrates the concrete procedures through hypothetical case studies. Further, specific restrictions of hedge accounting are revealed and clarified, so that an acquirer can already consider them during the purchase negotiations.

Hedge Accounting --- IFRS 9 --- Corporate Acquisitions --- M&A --- Derivatives --- Riskmanagement --- Sciences économiques & de gestion > Comptabilité & audit

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On the 18th May 2017, after many years of debate and work, the IASB published IFRS 17, which covers insurance contracts. This standard was planned to go into application on 1st January 2021. This lengthy period of time between publication and application was further increased: The implementation of the standard required complex developments within a unreasonably constrained time. As a result, the IASB has decided to postpone the effective date to 1st January 2023, which is for two additional years. IFRS 17 will replace the current IFRS 4 standard, which allows insurance companies to continue to use their local accounting standards. The new IFRS 17 standard on insurance contracts fundamentally changes the principles of evaluation, presentation and accounting of insurance contracts compared to IFRS 4. 
The objective of IFRS 17 is to eliminate the various accounting practices permitted today and to propose a model that reflects the economic reality of insurance contracts. For this purpose, insurance liabilities will be valued at present value on the basis of assumptions specific to the insurance company. Insurance liabilities will incorporate a risk adjustment to assess the effect of uncertainty. No gain can be recognized as a result of a subscription (the concept of pure contractual service margin). The future standard on insurance contracts provides for 4 accounting models, three of which are derived from the building block approach.
The choice of presentation of the income statement reflects the objective of harmonizing the presentation of the profit and loss account of insurance activities with that of other business sectors. Income from insurance contracts will be recognized when they are acquired or when they occur. Insurance premiums will no longer be presented in the income statement but will be the subject of information in the appendix. The volatility of insurance companies' results will depend on the options selected under IFRS 9 and the valuation model applicable according to IFRS 17.
As of the date of first application, IFRS 17 must be recognized retrospectively unless this is not possible. In this case, the insurer must apply a retrospective "modified" approach or a so-called "fair value" approach.
The main challenge for insurers is to capitalise on the accounting and actuarial tools developed within the framework of projects carried out so far, and Solvency II: the challenge will be to re-use existing tools, systems and processes as much as possible.

IFRS 17 --- IFRS 4 --- IFRS 9 --- Solvency II --- Insurance contracts --- Sciences économiques & de gestion > Finance --- Sciences économiques & de gestion > Comptabilité & audit