With the mandatory implementation deadline of 1 January 2018 less than a year away, the impact of IFRS 9 Financial Instruments should not be underestimated. This accounting standard significantly changes the accounting of financial instruments and has substantial implications for corporates and their treasury departments.
Last year the International Accounting Standards Board (IASB) published its final version of International Financial Reporting Standards (IFRS) 9. IFRS 9 covers three areas, namely classification and measurement of financial assets and financial liabilities, impairment and hedge accounting.
The opening of business opportunities in emerging markets and their increasing relative importance for corporates in Europe and the US put extra pressure on managing foreign exchange (FX) risks. Especially since exposure to FX risk from emerging market currencies are typically not handled in the same manner as the major hard currencies (EUR and USD). The combination of deregulation, rapidly depreciating currencies and increasing FX volatility, as seen across a number of emerging market currencies, has put the management of FX risk for emerging markets higher on the treasurer’s agenda than ever before.