Study Reveals Delay in Implementation of New Standard, Reval Calls for Action
Although understanding of new rules governing derivative valuation under International Financial Reporting Standard (IFRS) 13 Fair Value Measurement is increasing, more than 50 percent of treasurers are risking non-compliance as they are still unsure how to implement the new standard, says Reval, a leading global Software-as-a-Service (SaaS) provider of comprehensive and integrated Treasury and Risk Management (TRM) solutions. Reval, which conducted two separate polls on the standard, will be available to answer questions about IFRS 13 and more at stand number 30 at the Association of Corporate Treasurers (ACT) Annual Conference.
Effective for accounting periods beginning on or after the first of this year, IFRS 13 changes the definition of fair value and, therefore, the calculation of fair value for derivatives. Companies will be required to incorporate the appropriate credit risk into the valuations of derivatives used to hedge financial risks.
“The longer treasurers wait, the higher the regulatory pressure will be,” says Jacqui Drew, Senior Solution Consultant at Reval. “It´s high time for treasurers to form quantitative analyses that include credit risk for asset positions and non-performance risk for liability positions in the fair values of their derivatives. Additionally, they should coordinate their preferred IFRS 13 approach with their audit and advisory firms. In parallel, they should review whether their treasury technology supports credit value adjustments (CVA) and debit value adjustments (DVA) calculations and consider where they should source market data from to run their calculations. The impact on hedge accounting results should also be reviewed.”
Compared to 2012, when more than 60 percent of treasurers Reval polled said that they were struggling to understand IFRS 13, 33 percent say they are still unclear on the regulatory requirements today. But finance professionals are falling behind with implementation, Drew says, “We are finding that treasurers do not know how to apply IFRS 13. As CVA and DVA calculations are complex, I would encourage treasurers to start evaluation now, considering the implications of non-compliance with IFRS on shareholder value and reputation.”
Reval polls were conducted during webinars it hosted in July 2012 and February 2013. Reval´s SaaS TRM solution provides CVA and DVA calculations required under IFRS 13.
