Hedge accounting under IAS 39 and IFRS 9 - A critical comparison Research Proposal

Hedge accounting under IAS 39 and IFRS 9 - A critical comparison - Research Proposal Example The second section  reviews  the literature related to IAS 39 and IFRS 9 as financial instruments used in hedge accounting. The next section outlines the methodology used in this study, including a conceptual framework of research variables, data sources, data collection and data analysis methods. The last section of this study discusses the ethical issues ethical issues arising from the proposed research and techniques to address these issues. Introduction Hedge accounting is a technique utilized in accounting where entries for the rights of a security and the opposing hedge are treated simultaneously. Hedge accounting endeavors to ease the volatility generated by the repetitive adjustment of the value of a financial instrument. This reduced volatility is done by combining the hedge and the instrument as one entry, which balances the opposing movements (GUPTA, 2008). IAS 39 Financial Instruments: Recognition and Measurement are a global accounting standard for financial instrume nts released by the International Accounting Standards Board (IASB) which summarizes the requirements for the recognition and measurement of financial liabilities, financial assets, and some contracts to buy or sell non-financial items. International Financial Reporting Standards (IFRS) is a complete, internationally recognized set of accounting standards using an  approach  based on principles  with a bigger emphasis on elucidation and relevance of those principles, intending at best replicating the economic substance of transactions. IFRS 9 Financial Instruments outlines the recognition and measurement requirements for fiscal  instruments and contracts to buy or sell non-financial items set to eventually form a comprehensive substitution for IAS 39 Financial Instruments: Recognition and Measurement. It was initially published in November 2009, reissued in October 2010 with requirements for financial liabilities, and pertains to annual periods commencing on or after 1st Jan uary 2015 (MIRZA & NANDAKUMAR, 2013). What makes IFRS 9 to be the most preferred than IAS 39 is its top preference of financial information which is a prerequisite for the evolution of capital markets as it has been argued that the structure informational environment plays a principal role in helping investors come up with decisions. Regulators will also have a lot of power with them to order a financial body to act whenever an instance is deemed to not be adequate (DICK & MISSIONIER-PIERA, 2010). In conclusion therefore, this is a complex issue that will need to be tackled carefully by experts in this field. In as much as the IAS 39 was greatly deemed unreliable and IASB went to great lengths to come up with a better standard that they thought would be suitable, these efforts may have not paid as it is not yet clear if most companies are going to readily adopt this new standard (IFRS 9). Although it has been termed as better than the previous one, still concerns have been raised th at more amendments should be done on the yet not completed IFRS 9. The major complaint launched being that financial reporting be carried out in a specific context before any standard is imposed. This is actually hard to achieve and may continue to delay the completion of the IFRS 9 which is in fact still underway and has already suffered great delays. IFRS 9 is a 'work in progress' and will eventually replace IAS 39 in its entirety and is subject to