Hedge accounting is voluntary but rationally, companies should welcome the chance to 'match' their hedge accounting with their risk management activities. But, as mentioned by the IASB Staff discussion paper 20C here, there are equally cogent reasons not to do so namely
- Burden of required documentation of designating the hedging relationship
- And more importantly, users of financial statements can infer from information in management reports or similar information about risk management outside the financial reporting context what the entity’s hedging activities are. To avoid reverse engineering of their unique risk management strategies by competitors, companies may still want to avoid hedge accounting.
Takeaway:- The IASB needs to tread a fine line between improving disclosures and scaring away companies.