# Commission Regulation (EU) No 1375/2013Show full title

Commission Regulation (EU) No 1375/2013 of 19 December 2013 amending Regulation (EC) No 1126/2008 adopting certain international            accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards            International Accounting Standard 39 (Text with EEA relevance)         

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U.K.

# Commission Regulation (EU) No 1375/2013                     

# of 19 December 2013

# amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC)                        No 1606/2002 of the European Parliament and of the Council as regards International Accounting Standard 39                     

# (Text with EEA relevance)

THE EUROPEAN COMMISSION,

Having regard to the Treaty on the Functioning of the European Union,

Having regard to Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 on the application                           of international accounting standards(1), and in particular Article 3(1) thereof,                        

Whereas:

(1)By Commission Regulation (EC) No 1126/2008(2) certain international standards and interpretations that were in existence at 15 October 2008 were adopted.

(2)On 27 June 2013 the International Accounting Standards Board published amendments to International Accounting Standard (IAS)                              39 *Financial Instruments: Recognition and Measurement* entitled *Novation of Derivatives and Continuation of Hedge Accounting*. The objective of the amendments is to provide relief in situations where a derivative, which has been designated as a hedging                              instrument, is novated from one counterparty to a central counterparty as a consequence of laws or regulations. Such a relief                              means that hedge accounting can continue irrespective of the novation which, without the amendment, would not be permitted.

(3)Regulation (EU) No 648/2012 of the European Parliament and of the Council(3) requires central clearing of certain classes of OTC derivatives. As a consequence, counterparties of certain hedging instruments                              should agree to replace their original counterparty of the hedging transaction by a central counterparty that is compliant                              with the requirements of that Regulation.

(4)In order to avoid a financial reporting burden arising from the novation of OTC derivatives to a central counterparty as a                              consequence of laws or regulations or the introduction of laws or regulations, it is necessary to provide for an exception                              to the existing requirements for discontinuation of hedge accounting in IAS 39.

(5)The consultation with the Technical Expert Group of the European Financial Reporting Advisory Group confirms that the amendments                              to IAS 39 meet the technical criteria for adoption set out in Article 3(2) of Regulation (EC) No 1606/2002.

(6)Commission Regulation (EC) No 1126/2008 should therefore be amended accordingly.

(7)The measures provided for in this Regulation are in accordance with the opinion of the Accounting Regulatory Committee,

HAS ADOPTED THIS REGULATION:

# Article 1U.K.

In the Annex to Regulation (EC) No 1126/2008, International Accounting Standard (IAS) 39 *Financial Instruments: Recognition and Measurement* is amended as set out in the Annex to this Regulation.                  

# Article 2U.K.

Each company shall apply the amendments referred to in Article 1, at the latest, as from the commencement date of its first                     financial year starting on or after 1 January 2014.                  

# Article 3U.K.

This Regulation shall enter into force on the third day following that of its publication in the *Official Journal of the European Union*.                  

This Regulation shall be binding in its entirety and directly applicable in all Member States.

Done at Brussels, 19 December 2013.

*For the Commission*                            

*The President*                            

José Manuel Barroso                            

## ANNEXU.K.INTERNATIONAL ACCOUNTING STANDARDS

‘Reproduction allowed within the European Economic Area. All existing rights reserved outside the EEA, with the exception                     of the right to reproduce for the purposes of personal use or other fair dealing. Further information can be obtained from                     the IASB at www.iasb.org’U.K.                  

### **Amendments to IAS 39 Financial Instruments: Recognition and Measurement*****Novation of Derivatives and Continuation of Hedge Accounting***U.K.

Paragraphs 91 and 101 are amended.

#### **Fair value hedges**U.K.

...

##### **91****An entity shall discontinue prospectively the hedge accounting specified in paragraph 89 if:**U.K.

**the hedging instrument expires or is sold, terminated or exercised. For this purpose, the replacement or rollover of a hedging                                 instrument into another hedging instrument is not an expiration or termination if such replacement or rollover is part of                                 the entity’s documented hedging strategy. Additionally, for this purpose there is not an expiration or termination of the                                 hedging instrument if:**                            

**as a consequence of laws or regulations or the introduction of laws or regulations, the parties to the hedging instrument                                          agree that one or more clearing counterparties replace their original counterparty to become the new counterparty to each                                          of the parties. For this purpose, a clearing counterparty is a central counterparty (sometimes called a ‘clearing organisation’                                          or ‘clearing agency’) or an entity or entities, for example, a clearing member of a clearing organisation or a client of a                                          clearing member of a clearing organisation, that are acting as counterparty in order to effect clearing by a central counterparty.                                          However, when the parties to the hedging instrument replace their original counterparties with different counterparties this                                          paragraph shall apply only if each of those parties effects clearing with the same central counterparty.**                                     

**other changes, if any, to the hedging instrument are limited to those that are necessary to effect such a replacement of the                                          counterparty. Such changes are limited to those that are consistent with the terms that would be expected if the hedging instrument                                          were originally cleared with the clearing counterparty. These changes include changes in the collateral requirements, rights                                          to offset receivables and payables balances, and charges levied.**                                     

...

...

#### **Cash flow hedges**U.K.

...

##### **101****In any of the following circumstances an entity shall discontinue prospectively the hedge accounting specified in paragraphs                           95–100:**U.K.

**The hedging instrument expires or is sold, terminated or exercised. In this case, the cumulative gain or loss on the hedging                                 instrument that has been recognised in other comprehensive income from the period when the hedge was effective (see paragraph                                 95(a)) shall remain separately in equity until the forecast transaction occurs. When the transaction occurs, paragraph 97,                                 98 or 100 applies. For the purpose of this subparagraph, the replacement or rollover of a hedging instrument into another                                 hedging instrument is not an expiration or termination if such replacement or rollover is part of the entity’s documented                                 hedging strategy. Additionally, for the purpose of this subparagraph there is not an expiration or termination of the hedging                                 instrument if:**                            

**as a consequence of laws or regulations or the introduction of laws or regulations, the parties to the hedging instrument                                          agree that one or more clearing counterparties replace their original counterparty to become the new counterparty to each                                          of the parties. For this purpose, a clearing counterparty is a central counterparty (sometimes called a ‘clearing organisation’                                          or ‘clearing agency’) or an entity or entities, for example, a clearing member of a clearing organisation or a client of a                                          clearing member of a clearing organisation, that are acting as counterparty in order to effect clearing by a central counterparty.                                          However, when the parties to the hedging instrument replace their original counterparties with different counterparties this                                          paragraph shall apply only if each of those parties effects clearing with the same central counterparty.**                                     

**other changes, if any, to the hedging instrument are limited to those that are necessary to effect such a replacement of the                                          counterparty. Such changes are limited to those that are consistent with the terms that would be expected if the hedging instrument                                          were originally cleared with the clearing counterparty. These changes include changes in the collateral requirements, rights                                          to offset receivables and payables balances, and charges levied.**                                     

...

Paragraph 108D and, in Appendix A, paragraph AG113A are added.

##### **Effective date and transition**U.K.

...

###### 108D*Novation of Derivatives and Continuation of Hedge Accounting* (Amendments to IAS 39), issued in June 2013, amended paragraphs 91 and 101 and added paragraph AG113A. An entity shall apply                        those paragraphs for annual periods beginning on or after 1 January 2014. An entity shall apply those amendments retrospectively                        in accordance with IAS 8 *Accounting Policies, Changes in Accounting Estimates and Errors*. Earlier application is permitted. If an entity applies those amendments for an earlier period it shall disclose that fact.U.K.

...

##### **Assessing hedge effectiveness**U.K.

...

###### AG113AFor the avoidance of doubt, the effects of replacing the original counterparty with a clearing counterparty and making the                        associated changes as described in paragraphs 91(a)(ii) and 101(a)(ii) shall be reflected in the measurement of the hedging                        instrument and therefore in the assessment of hedge effectiveness and the measurement of hedge effectiveness.U.K.

1

OJ L 243, 11.9.2002, p. 1.                           

2

OJ L 320, 29.11.2008, p. 1.                           

3

Regulation (EU) No 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties                              and trade repositories (OJ L 201, 27.7.2012, p. 1).