The IASB has completed initial deliberations on the DRM model that may in future be used by banks to hedge account for interest rate risk.
The IASB has sought to align the accounting model with the approach actually used for risk management, so as to limit any inconsistencies between them. In particular, the Dynamic Risk Management (DRM) model has moved away from traditional hedge accounting models that focus on a specific hedged amount, to a risk management strategy that sets out an acceptable range (using risk limits) within which the risk exposure can vary.
It is now possible to understand, at a high level, how the model is expected to work. However, a number of important details have yet to be determined and the IASB has set out a project plan to address these issues, commencing in the fourth quarter of 2022 to work towards an Exposure Draft.
