Aspects of hedge accounting not implemented in Brazil

Abstract

The implementation of rules for recognition, measurement, and disclosure of hedge accounting is pointed out by the edition of SFAS 133 and IAS 39, issued by FASB (Financial Accounting Standards Board) and IASB (International Accounting Standards Board), respectively. In Brazil, just part of these requirements established in the international pronouncements has been set out for financial institutions and investment funds since 2002, when the Central Bank of Brazil issued the Circulares 3.068, 3.082, and 3.086. Despite them, some relevant aspects were ommited like hedge of foreign investments, specifications for hedge of foreign currency, and the treatment for embedded derivatives. Furthermore, topics recently approved by IASB such as interest rate hedge for net open positions, called macro-hedge, are not implemented in Brazil. Considering that, there are important differences between Brazilian and international rules, especially in hedge accounting operations. While the financial institutions legislation need improvements to fulfill the lacuns observed, non-financial institutions are still waiting for appropriated legislation of such operations.