Is hedge accounting permitted under PSAB's new suite of financial instruments standards?
The short answer is no. PSAB removed hedge accounting from its handbook and PS 3450 (Financial Instruments) and PS 2601 (Foreign Currency Translation) do not permit hedge accounting.
This is a significant change from PSAB's previous standard on foreign currency translation which permitted a hedge accounting option and synthetic accounting (synthetic accounting being where two financial instruments may be combined and treated as one under certain conditions).
This is also unique when compared to international standards that have several different classifications for financial instruments, along with hedging options to account for different types of hedges and accounting mismatches.
PSAB's standards do contain some subtle hedge accounting features embedded in the details of the full suite of financial instrument standards. These features can help public sector entities relieve accounting mismatches created through fair value accounting.