Hedge accounting - what does really mean?

Question

I found the below definition:
"A method of accounting where entries for the ownership of a security and the opposing hedge are treated as one. Hedge accounting attempts to reduce the volatility created by the repeated adjustment of a financial instrument's value, known as marking to market. This reduced volatility is done by combining the instrument and the hedge as one entry, which offsets the opposing movements"

Can anyone explain this with some real world examples? What is the standard that deals with hedge accounting? IAS 39 or IFRS 9?

Answer 1

Hedge Accounting is to be governed by IFRS 9 which is being expended to fully replace IAS 39. Mandatory effective date of IFRS 9 Financial Instruments will be 1 January 2015. IASB is currently having sub projects for general & macro hedge accounting which are aimed at standardizing hedge accounting. Once these projects are complete you will get the definitions from IFRS point of view. Until then you can use exiting provisions of IAs 39.