Accounting change threatens structured note DVA hedges

Move could force unwinds, but an IFRS exemption may prove a saviour

Accounting changes
Changes to US and international accounting regimes will push DVA out of earnings in most cases

When the US accounting standard setter announced in December that it would follow its international counterpart and shift the gains and losses from banks' own credit spread movements – known as debit valuation adjustment (DVA) – out of the earnings statement, dealers rejoiced. For years, they had argued this figure caused artificial volatility in their profit and loss (P&L) reports.

But amid the celebrations, some bankers were pulled into meetings with accounting experts worried about the impact

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