 |
International Accounting Standards (IAS)
|
|
| U.S. GAAP | IFRS, IAS | Accounting Topics |
International Accounting Standard (IAS) 39
Financial Instruments: Recognition and Measurement
Hedge Accounting
International Financial
Reporting Standards (IFRS) |
|
International Accounting
Standards (IAS) |
|
U.S. GAAP by Topic |
| International Accounting Standard (IAS) 39 |
|
IAS 39
Financial Instruments: Recognition and Measurement Issued in
March 1999 Revised in
December 2003 Recent amendment:
by IFRS 3 revised in January 2008
Financial Instruments |
| Hedge Accounting |
|
When can a
derivative be designated as a hedging
instrument? --> only if a derivative meets the conditions of IAS 39, Para. 88 |
|
Can a
purchased option qualify as a hedging
instrument? --> Yes. |
|
Can a
written option qualify as a hedging instrument? --> In general, no. When can a written option qualify as a hedging instrument? --> only when a written option is designated as an offset to a purchased option |
|
Can a
non-derivative financial asset qualify as a
hedging instrument? --> only for a hedge of a foreign currency risk |
|
Can a
non-derivative financial liability qualify as a
hedging instrument? --> only for a hedge of a foreign currency risk |
|
Three
types of hedging relationships: (1) fair value hedge (2) cash flow hedge (3) hedge of a net investment in a foreign operation |
|
A
hedge of foreign currency risk is treated --> as a fair value hedge or a cash flow hedge |
|
Conditions of IAS 39, Para. 88: (1) formal designation and documentation of hedging relationship --> at the inception of hedge (2) hedge is expected to be highly effective (3) effectiveness of hedge can be reliably measured (4) hedge is assessed and determined to have been highly effective (5) for cash flow hedges, a forecast transaction --> is highly probable and --> presents an exposure to variations in cash flows |
|
Fair value hedges (1) for a derivative hedging instrument, --> gain or loss --> from remeasuring a derivative hedging instrument at fair value --> is recognised in profit or loss (2) for a non-derivative hedging instrument, --> foreign currency component of its carrying amount --> measured using the rules of IAS 21 --> is recognised in profit or loss (3) gain or loss on the hedged item (attributable to the hedged risk) --> is recognised in profit or loss --> by adjusting carrying amount (of hedged item) |
|
Cash flow hedges Gain or loss on hedging instrument: (1) effective portion --> recognised in other comprehensive income (2) ineffective portion --> recognised in profit or loss |
|
Hedges of
a net investment in a foreign operation Gain or loss on hedging instrument: (1) effective portion --> recognised in other comprehensive income (2) ineffective portion --> recognised in profit or loss When the foreign operation is disposed of: --> gain or loss recognised in other comprehensive income --> is reclassified to profit or loss --> as a reclassification adjustment |
