Cash flow hedge documentation

In addition to the general documentation requirements discussed in ‘Hedge documentation‘, there are incremental documentation requirements specific to cash flow hedges. These primarily relate to the documentation around the specific identification of a forecasted transaction. A forecasted transaction needs to be described with sufficient specificity such that when the transaction occurs, it is clear whether …

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Fair value hedge documentation

In addition to the general documentation requirements discussed in ‘Hedge documentation‘, there are incremental documentation requirements specific to fair value hedges relating to firm commitments and hedging relationships designated under the last-of-layer method. Firm commitments Documentation includes a reasonable method for recognizing in profit or loss the asset or liability that represents the gain or …

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The Risk and Rewards test and the Control test

Based on criteria in previous steps it has been concluded that an entity has transferred a financial asset (see IFRS 9 B3.2.1). The central questions here are: 1) has the entity transferred or retained substantially all risks and rewards? and 2) has the entity retained control of the asset(s)? Which leads to 3 possible outcomes, …

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Pass-through testing

Here are some examples to learn which types of financial instruments/transactions qualify for accounting for a pass-through arrangement. An explanation of a pass-through arrangement and the three conditions a vehicle has to meet in qualifying for a pass-through are provided in ‘Pass-through arrangements‘  If the originator/transferor meets these three conditions the assets transferred are derecognised …

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Derecognise a transfer of a financial instrument or not?

Here are some examples regarding transfers of financial instruments and the question of whether or not these should be derecognised (and why)? Transfer versus agency relationship Question Is the transfer of securities to a custodian a transfer of the contractual rights under IFRS 9 3.2.4(a)? Background Entity K enters into an arrangement with bank L …

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