High level and best overview IFRS 9 Hedge accounting

High level and best overview IFRS 9 Hedge accounting


The objective of hedge accounting is to represent, in the financial statements, the effect of an entity’s risk management activities that use financial instruments to manage exposures arising from particular risks that could affect profit or loss (or other comprehensive income, in the case of investments in equity instruments for which an entity has elected to present changes in fair value in other comprehensive income). High level and best overview IFRS 9 Hedge accounting


A hedging relationship qualifies for hedge accounting only if all the following criteria are met (IFRS 9 6.4.1):

  1. the hedging relationship consists only of eligible hedging instruments and eligible hedged items. High
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IFRS 15 Contract terms with customers

IFRS 15 Contract terms with customers – what is it about??????

IFRS 15 11

The standard is applied to the duration of the contract (i.e. the contractual period) in which the parties to the contract have presently enforceable rights and obligations.

IFRS 15 12

A contract does not exist if each party to the contract has the unilateral enforceable right to terminate a wholly unperformed contract without compensating the other party (or parties).

A contract is ‘wholly unperformed’ if both of the following criteria are met:

  • the entity has not yet transferred any promised goods or services to the customer; and

  • the entity has not yet received, and is not yet entitled to receive, any consideration in exchange for promised

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IFRS 7 Kickstart sensitivity disclosures

IFRS 7 Kickstart sensitivity disclosures – Management has to disclose a sensitivity analysis for each type of market risk to which the entity is exposed at the reporting date. This should show how profit or loss and equity would have been affected by changes in the relevant risk variable that were reasonably possible at that date [IFRS 7 40(a)]

Case: ‘Worse case scenario’ sensitivity analysis

Not required. IFRS 7 40(a) requires a sensitivity analysis to show the effect on profit or loss and equity of reasonably possible changes in the relevant risk variable. A reasonably possible change is judged relative to the economic environments in which the entity operates; it does not include remote or ‘worst case’ scenarios or … Read more

Service concessions – Summary

There is no definition in IFRIC 12 but a characteristic included is as follows: a service concession: “typically involves a private sector entity (an operator) constructing the infrastructure used to provide the public service or upgrading it (for example, by increasing its capacity) and operating and maintaining it for a specified period of time. The operator is paid for its services over the period of the arrangement. The arrangement is governed by a contract that sets out performance standards, mechanisms for adjusting prices, and arrangements for arbitrating disputes”.

The following summary provides the headlines of items to deal with in service concessions as per IFRS 12:

Treatment of the operator’s rights over the infrastructure

Infrastructure within the scope of … Read more

IFRS 9 – Reclassification of financial instruments

The IFRS 9 requirements for reclassification of financial instruments are significantly different from those in IAS 39.

IAS 39


  • IAS 39 contains numerous reclassification rules for the various categories of financial instruments.
  • For instance, a change in intention or ability causes the initial classification to be inappropriate, a reliable measure of fair value becomes available or is no longer available, etc.

(IAS 39.50-54)

IFRS 9 – Reclassification of financial instruments

  • There is only one principle for reclassification of financial assets. Reclassification of financial assets is required only when an entity changes its business model for managing them.
  • No reclassification of financial liabilities is allowed.


IFRS 9 – Reclassification of financial instruments

IFRS 9 –

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Royalty Avoidance Approach

One method to determine the market value of Intellectual Property assets like patents, trademarks, and copyrights is to use the royalty avoidance approach (also known as Relief from royalty or Royalty Relief). This approach determines the value of Intellectual Property assets by estimating what it would cost the business if it had to purchase the Intellectual Property (IP) it uses from an outsider.

This approach requires the valuator to (1) project future sales of the products that use the technology, (2) determine an appropriate reasonable royalty rate, and (3) determine either a present value factor or an appropriate discount rate. The result is the present value of the Intellectual Property to the company. See the following example of the valuation Read more