2 This Standard shall be applied by all entities to all financial instruments within the scope of IFRS 9 Financial Instruments if, and to the extent that:
- IFRS 9 permits the hedge accounting requirements of this Standard to be applied; and
- the financial instrument is part of a hedging relationship that qualifies for hedge accounting in accordance with this Standard.
8 The terms defined in IFRS 13, IFRS 9 and IAS 32 are used … Continue reading
71 If an entity applies IFRS 9 and has not chosen as its accounting policy to continue to apply the hedge accounting requirements of this Standard (see paragraph 7.2.21 of IFRS 9), it shall apply the hedge accounting requirements in Chapter 6 of IFRS 9. However, for a fair value hedge of the interest rate exposure of a portion of a portfolio of financial assets or financial liabilities, an entity may, in accordance with paragraph 6.1.3 of IFRS 9, … Continue reading
Appendix A Application guidance
This appendix is an integral part of the Standard.
Hedging (paragraphs 71–102)
Hedging instruments (paragraphs 72–77)
Qualifying instruments (paragraphs 72 and 73)
AG94 The potential loss on an option that an entity writes could be significantly greater than the potential gain in value of a related hedged item. In other words, a written option is not effective in reducing the profit or loss exposure of a hedged item. Therefore, a written option does … Continue reading
Hedged items (paragraphs 78–84)
Qualifying items (paragraphs 78–80)
AG98 A firm commitment to acquire a business in a business combination cannot be a hedged item, except for foreign exchange risk, because the other risks being hedged cannot be specifically identified and measured. These other risks are general business risks.
AG99 An equity method investment cannot be a hedged item in a fair value hedge because the equity method recognises in profit or loss the investor’s share of the associate… Continue reading
Hedge accounting (paragraphs 85–102)
AG102 An example of a fair value hedge is a hedge of exposure to changes in the fair value of a fixed rate debt instrument as a result of changes in interest rates. Such a hedge could be entered into by the issuer or by the holder.
AG103 An example of a cash flow hedge is the use of a swap to change floating rate debt to fixed rate debt (ie a hedge of a future … Continue reading