is used in hedge accounting and is the adjustment on an individual asset basis of the hedged item or portfolio basis of hedged items using a systemic and rational method for changes in business risks (for example interest rate risk, foreign currency risk) occurring throughout the hedging relationship’s life. The name comes from the fact that the (measurement) basis of the hedged item is always amortised costs
Basis adjustments are accounted for in the same manner as other components of the amortized cost basis of the hedged item. Partial dedesignation is permitted when expectations about the last of layer have changes such that the remaining amount is expected to be outstanding at the end of the hedging relationship is less than the hedged item. Partial dedesignation is required for the amount no longer expected to be outstanding. The basis adjustment associated with the amount of the hedged item dedesignated is allocated to all remaining assets in the closed portfolio using a systemic and rational method.
When the last layer is breached, full dedesignation is required. An entity would recognize a portion of the basis adjustment immediately on profit or loss. The remaining outstanding basis adjustment would be allocated to all remaining individual assets in the closed portfolio using a systemic and rational method.