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Hedged item Cash flow hedges Future interest flows

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Last update 22/12/2019 Hedged item Cash flow hedges Future interest flows – Q: Does IFRS 9 allow the following cash flow hedge designations of future interest flows? Considerations:Consider the following cases. Note: In all scenarios both the swap and the hedged debt are denominated in Company A’s functional currency. Case 1Company A enters into a … Read more

The five contract identification criteria

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Last update 06/01/2020 The five contract identification criteria – These criteria are part of the first step in the application of the core principle in IFRS 15.  IFRS 15 9 Revenue from Contracts with Customers is applied to contracts with customers that meet all of the following five contract identification criteria (contract existence): The contract … Read more

Hedge Risk components General requirements

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Last update 27/11/2019 Risk components General requirements is about hedging risk components be it financial or non-financial risks (new in IFRS 9). Instead of hedging the total changes in fair values or cash flows, risk managers often enter into derivatives to only hedge specific risk components. Managing a specific risk component reflects that hedging all … Read more

The acquisition method

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Last update 27/12/2019 The acquisition method – Assuming that a transaction is concluded to be a business combination, IFRS 3 requires that a business combination be accounted for by applying what is referred to as the acquisition method. The IFRS/US GAAP replaced the term “purchase method,” which previously was used to describe the method of … Read more

Hedge of forecast foreign currency purchases

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Last update 28/11/2019 Hedge of forecast foreign currency purchases presents a complete descriptive case of a hedge, from start to finish. Step-by-step build a file to document a hedge and appropriately account for it under IFRS. This narrative can also be used as a sort of starting point to the hedge documentation required for each … Read more

Term deposits

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Last update 13/12/2019 Term deposits are financial instruments. These are cash deposits remunerated at fixed maturity date and rate, determined in advance. 1. Characteristics: Yield: payment of interests; Duration: short-term (up to 4 years), medium-term (4-8 years) or long-term (more than 8 years); Interests: interests depend on the terms and conditions of the deposit; e.g. … Read more

Hedge of a net position

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Last update 28/10/2019 Topics hide Q: When can an entity make use of a hedge of a net position? Under IFRS 9 can the group designate the net position of USD10,000 as the hedged item? Hedging an overall net position Hedge of a net position Case — hedge of a net position Treasury involvement Cash … Read more

Synthetic products

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Last update 11/12/2019 Synthetic products are financial instruments. Synthetic products – essentially covered options and certificates – are characterised by their identical or similar profit and loss structures when compared with specific traditional financial instruments (shares or bonds). They result from the combination of two or several financial instruments in the same product. Basket certificates, … Read more

Hedge Economic relationship

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Last update 27/11/2019 Hedge Economic relationship is the basis why hedging has been invented in the first place – your loss is my profit to put it simple, just like buying a piece of art and pay it by cash, win and loose. Under IFRS 9, a hedging relationship qualifies for hedge accounting if it … Read more

SWAP

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Last update 29/12/2019 Swaps are contractual agreements between two parties who agree to exchange one set of cash flows for another. The two parties that agree to exchange the cash flows are called counterparties of the swaps. Swaption – A swaption is an option granting its owner the right but not the obligation to enter … Read more