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Webcast: Hedge Accounting under IFRS 9

Speaker: Juan Ramirez

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A course on this topic is available in London, Singapore and New York

Webcast Agenda


  • IFRS standards and objective of hedge accounting
  • Hedge item vs. hedging instrument
  • Types of hedges
  • Qualifying criteria
  • Cash flow hedging mechanics
  • Fair value hedging mechanics
  • Net investment hedging mechanics
     

Learning Outcomes


  • Get a basic knowledge of the purpose and mechanics of hedge accounting


Q&A


1. You mentioned that the application of hedge accounting is voluntary; are there any other alternatives for hedges?
A. Yes, an entity may apply the fair value option to change the recognition of the element being hedged. However, this alternative faces key constraints such as it has to be designated at initial recognition and once designated it cannot be revoked.

2. You mentioned that in order to apply hedge accounting, the hedge relationship has to meet certain requirements. What happens if the requirements cease to be met once the hedging relationship has been in place?
A. If any of the requirements for hedge accounting is no longer met, the hedging relationship is discontinued from that moment. This is commonly the case when the hedged item does not exist anymore (for example because a debt has been repaid), the hedging instrument has been early terminated or because there is no longer an economic relationship between the hedged item and the hedging instrument that gives rise to an offset.

3. Can an entity change the method to assess effectiveness once the hedging relationship is in place?
A. IFRS does not state which method an entity should use. However, the method chosen has to be consistently applied to similar hedges. The method stated in the hedge documentation cannot be changed subsequently.

So for instance, if an entity is applying the critical terms method and ineffectiveness arise and that method is not appropriate anymore, the entity cannot just change to say the application of the regression analysis method. It would need to discontinue the existing hedging relationship and enter into a new one in which the regression analysis method is applied.

Thank you to those attendees who submitted their questions.


LFS offers the 2-day 'Accounting for Derivatives in Practice under IFRS9' programme with Juan Ramirez in London and Singapore.

To find out more, click on the location links above or contact us at advisor@londonfs.com

Are you interested in running our public courses in-house? Contact our in-house team to discuss further.


Why travel? Many clients are already attending our courses from the convenience of their home or office with LFS's state-of-the-art remote learning platform: LFS Live