What is the principle for recognition of a financial asset in IFRS 9?
Under IFRS 9 all financial instruments are initially measured at fair value plus or minus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs. This requirement is consistent with IAS 39.
What does hedge mean in accounting?
Hedge accounting is a method of accounting where entries to adjust the fair value of a security and its opposing hedge are treated as one. Hedge accounting attempts to reduce the volatility created by the repeated adjustment to a financial instrument’s value, known as fair value accounting or mark to market.
What is meant by hedge accounting?
What is the principle for recognition of a financial asset?
What is the principle for recognition of a financial asset or a financial liability in IAS 39? (a) A financial asset is recognized when, and only when, it is probable that future economic benefits will flow to the entity and the cost or value of the instrument can be measured reliably.
What is hedge accounting IFRS?
The hedge ratio is defined as the relationship between the quantity of the hedging instrument and the quantity of the hedged item in terms of their relative weighting. IFRS 9 requires that the hedge ratio used for hedge accounting purposes should be the same as that used for risk management purposes.
What is hedging in IFRS?
The objective of hedge accounting is to represent the effect of an entity’s risk management activities that use financial instruments to manage exposures arising from particular risks that could affect P/L or OCI (IFRS 9.6. Application of hedge accounting is voluntary (IFRS 9.6. 5.1).
What is hedge accounting under IFRS 9?
IFRS 9 hedge accounting applies to all hedge relationships, with the exception of fair value hedges of the interest rate exposure of a portfolio of financial assets or financial liabilities (commonly referred as ‘fair value macro hedges’). This exception arises because the Board has a separate project to address the accounting for macro hedges.
What is the general requirement in IFRS 9?
The general requirement in IFRS 9 is that an entity must apply IFRS 9 at the date of initial adoption retrospectively (i.e., as if the new requirements had always been in effect) in accordance with IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors
What are the different types of hedging accounting?
Hedge Accounting (IFRS 9) 1 Hedging instruments. 2 Hedged items. 3 Hedges of a group of items. 4 Qualifying criteria for hedge accounting. 5 Three types of hedging relationships. 6 Fair value hedges. 7 Cash flow hedges. 8 Hedges of a net investment in a foreign operation. 9 Discontinuation of hedge accounting.
What does IFRS 9 say about fair value?
[IFRS 9, paragraph 5.7.5] Despite the fair value requirement for all equity investments, IFRS 9 contains guidance on when cost may be the best estimate of fair value and also when it might not be representative of fair value. IFRS 9 doesn’t change the basic accounting model for financial liabilities under IAS 39.