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hedgeaccountingproposalsifrs9ias39-summaryofexposuredraft-101227225902-phpapp01 (1).pdf

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Hedge Accounting Proposals Summary of Exposure Draft under IAS 39 dated 9th Dec 2010 Compiled by CA. R. Venkata Subramani  R. Venkata Subramani Email: rvsbell@gmail.com http://accountingforinvestments.com Exposure Draft IAS 39 dated 9th December 2010 Parameter Objective Existing IAS 39 Standard To mitigate the recognition and measurement anomalies between the accounting for hedged items and to manage the timing of the recognition of gains or losses on derivative hedging instruments used t
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  Hedge Accounting Proposals Summary of Exposure Draft under IAS 39 dated 9 th Dec 2010 Compiled by CA. R. VenkataSubramani  R. Venkata SubramaniEmail: rvsbell@gmail.com http://accountingforinvestments.com   R. Venkata SubramaniEmail: rvsbell@gmail.com http://accountingforinvestments.com Exposure Draft IAS 39 dated 9 th December 2010 ParameterExisting IAS 39 StandardProposed IFRS 9 StandardObjective To mitigate the recognition and measurement anomalies between the accounting for hedged items and to manage the timing of the recognition of gains or losses on derivative hedging instruments used to mitigate cash flow riskTo represent in the financial statements the effect of managing exposures arising from particular risks that affect profit or loss Hedging instruments A non-derivative financial asset/liability measured at fair value through profit or loss is not eligible for designation as a hedging instrumentA non-derivative financial asset/liability measured at fair value through profit or loss may be eligible for designation as a hedging instrument   R. Venkata SubramaniEmail: rvsbell@gmail.com http://accountingforinvestments.com Exposure Draft IAS 39 dated 9 th December 2010 ParameterExisting IAS 39 StandardProposed IFRS 9 StandardHedged items An aggregated exposure that is a combination of an exposure and a derivative cannot be designated as a hedged itemAn aggregated exposure that is a combination of an exposure and a derivative may be designated as a hedged item Non-financial items Risk component separately identifiable and reliably measureable may be designated as the hedged item in a hedging relationship but only for financial items Risk component separately identifiable and reliably measureable may be designated as the hedged item in a hedging relationship for non-financial items also   R. Venkata SubramaniEmail: rvsbell@gmail.com http://accountingforinvestments.com Exposure Draft IAS 39 dated 9 th December 2010 ParameterExisting IAS 39 StandardProposed IFRS 9 StandardHedge effectiveness testingRule-based: The offset is within the range of 80-125 % a hedge is effective and only then it qualifies for hedge accounting Principle-based: The hedging relationship should meet the objective of the hedge effectiveness assessment as laid down in the risk management policy of the entity Retrospective testing On an ongoing basis an entity should assess the effeictivenessof the hedge by retrospective testingThe assessment relates to expectations about hedge infectiveness and offsetting and therefore is only forward looking. No retrospective testing
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