Page 446 - SBR Integrated Workbook STUDENT S18-J19
P. 446
Chapter 25
Example 15
Cash flow hedge – gains and losses
1 October 20X1.
No entries are posted on this date. The derivative has a fair value of nil so is
unrecognised.
31 December 20X1
Under a cash flow hedge, the hedging instrument is remeasured to fair value
and the effective portion of the gain is recognised in OCI:
Dr Derivative $0.4m
Cr OCI $0.4m
31 March 20X2
The derivative is remeasured to fair value with the gain in OCI
Dr Derivative ($0.6m – $0.4m) $0.2m
Cr OCI $0.2m
The PPE is purchased:
Dr PPE $2.6m
Cr Cash $2.6m
The derivative is settled net in cash:
Dr Cash $0.6m
Cr Derivative $0.6m
The gains recorded in OCI are adjusted against the PPE:
Dr Other components of equity $0.6m
Cr PPE $0.6m
The PPE is therefore initially recorded at $2 million ($2.6m – $0.6m).
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