Page 18 - PowerPoint Presentation

HEDGING

Example 1

COMMENT

• The non-cancellable order meets the definition of a firm

commitment (IFRS 9 Appendix A).

• Since this is a hedge of a foreign currency risk it may be

accounted for as a cash flow hedge or fair value hedge
(IFRS 9.6.5.4).

• It is therefore important to determine what has been

identified by Clever Ltd as the hedged risks namely

changes in future cash flows or changes in fair value of
the hedged item.

• The sentences under required (a) and (b) show the

various risk management policies in this regard that

assists in determining the hedged risks. Look out for

these in a test or an exam!

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