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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