Amortisation may begin as soon as an adjustment exists and shall begin no later than when the hedged item ceases to be adjusted for hedging gains and losses. If, however, the hedge is a cash flow hedge, then the net position can only be eligible as a hedged item if it is a hedge of foreign currency risk and the designation of that net position specifies the reporting period in which the forecast transactions are expected to affect profit or loss and also specifies their nature and volume. Similarly, if, for example, an entity hedges an exposure using a nominal amount of 40 units of a financial instrument, it shall designate the hedging relationship using a hedge ratio that is the same as that resulting from that quantity of 40 units (ie the entity must not use a hedge ratio based on a higher quantity of units that it might hold in total or a lower quantity of units) and the quantity of the hedged item that it actually hedges with those 40 units. However, if the asset is not readily obtainable in the market, derecognition is precluded to the extent of the amount of the asset that is subject to the call option because the entity has retained control of the asset. The presentation of hedging gains or losses in that statement depends on the group of items. (ii)       decreasing the volume of the hedged item. In this Standard monetary amounts are denominated in ‘currency units’ (CU) and ‘foreign currency units’ (FC). IFRS 9 Financial Instruments June 2019 – FRC response to IASB Exposure Draft ED/2019/1 Interest Rate Benchmark Reform. This is normally set out in a general document that is cascaded down through an entity through policies containing more specific guidelines. Such a repurchase does not preclude derecognition provided that the original transaction met the derecognition requirements. For example - If a contract includes a financial instrument (e.g. B4.3.1           When an entity becomes a party to a hybrid contract with a host that is not an asset within the scope of this Standard. The most significant effect of IFRS 9 Financial Instruments for non-financial entities will be the application of the new hedge accounting model. Because LIBOR is less than this effective yield, the entity can designate a LIBOR component of eight per cent that consists partly of the contractual interest cash flows and partly of the difference between the current fair value (ie CU90) and the amount repayable on maturity (ie CU100). B6.6.14        If the group of items does not have any offsetting risk positions (for example, a group of foreign currency expenses that affect different line items in the statement of profit or loss and other comprehensive income that are hedged for foreign currency risk) then the reclassified hedging instrument gains or losses shall be apportioned to the line items affected by the hedged items. B6.5.1           An example of a fair value hedge is a hedge of exposure to changes in the fair value of a fixed-rate debt instrument arising from changes in interest rates. However, in contrast the entity’s execution of that strategy has changed and this means that, for CU20 of variable-rate exposure that was previously hedged, the risk management objective has changed (ie at the hedging relationship level). B6.4.8           An example of credit risk dominating a hedging relationship is when an entity hedges an exposure to commodity price risk using an uncollateralised derivative. B6.4.1           Hedge effectiveness is the extent to which changes in the fair value or the cash flows of the hedging instrument offset changes in the fair value or the cash flows of the hedged item (for example, when the hedged item is a risk component, the relevant change in fair value or cash flows of an item is the one that is attributable to the hedged risk). B6.5.29        An option can be considered as being related to a time period because its time value represents a charge for providing protection for the option holder over a period of time. However, in accordance with paragraph 6.5.4, a hedge of the foreign currency risk of a firm commitment could alternatively be accounted for as a cash flow hedge. If the entity has not retained substantially all the risks and rewards of ownership of the transferred asset, it determines whether it has retained control of the transferred asset. (b)      a time-period related hedged item, the amortisation expense related to the time value is nil. Hence, as long as the three-month LIBOR forward curve for the remaining life of that liability does not fall below 20 basis points, the hedged item has the same cash flow variability as a liability that bears interest at three-month LIBOR with a zero or positive spread. Changes in volume refer to the quantities that are part of the hedging relationship. IFRS 9.3.2.15 and IFRS 9.3.2.17 apply to measurement of such liabilities; c. financial guarantee contracts. Earlier application is permitted. However, the entity requires fixed-rate exposure in its functional currency only for a short to medium term (say two years) and floating rate exposure in its functional currency for the remaining term to maturity. Hence, an entity shall assess the type of hedged item (see paragraphs 6.5.16 and 6.5.15(a)) on the basis of the nature of the hedged item (regardless of whether the hedging relationship is a cash flow hedge or a fair value hedge): (a)      the forward element of a forward contract relates to a transaction related hedged item if the nature of the hedged item is a transaction for which the forward element has the character of costs of that transaction. However, the changes in the value of the items in the net position that have a similar effect as the hedging instrument are recognised only once the transactions that they relate to are recognised, such as when a forecast sale is recognised as revenue. Rather, this Standard provides for special accounting for such regular way contracts (see paragraphs 3.1.2 and B3.1.3-B3.1.6). B6.4.2           When designating a hedging relationship and on an ongoing basis, an entity shall analyse the sources of hedge ineffectiveness that are expected to affect the hedging relationship during its term. Instead, it is a representation of AASB, (a)       AASB 9 applies to annual reporting periods beginning on or after 1 January 2018 (instead of 1 January 2017) as a result of amendments made by AASB 2014-1, Entities may elect to apply the amendments to AASB 9 in this Standard as set out in paragraphs Aus1.3 and Aus1.4 of AASB 9, provided that AASB 10, Entities may elect to apply the amendments to AASB 9 in this Standard as set out in paragraphs Aus1.3 and Aus1.4 of AASB 9, provided that AASB 13, (i)        Entities may elect to apply the amendments to AASB 9 (2010) in this Standard only as set out in paragraph Aus 1.4 of AASB 9 (2010), provided that AASB 15. as issued and amended by the International Accounting Standards Board (IASB). Note 4 – Financial guarantees Financial guarantee contracts are within IAS 39’s scope from the issuer’s perspective, unless the issuer has previously asserted explicitly that it regards such contracts as insurance contracts and has used accounting applicable to … are applied to 90 per cent of those interest cash flows. Non-financial variables specific to a party to the contract include the occurrence or non-occurrence of a fire that damages or destroys an asset of a party to the contract. For. This is because the transferor has transferred substantially all the risks and rewards of ownership. (See AASB 13.). The intrinsic value of a purchased option hedging instrument (assuming that it has the same principal terms as the designated risk), but not its time value, reflects a one-sided risk in a hedged item. Note 9.4 Reserves economic flow Under AASB 9, financial liabilities designated as Fair Value Through Profit or Loss (FVTPL) – other than loan commitments or financial guarantee contracts, the portion of the change attributable to changes in the entity’s own credit risk is recognised in Other Comprehensive Income (OCI), with no An entity may have a contract to buy or sell a non-financial item that can be settled net in cash or another financial instrument or by exchanging financial instruments (eg a contract to buy or sell a commodity at a fixed price at a future date). BA.3             One of the defining characteristics of a derivative is that it has an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. IFRS 9 (2014) Financial Instruments1has been developed by the International Accounting Standards Board (IASB) to replace IAS 39 Financial Instruments: Recognition and Measurement. The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from IAS 39 without change except for financial liabilities that are designated at fair value through profit or loss. If those sales volumes are expected to affect profit or loss in different reporting periods, the entity would include that in the documentation, for example, the first FC70 from sales of Product A that are expected to affect profit or loss in the first reporting period and the first FC30 from sales of Product B that are expected to affect profit or loss in the second reporting period. 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