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¶ … IFRS No.39 hedge accounting requirements, accounting for investments in derivative financial instruments, criteria for hedge accounting recognition, and deferral of recognition of periodic unrealized fair value changes.
IFRS No.39 hedge accounting requirements
IFRS 39 permits hedge accounting under certain circumstances as long as the hedging relationship is:
Thoroughly and fully spelled out and defined as well as the circumstances in which it will be used, the objective, the nature of the risk, and how the entity will assess the hedging instrument's effectiveness
It is regularly assessed and determined to be effective
It is determined to be effective in achieving changes in fair value or cash flows attributable to the hedged risk as is written, and that this effectiveness can be reliably measured (Deloitte IAS 39)
Accounting for investments in derivative financial instruments,
If an embedded derivative is separated, the host contract is accounted for under the appropriate standard. If the entity is however unable to measure the embedded...
(Deloitte IAS 39)
Deferral of recognition of periodic unrealized fair value changes.
IAS 39 requires recognition of a financial asset or a financial liability only when the entity becomes part of the contractual provisions of the instrument. There are also various conditions outlined as per its requirements (see for instance Deloitte IAS 39)
Identify and describe financial instruments used by firms for hedging activities and their distinctive characteristics.
Some of the financial instruments are stocks (where investors have a share in the company), exchange-traded funds…
Sources
Deloitte IAS 39 -- Financial Instruments: Recognition and Measurement http://www.iasplus.com/en/standards/standard38
Jorion, Philippe (2009). Financial Risk Manager Handbook (5 ed.). John Wiley and Sons.
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