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Hedge accounting is an accountancy practice, ... (for example interest rate risk, ... (replacement of IAS 39), of the International Accounting Standards Board;
A cash flow hedge [1] is a hedge of the exposure to the variability of cash flow that: is attributable to a particular risk associated with a recognized asset or liability. Such as all or some future interest payments on variable rate debt or a highly probable forecast transaction and; could affect profit or loss (IAS 39, §86b)
It was released by the International Accounting Standards Board (IASB) in 2003, and was replaced in 2014 by IFRS 9, which became effective in 2018. It was adopted by the European Union in 2004. [1] In 2005, the EU also introduced the fair value and hedging provision of the amended version of IAS 39. [2] [3]
Recognition of previous GAAP hedge relationship when it first applies IAS 39, Accountancy; Jun2004, Vol. 133 Issue 1330, p90-91. Accounting for electricity derivatives under IAS 39 , Journal of Derivatives & Hedge Funds (2007) 13, 233–246.
IAS 39 defines two major types of hedges. The first is a cash flow hedge, defined as: “a hedge of the exposure to variability in cash flows that (i) is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction, and (ii) could affect profit or loss”. [5]
Statements of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, commonly known as FAS 133, is an accounting standard issued in June 1998 by the Financial Accounting Standards Board (FASB) that requires companies to measure all assets and liabilities on their balance sheet at “fair value”.
It addresses the accounting for financial instruments. It contains three main topics: classification and measurement of financial instruments, impairment of financial assets and hedge accounting. The standard came into force on 1 January 2018, replacing the earlier IFRS for financial instruments, IAS 39.
Gains and losses on derivatives held as cash flow hedges (only for effective portions) [IAS 39/ "FAS 133" – "Accounting for Derivative Instruments and Hedging Activities"] Gains and losses resulting from translating the financial statements of foreign subsidiaries (from foreign currency to the presentation currency) [IAS 21/ "FAS 52 ...