Transition for hedge accounting (ChapterTransition for hedge accounting (Chapter 6)

Transition for hedge accounting (Chapter 6)

7.2.21 When an entity first applies this Standard, it may choose as its accounting policy to continue to apply the hedge accounting requirements of AASB 139 instead of the requirements in Chapter 6 of this Standard. An entity shall apply that policy to all of its hedging relationships. An entity that chooses that policy shall also apply Interpretation 16 Hedges of a Net Investment in a Foreign Operation without the amendments that conform that Interpretation to the requirements in Chapter 6 of this Standard.

Aus7.2.21.1 AASB 2014-1 Amendments to Australian Accounting Standards and AASB 2014-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2014) amend paragraphs 3, 5–7, 14, 16, AG1, AG8 and IE5 of Interpretation 16 and add paragraphs 18A–18B to conform Interpretation 16 to the requirements in Chapter 6 of this Standard.

7.2.22 Except as provided in paragraph 7.2.26, an entity shall apply the hedge accounting requirements of this Standard prospectively.

7.2.23 To apply hedge accounting from the date of initial application of the hedge accounting requirements of this Standard, all qualifying criteria must be met as at that date.

7.2.24 Hedging relationships that qualified for hedge accounting in accordance with AASB 139 that also qualify for hedge accounting in accordance with the criteria of this Standard (see paragraph 6.4.1), after taking into account any rebalancing of the hedging relationship on transition (see paragraph 7.2.25(b)), shall be regarded as continuing hedging relationships.

7.2.25 On initial application of the hedge accounting requirements of this Standard, an entity:

(a) may start to apply those requirements from the same point in time as it ceases to apply the hedge accounting requirements of AASB 139; and

(b) shall consider the hedge ratio in accordance with AASB 139 as the starting point for rebalancing the hedge ratio of a continuing hedging relationship, if applicable. Any gain or loss from such a rebalancing shall be recognised in profit or loss.

7.2.26 As an exception to prospective application of the hedge accounting requirements of this Standard, an entity:

(a) shall apply the accounting for the time value of options in accordance with paragraph 6.5.15 retrospectively if, in accordance with AASB 139, only the change in an option’s intrinsic value was designated as a hedging instrument in a hedging relationship. This retrospective application applies only to those hedging relationships that existed at the beginning of the earliest comparative period or were designated thereafter.

(b) may apply the accounting for the forward element of forward contracts in accordance with paragraph 6.5.16 retrospectively if, in accordance with AASB 139, only the change in the spot element of a forward contract was designated as a hedging instrument in a hedging relationship. This retrospective application applies only to those hedging relationships that existed at the beginning of the earliest comparative period or were designated thereafter. In addition, if an entity elects retrospective application of this accounting, it shall be applied to all hedging relationships that qualify for this election (ie on transition this election is not available on a hedging-relationship-by-hedging-relationship basis). The accounting for foreign currency basis spreads (see paragraph 6.5.16) may be applied retrospectively for those hedging relationships that existed at the beginning of the earliest comparative period or were designated thereafter.