Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Cash flow hedging
- This topic has 1 reply, 2 voices, and was last updated 4 years ago by Stephen Widberg.
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- November 21, 2020 at 11:37 am #595895
Hi,
I have just come across a question in which I have tried to apply the logic behind the video I have just watched on cash flow hedging but I am struggling..A company enters into a derivative contract in order to protect cash inflows.
The FV of the instrument was nil at inception.
At the reporting date – the FV of the loss in respect of future cash flows was $9,100.Explain the accounting treatment if the fair value of the hedging instrument was :
a) $8,500
b) $10,000Sorry – I am struggling here – what is the $9,100? is that the loss in OCI. I cannot work this out at all, because I am struggling to see where the hedging item is – it doesn’t give any details on this.
Thanks
November 22, 2020 at 8:35 am #596014Hedged item is expected future cash flows of 9100 – not yet recognised in the FS
Hedging instrument is derivative
(a) Gain in derivative to OCI
(b) Gain on derivative – 9100 to OCI and 900 to P&L
Go easy on hedging – exam questions are not that hard (honestly!)
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