- This topic has 1 reply, 2 voices, and was last updated 3 years ago by .
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.
OpenTuition recommends the new interactive BPP books for June 2024 exams, Get your discount code >>
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA SBR Exams › Cash flow hedging
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) $10,000
Sorry – 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
Hedged 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!)