Cash flow hedge
Eligible exposures can include variable cash flows on a recognised asset or liability or a highly probable forecast transaction. For a qualifying relationship, recognise the effective portion of the hedging instrument’s gain or loss in other comprehensive income within the cash flow hedge reserve; recognise ineffectiveness in profit or loss. Subsequent treatment of the reserve depends on the hedged transaction and the applicable IFRS 9 rules.
Worked example
A company uses a qualifying derivative to hedge variable interest payments on a loan. If the effective gain for the period is $6,000, that portion is recognised in OCI subject to the reserve limit and other hedge-accounting requirements.
Common mistake
Equating a cash flow hedge with the statement of cash flows, or placing all hedging gains and losses immediately in profit or loss.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBR | Direct | September 2026–June 2027 |