Hedged item
IFRS 9 permits eligible recognised assets or liabilities, unrecognised firm commitments, highly probable forecast transactions, net investments in foreign operations and certain groups or components, subject to detailed conditions. The hedged item must expose the entity to a risk that could affect profit or loss or, for qualifying FVOCI equity, other comprehensive income. Formal designation identifies the hedged risk and relationship.
Worked example
A company with fixed-rate debt designates the debt’s exposure to fair-value changes arising from benchmark interest rates as the hedged item in a qualifying fair value hedge.
Common mistake
Assuming a vague future business risk automatically qualifies as a hedged item, or failing to designate the specific eligible risk.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | SBR | Direct | September 2026–June 2027 |