Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AAA Exams › capex: cash flow hedge ?
- This topic has 9 replies, 2 voices, and was last updated 10 years ago by MikeLittle.
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- November 22, 2013 at 12:34 pm #147379
Dear Mike,
would it be suitable to apply the Cash flow hedge accounting technique to a transaction regarding Capex purchase (assuming just one cash out movement).
If the cash flow hedge were adopted when would it be reversed through P/L: when Depreciation is accounted for or when the payment is settled ?
In my view the reversal of the CFH (or the effect of the fair value hedge) should be spread over the depreciation period to guarantee the correlation, is it correct ?
thanks a lot
November 25, 2013 at 2:31 pm #147752Dear Mike, would you be so kind as to give a feedback to this as well.
thanks
November 26, 2013 at 10:59 am #147887Marvin, I’ve just checked out the half page on cash flow hedging accounting treatment in Kaplan’s text book, page 595. To save me from writing it out, could you confirm that you have access to this study text?
November 26, 2013 at 9:00 pm #147977Dear Mike,
I don’t have the text you mention.
However, on the grounds of the materials I have, the examples I’ve got concern forward exchange rate contracts or subsidiary investments ones (the latter hedged through fair value hedge).
I’ve never tackled an example as that over tangible assets: I raised the point because of the related depreciation which impacts P/L in different years so that I thought (probably incorrectly) it would make sense argue about the correct hedge method (regardless of effective cash outs) from a conceptual standpoint.
However there is no point to write out the entire page… .
thanks
Marvin
November 27, 2013 at 6:44 am #148002You’re welcome!
November 27, 2013 at 3:43 pm #148093….but if there is …..
November 27, 2013 at 7:49 pm #148113if there is I’d say that Capex should be hedged through fair value hedge..
November 28, 2013 at 11:11 am #148260“i’m sure there will never be a question abt perofrming audit procedures or evidenece to be sought regarding hedging or complex financial instruments”
My response was “….but if there is …..”
I think my previous post was mischievous. I really cannot see your P7 examiner coming up with an audit procedures question / problem for hedging or complex financial instruments. There are so many more obvious daily problems without getting into the ethereal realms of complex instruments
November 28, 2013 at 10:43 pm #148384I didn’t think my question could be so complex ..
there has recently been an article over hedging matters so that I tried to understand whether my understanding about hedging was correct.. regardless of whether or not the P7 could ever ask such tricky question. (. it is the P/L impact of the underlying or the cash out aspect that drives the hedging suitability, )
December 1, 2013 at 1:33 pm #148827Marvin, I don’t know whether you’re expecting any further comment from me, or not. If you’re happy where we are up to, then fine, don’t post again. Every time you (or anyone else) posts, I have to check it to see whether it needs a response. On those occasions when it doesn’t, then it means I have just wasted my time and you will appreciate that, on this day in early December, time is of the essence
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