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Hi,
Do we need to do hedge accounting as part of financial instrument? Couldn’t find anything related to that in the notes. is it important?Hi,
Yes there is currently nothing on hedging in there but it is examinable as part of IFRS 9.
You could possibly get away without looking at it but it would be a bit of a risk not to.
Thanks
Hedge is a derivative financial instruments. It derives its value from underlying assets. example lets say we want ro buy a car for $50000 in 3 months time but we are worried that the price may increase. We can fix the price by entering into a contract with the bank to pay for the car at the price of 51000 if after three months the price has rised to $53000 we madea gain of $2000 but if instead the price go down to 49500 we will loss 500 on the transaction.
the price of the forward contract is linked tl tje price of the car.
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