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Hello Mike
The old rule for the effectiveness of hedging is the one of 80-125% band.
Ifrs 9 replaces this with (economic relationship, Credit risk doesn’t dominate the fair value changes and hedging items must match)
Q1) In exam do we have to apply the 80-125% band? Do I just forget about this rule?
Q2)Cash flow hedge: Lets say the fair value of hedge instrument contract has increased by 50 and the loss on hedged item is -45.
So do we do the following entries
Debit derivative 50
Credit oci 45
Credit I/s 5
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