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Coatmin’s creditworthiness has been worsening but it has entered into an interest rate swap agreement which acts as a hedge against a $2 million 2% bond issue which matures on 31 May 2016. The notional amount of the swap is $2 million with settlement every 12 months. The start date of the swap was 1 December 2013 and it matures on 31 May 2016. The swap is enacted for nil consideration. Coatmin receives interest at 1·75% a year and pays on the basis of the 12-month LIBOR rate. At inception, Coatmin designates the swap as a hedge in the variability in the fair value of the bond issue.
Fair value Fair value
1 December 2013 30 November 2014
$000 $000
Fixed interest bond 2,000 1,910
Interest rate swap Nil 203Coatmin wishes to know the circumstances in which it can use hedge accounting and needs advice on the use of hedge accounting for the above transactions.
How are we going to treat it as per IFRS 9 ???????????
Why do you finish all your posts with 10 unnecessary question marks?
Do you think that one isn’t enough?
Re hedge accounting, life is too short for me to write out a lecture on it because that’s what it would take
Check out these websites (the first is eminently readable!)
https://www.ifrsbox.com/hedge-accounting-ias39-ifrs9/
https://www.iasplus.com/en/news/2013/11/iasb-finalises-ifrs-9-chapter-on-general-hedge-accounting
If you’re still stuck after those, post again
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