mismatched remeasurement

This topic has 3 replies, 2 voices, and was last updated 7 years ago by MikeLittle.

Viewing 4 posts - 1 through 4 (of 4 total)

Author

Posts
August 31, 2015 at 1:34 pm #269290
syed ali
- Topics: 92
- Replies: 54
mismatched remeasurement arise when there are linked assets or liabilities but only one item within the set is regularly remeasured to current values
it is proposed that gain or loss on remeasurement of single item should be recorded on OCI.
this will be recycled to profit or loss later that the effects of the two linked items are presented together.
sir what is linked assets and liabilities and sir please explain this scenario with example i can not understand logic i will be very thankfull for kindness
August 31, 2015 at 6:27 pm #269332
MikeLittle
Keymaster
- Topics: 26
- Replies: 22601
Syed, you’re into the area of hedging here where contracts are entered into in an effort to avoid the unnecessarily harsh results of adverse exchange rate movements.

Only one side of these linked elements will be adjusted / re-measured until the maturity of the base contract and, at that stage, any gains or losses held in equity through OCI will be recycled through statement of profit or loss

Does that make sense to you?
August 31, 2015 at 7:43 pm #269346
syed ali
- Topics: 92
- Replies: 54
sir if you explain this with an example
sir explain this with transaction because i can not understand linked elements and base contract actually i am not cleared yet please sir if you have time please explain for me
August 31, 2015 at 9:36 pm #269363
MikeLittle
Keymaster
- Topics: 26
- Replies: 22601
Where a company is in a contract to be settled in a foreign currency some time in the future, the company may well choose to minimise their exposure to adverse movements in foreign exchange rates by entering into a contract to buy the affected currency at a determined rate, thus reducing the risk otherwise faced.

But if we were to allow only one side (either the future payment or the future recipt to be annually re-measured, that would lead to an anomalous situation where two future cash transactions that are linked would not be treated consistently with each other

By re-measuring only one side that would lead to an imbalance so, in that situation, we would re-measure both to prevent that imbalance

But if the two matters are not closely linked, only one would be re-measured and treated as previously explained
Author

Posts

Viewing 4 posts - 1 through 4 (of 4 total)

You must be logged in to reply to this topic.