Disclosures - Future Cash Flows – FAQ | IFRS

Disclosures – Future cash flows

The amount, timing and uncertainty of future cash flows Disclosures – Future cash flows

Further to the strategy, entities have to disclose the ‘terms and conditions of hedging instruments and how they affect the amount, timing and uncertainty of future cash flows’. More precisely, an entity has to disclose, by category of risk:

  • A profile of the timing of the nominal amount of the hedging instrument Disclosures – Future cash flows
  • If applicable, the average price or rate of the hedging instrument, which could be a strike price or a forward rate Disclosures – Future cash flows

Entities also have to disclose a description of the sources of hedge ineffectiveness that are expected to affect the hedging relationship during its term. This would include an update of new sources of ineffectiveness that emerge in a hedging relationship over the term. Disclosures – Future cash flows

Finally, if an entity has previously designated forecast transactions as hedged items in a cash flow hedging relationship and these are no longer expected to occur, this fact and a description of the forecast transaction have to be disclosed.

Disclosure of the profile of nominal amounts of hedging instruments and their average prices, as required by paragraph 23B of IFRS 7, would not be very meaningful when an entity applies a dynamic hedging process in which both the amount of hedged item and hedging instrument change frequently. Disclosures – Future cash flows

Consequently, an entity using a dynamic hedging process is exempt from providing these disclosures. Instead, such an entity must disclose:

  • A description of what the ultimate risk management strategy is in relation to those dynamic hedging relationships.
  • A description of how it reflects this risk management strategy by using hedge accounting and designating those particular hedging relationships.
  • An indication of how frequently the hedging relationships are discontinued and restarted as part of the entity’s process in relation to those hedging relationships.

If, at the reporting date, the volume of hedging relationships (which is part of the disclosures discussed in ‘The effects of hedge accounting on the financial position and performance‘) to which the above exemption applies is not representative of the normal volumes hedged during the period, an entity has to disclose this fact and the reason it believes the volumes are not representative.

Disclosures – Future cash flows

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