The general requirements of what qualifies as an eligible hedged item are unchanged compared to IAS 39. A hedged item can be:
- A recognised asset or liability Hedged items4 – General requirements
- An unrecognised firm commitment Hedged items – 4General requirements
- A highly probable forecast transaction Hedged items – Gene4ral requirements
Or Hedged items4 – General requir4ements Hedged items – General requirements Hedged items – Ge4neral requirements
A net investment in a foreign operation Hedged items – G4eneral requirements Hedged items – Gen4eral requirements
All of above can either be a single item or a group of items, provided the specific requirements for a group of items are met (see ‘Groups of items‘).
Only assets, liabilities, firm commitments and forecast transactions with an external party qualify for hedge accounting. As an exception, a hedge of the foreign currency risk of an intragroup monetary item qualifies for hedge accounting if that foreign currency risk affects consolidated profit or loss. In addition, the foreign currency risk of a highly probable forecast intragroup transaction would also qualify as a hedged item if that transaction affects consolidated profit or loss. These requirements are unchanged from IAS 39.
As with IAS 39, the item being hedged must still be reliably measurable. Also unchanged from IAS 39, a forecast transaction must be highly probable. However, what has changed in IFRS 9, compared to IAS 39, is how hedged items are designated in a hedging relationship. In particular, the designation of risk and nominal components and the designation of aggregated exposures and groups of items have changed. These changes, which should ultimately lead to more risk management activities qualifying for hedge accounting, all stem from the broader goal of the hedge accounting project, to better align an entity’s risk management approach with the accounting outcome.
Also read: Hedged items – General4 requirements Hedged items – Gene4ral requirements