IAS 39 Financial Instruments Recognition and Measurement

IAS 39 Scope Definitions

1 [Deleted]


2 This Standard shall be applied by all entities to all financial instruments within the scope of IFRS 9 Financial Instruments if, and to the extent that:

  1. IFRS 9 permits the hedge accounting requirements of this Standard to be applied; and
  2. the financial instrument is part of a hedging relationship that qualifies for hedge accounting in accordance with this Standard.

2A–7 [Deleted]


8 The terms defined in IFRS 13, IFRS 9 and IAS 32 are used in this Standard with the meanings specified in Appendix A of IFRS 13, Appendix A of IFRS 9 and paragraph 11 of IAS 32. IFRS 13, IFRS 9 and IAS 32 define the following terms:

  • amortised cost of a financial
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IAS 39 Hedging

71 If an entity applies IFRS 9 and has not chosen as its accounting policy to continue to apply the hedge accounting requirements of this Standard (see paragraph 7.2.21 of IFRS 9), it shall apply the hedge accounting requirements in Chapter 6 of IFRS 9. However, for a fair value hedge of the interest rate exposure of a portion of a portfolio of financial assets or financial liabilities, an entity may, in accordance with paragraph 6.1.3 of IFRS 9, apply the hedge accounting requirements in this Standard instead of those in IFRS 9. In that case the entity must also apply the specific requirements for fair value hedge accounting for a portfolio hedge of interest rate risk (see paragraphs 81A, Read more

IAS 39AG Hedging instruments

Appendix A Application guidance

This appendix is an integral part of the Standard.

AG1–AG93 [Deleted]

Hedging (paragraphs 71–102)

Hedging instruments (paragraphs 72–77)

Qualifying instruments (paragraphs 72 and 73)

AG94 The potential loss on an option that an entity writes could be significantly greater than the potential gain in value of a related hedged item. In other words, a written option is not effective in reducing the profit or loss exposure of a hedged item. Therefore, a written option does not qualify as a hedging instrument unless it is designated as an offset to a purchased option, including one that is embedded in another financial instrument (for example, a written call option used to hedge a callable liability). In contrast, a Read more

IAS 39AG Hedged items

Hedged items (paragraphs 78–84)

Qualifying items (paragraphs 78–80)

AG98 A firm commitment to acquire a business in a business combination cannot be a hedged item, except for foreign exchange risk, because the other risks being hedged cannot be specifically identified and measured. These other risks are general business risks.

AG99 An equity method investment cannot be a hedged item in a fair value hedge because the equity method recognises in profit or loss the investor’s share of the associate’s profit or loss, rather than changes in the investment’s fair value. For a similar reason, an investment in a consolidated subsidiary cannot be a hedged item in a fair value hedge because consolidation recognises in profit or loss the subsidiary’s profit Read more

IAS 39AG Hedge accounting

Hedge accounting (paragraphs 85–102)

AG102 An example of a fair value hedge is a hedge of exposure to changes in the fair value of a fixed rate debt instrument as a result of changes in interest rates. Such a hedge could be entered into by the issuer or by the holder.

AG103 An example of a cash flow hedge is the use of a swap to change floating rate debt to fixed rate debt (ie a hedge of a future transaction where the future cash flows being hedged are the future interest payments).

AG104 A hedge of a firm commitment (eg a hedge of the change in fuel price relating to an unrecognised contractual commitment by an electric utility to Read more