Cash flow hedges
When designating a group of items in a cash flow hedge, the presentation of the related hedging gains or losses in the statement of profit or loss depends on the nature of the group position.
Note that the designation of a net position cash flow hedge is only permitted when hedging foreign currency risk (see ‘Cash flow hedge of a net position‘).
The above requirement for net position cash flow hedges might not seem very attractive, as the presentation of the hedged transactions would not reflect the effect of the hedge. However, the Board was concerned that grossing-up the hedging gain or loss would result in non-existing gains or losses being recognised in the statement of profit or loss, which would be in conflict with the IASB’s Conceptual Framework for Financial Reporting.
Fair value hedges
For fair value hedges of groups of items with offsetting risk positions (i.e., hedges of a net position), entities would have to present the hedging gains or losses in a separate line item in the income statement in order to avoid grossing up the hedging gain or loss on a single instrument into multiple line items.
However, the treatment in the statement of financial position is different, in that the individual items in the group are separately adjusted for the change in fair value due to changes in the hedged risk.