Qualifying Criteria For Hedge Accounting

Qualifying Criteria For Hedge Accounting

The following list summarizes qualifying criteria for a pair of hedged and hedging instruments to be eligible for hedge accounting

• The hedging relationship consists only of eligible hedging instruments and eligible hedged items
• At the inception of the hedging relationship there is formal designation and documentation of the hedging relationship and the entity’s risk management objective and strategy for undertaking the hedge.
• The hedging relationship meets all of the following Hedge Effectiveness requirements:
  • There is an economic relationship between the hedged item and the hedging instrument
  • The effect of credit risk does not dominate the value changes that result from that economic relationship
  • The Hedge Ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the entity actually hedges and the quantity of the hedging instrument that the entity actually uses to hedge that quantity of hedged item.

See Also

• IFRS 9 Glossary

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