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Akuntansi Lindung Nilai
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Agenda
The Basic Hedged Items
Hedging Instruments
Hedge EffectivenessAccounting Criteria
Ilustrations
Summary
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Akuntansi Lindung Nilai
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What is hedging?
Hedging is the economic process of
entering into a transaction in order to
reduce risk.
Hedging involves entering into a secondtransaction, the returns of which will change in theopposite way to those of the initial transaction
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What is Hedge Accounting?
Hedge accounting is the application of specialrules to account for the component parts of
the hedging relationship
An entity is only allowed to use hedge accounting su!ectto strict conditions.
"ot all hedging activities of an entity will #ualify for hedge
accounting, and therefore, hedge accounting is a
privilege and not a right The re#uirements for hedge accounting are contained in
IAS $%.
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!isk "#posure
Hedge transactions are used to reduce ris&e'posure. But what are the possile ris&s(E'ample ) Sterling Effort plc, a *B+ functional
company, has a firm commitment in si' monthstime to purchase an item of machinery for a fi'edamount in -S .
The ris&/
Sterling Effort has a foreign e'change e'posureto the -S . The cost to Sterling Effort in *B+ ofthe future -S purchase will vary with the -S0*B+ e'change rate.
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!isk "#posure
E'ample 1/ Highlife Ban& plc has variale rate det 23IB456 178.
The ris&/
Highlife Ban& is e'posed to variaility in its cash outflowson its future interest payments, which will vary with the3IB45 interest9rate inde'.
E'ample $/ 3asting 5eturns plc has an e#uity investment in:orthy ;enture plc.
The ris&/
3asting 5eturns has a price or fair value e'posure on itse#uity investment in :orthy ;enture plc. 3asting 5eturnsaility to generate returns on its investment in :orthy;enture on a future sale will vary with the mar&et price for:orthy ;enture plc
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!educing risk e#posure
To reduce ris& e'posure companies enterinto hedging transactions
Companies hedge ris&s evident in items
that are already recognised on theiralance sheets, as well as hedge ris&s inrespect of future transactions that have yet
to occur.
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!educing risk e#posure
Sterling Effort enters into a forward contract to uy-S for the same amount and same maturity asits firm commitment to purchase an item ofmachinery in -S .
Highlife Ban& enters into a pay fi'ed, receivefloating interest rate swap with the same nominalamount as its variale rate loan and inde'ed tothe same inde' 23IB458 and with the samematurity as its loan.
3asting 5eturns purchases a put option to sell itsinvestment in :orthy ;enture at a specified priceat a specified future date.
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Lack of offset
The financial instruments that Sterling Effort, HighlifeBan& and 3asting 5eturns entered into to hedgetheir ris& e'posures are derivatives. It is alsopossile to use non9derivative financial instruments
to hedge foreign currency ris&. -nder IAS $% allderivatives must e recognised in the alance sheetat fair value. However, often the items that thecompanies hedge are either not yet recorded on the
alance sheet or are recorded, ut not measured atfair value. Therefore, there is a mismatch in thetiming of recognition of the gains and losses in profitand loss.This is where hedge accounting comes in.
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Achieving offset
(ompanies can emplo) hedge accountingto achieve offset in profit or loss. There arethree principal methods or types of hedgeaccounting, which achieve offset in different ways/
Cash flow hedge accounting
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Hedging !elationship
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Hedge Accounting
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Hedge Accounting
Types HedgeItem is
Accounting Treatment
FV FA/FL/ frmcommitment
both the hedged item & hedging instrument arerevalued to FV, and the opposite gain & loss arerecognized in the income statement
Cash o !orecast!uturetransaction"or frmcommitment !or !ore#
t#n$
the hedging instrument is revalued to FV and thegain/ loss is ta%en to separate reserve 'hen thehedged item is recognized, the separate reserve isrec(cled to income statement, or i! it is a non)monetar( asset/ liabilit( the rec(cling can be thecost o! the hedged item
*etinvestment
!oreignsubsidiar(
the hedging instrument "usuall( a loan$ is revaluedto FV ith an( gain/ loss recognized in reserves too+set against the gain/loss on the !oreignsubsidiar( he o+set is limited to the gain/ lossrecognized on the subsidiar(
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(ash flo* hedge accounting
Cash flow hedge accounting recognises changes inthe fair value of the hedging instrument outsideprofit or loss in e#uity and =recycles> them into theincome statement when the hedged item affects
profit or loss.This is &nown as a cash flow hedge ecause it is thee'posure to the variaility in future cash flows that iseing hedged.
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+air value hedge accounting
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Net investment hedges
A third and final category of hedge accounting ishedging a net investment in a foreign operation.This is accounted for similarly to a cash flow hedge
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,ondisi )g harus terpenuhi se-elum HedgeAccounting dapat diterapkan
+.!/AL
0"NA.N
5elialemeasurement of
effectiveness
The hedge ise'pected to e and is
highly effective
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(riteria for hedge accounting
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he reuirements of hedge accounting
There two principal re#uirements that have to emet to achieve hedge accounting.
Hedge effectiveness
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Hedge Accounting (riteria
Terdapat &ei!a&an tertulis, tu!uan mana!emenrisi&o ? strategi lindung nilai 2identifi&asiinstrumen, transa&si yang dilindungi, sifat risi&o,penilaian efe&tivitas instrumen lindung nilai8
Huungan lindung nilai diharap&an efe&tif 2highlyeffective8, yaitu &euntungan0&erugian potensialdari suatu transa&si dapat di offset oleh
&erugian0&euntungan potensial dari transa&silindung nilai
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Hedge effectiveness
4ne of the criteria that must e met for an economichedge to #ualify for hedge accounting is that it ishighly effective. A hedge is highly effective if thechanges in the fair value or cash flows of thehedged item attriutale to the hedged ris& 9 fore'ample, due to changes in interest rates or foreigne'change rates 9 are offset y the changes in fair
value or cash flows of the hedging instrument withina range of @9)17.
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+ormal 0esignation
IAS $% only allows an entity to apply hedgeaccounting if it specifically designates the hedginginstrument and the hedged item from the point intime when it wants to commence applying hedgeaccounting. There are strict criteria that must e metfor each hedge accounting relationship to #ualify forhedge accounting
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+ormal 0esignation
Consistent with the company>s ris& managementstrategy
The hedge must e consistent with the
company>s documented ris& managementstrategy. To comply with this condition an entitywill have to have a policy document in placewhere it specifies the ris& e'posures it hedges
and permissile hedging instruments.
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+ormal 0esignation
easurale, with ineffectiveness #uantified andrecognised in profit or loss
The actual level of effectiveness of the hedge
must e measurale and any ineffectivenessmust e recognised in profit or loss.
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+ormal 0esignation
+rospective effectivenessThe hedge must e e'pected to e highly effective.
This assessment is &nown as the =prospectiveeffectiveness test>.
5etrospective effectiveness
The effectiveness of the hedge must e assessed on anon9going asis 2at least at every reporting date8 and mustactually e highly effective
This assessment is &nown as the =retrospectiveeffectiveness test>.
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"ffectiveness esting
H" H"0" "67"("0 . 8"
AN0 HA 8""N HHL9 "++"(:"
7!.7"(:" "2highl) effective8
!"!.7"(:" ";
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ualif)ing hedged items
There are specific rules within IAS $% thatlimit which items can e considered hedgingitems.
A hedged item must e an identified hedgeditem or group of items that could affect profitor loss and #ualify for hedge accounting
under IAS $%.
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ualif)ing hedged items
A hedged item can e a/ a recognised asset or liaility
an unrecognised firm commitment
a highly proale forecast transaction
a net investment in a foreign operation thatcould affect profit or loss
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What (an 9ou Hedge?
ingle item
roup of similar items
;sharing the same risk@
7roportions of an item
Highl) pro-a-leforecast
transaction
+!/
(.///"N
A" LA8L9
Net investment in
foreign operations
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What (an 9ou Hedge
!.B7 .+ /LA! "/
+11% -4% -10% +43%+10%
+10% +9% +11% +10%+10%.,
.,
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What (anCt 9ou Hedge?
0"!:A:"
N!B/"N H/ A" ;forinterest rate and
prepa)ment risks@
HA!" .WN
+BB!" 7!.+
!"A/N" 7..N;eDgD group of
forecast sales andpurchases in
foreign currenc)@7ortions of risks of
non=financialassets and
lia-ilities;e#cept for +6 risk@
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Hedging 7ortions
ualifying itemsAn entity can designate all changes in the cashflows or fair value of a hedged item in a hedgingrelationship. An entity can also designate only
changes in the cash flows or fair value of a hedgeditem aove or elow a specified price or othervariale 2a one9sided ris&8.
The intrinsic value of a purchased option hedginginstrument 2assuming that it has the same principalterms as the designated ris&8, ut not its time value,reflects a one9sided ris& in a hedged item.
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Hedging 7ortions
E'ample/an entity can designate the variaility of future cashflow outcomes resulting from a price increase of aforecast commodity purchase aove a certain level.
In such a situation, only cash flow changes thatresult from an increase in the price aove thespecified level are designated. The hedged ris&does not include the time value of a purchased
option ecause the time value is not a component ofthe forecast transaction that affects profit or loss.
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Hedging 7ortionE +inancial tems
To e eligile for hedge accounting, the designatedris&s and portions must e separately identifialecomponents of the financial instrument, and changesin the fair value or cash flows of the entire financial
instrument arising from changes in the designatedris&s and portions must e relialy measurale.
-nless an inflation portion is a contractually specifiedportion of cash flows of an inflation lin&ed ond,
inflation is not separately identifiale and relialymeasurale and is not eligile for designation as ahedged ris& or portion of a financial instrument
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+inancial temsE "#ample
It is possile to designate something otherthan the entire fair value change or cash flowvariaility of a financial instrument as the
hedged item.To see how this wor&s, let>s ta&e the e'ampleof a five9year F7 fi'ed rate loan asset, which
has noteen classified as HT.
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+inancial temsE "#ample
). Hedge the full fair value of the cash flows onthe loan, in other words, all the contractualcash flows
1. Hedge the fair value of some 2ut not all8 of theloan 9 for e'ample, the fair value of 7 of theloan 9 a proportion of all the contractual cashflows.
$.
Hedge the fair value changes or cash flowvariaility on all cash flows attriutale to aspecific ris& only 9 for e'ample, interest rateris& 2ut not all ris&s8.
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+inancial temsE "#ample
G. Hedge some 2ut not all8 of the cash flows for cash flowvariaility or fair value changes attriutale to a specificris& only 9 for e'ample, designate the impact ofmovements in interest rates on 7 of the cash flows 2ahedge of a specific ris& on a proportion of all cash flows8.
The designated ris& and portion must e separatelyidentifiale and must e relialy measurale.. Hedge the fair value movement on principal only 2a
hedge of a portion of the cash flows8. The designatedportion must e separately identifiale and must erelialy measurale.
F. Hedge the fair value movement due to interest rate ris&2and not all ris&s8 on the principal only. The designatedris& must e separately identifiale and must e relialymeasurale.
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Non=financial items
A non9financial asset or liaility can only edesignated as a hedged item for foreign currencyris&, or in its entirety for all ris&s.
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Non=financial items
It may e possile to designate a copper forward asa hedging instrument in hedging the price of roneif/
there>s a high degree of correlation etweenthe price of rone and the price of copper, and
it can e demonstrated that the copper forwardwill e highly effective in hedging the price of
roneAny hedge ineffectiveness must e recognised inprofit or loss.
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+irm commitments and forecast transactions
Its important to distinguish etween forecasttransactions and firm commitments.
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+irm (ommitment
A firm commitment is a inding agreement for thee'change of a specified #uantity of resources at aspecified price on a specified future date or dates.
An e'ample is a legally inding purchase agreementto ta&e delivery of ), ushels of corn on $Septemer 1D) for 1 per ushel.
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+irm (ommitment
A commitment is inding if it is enforceale eitherlegally or otherwise. To e enforceale, theagreement should provide for remedies that areavailale to the parties to the contract in the event ofnon9performance.
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+orecast ransaction
A forecast transaction is an uncommitted utanticipated future transaction.
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An "#ception
If an entity is hedging the foreign e'change ris& in a firmcommitment, this may e accounted for either as a fair valuehedge or a cash flow hedge.E'ampleHeavy etal plc has a contract to sell ulldoers to
emolition Hire plc for delivery in si' months> time, at a fi'edprice in Euros that is determined today. Heavy etal>sfunctional currency is SterlingHeavy etal simultaneously enters into a foreign currencyforward to hedge the Euro e'posure arising from its firm
commitment. It can designate the forward as a hedginginstrument in either a cash flow hedge or a fair value hedgeof its foreign currency firm commitment.
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Non=ualif)ing items
There are also ris& e'posures that do not #ualify fordesignation as hedged items in a hedge relationship.These non9#ualifying e'posures include/
Intra9group items
4verall usiness ris&s
Held9to9maturity investments
erivatives
"et positions
4wn shares
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Non=ualif)ing items
Intra9group itemsTransactions etween entities within the samegroup can only e designated as hedged items inthe entity9only financial statements, not in theconsolidated financial statements of the group.
This is ecause inter9company transactions donot e'pose the entity to a ris& that affects
consolidated profit or loss.
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Non=ualif)ing items
4verall usiness ris&s4verall usiness ris& cannot e hedgedecause it cannot e specifically identified
and measured.
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Non=ualif)ing items
Held9to9maturity investmentsA held9to9maturity 2HT8 investment cannot e a hedgeditem with respect to interest rate ris& or prepayment ris&.To hedge an HT investment for those ris&s would e
inconsistent with the entity>s stated indifference to futureprofit opportunities for that asset, as evidenced y itsdecision to classify the asset as HT.
However, an HT asset can e a hedged item with
respect to foreign currency ris& and credit ris&.
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Non=ualif)ing items
erivativeserivatives cannot e designated as hedged items.
However, there>s one e'ception. A written option can#ualify as a hedging instrument if it is designated as an
offset to a purchased option.
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Non=ualif)ing items
"et positionsA hedge of an overall net position does not #ualify forhedge accounting.
This is ecause hedge effectiveness is re#uired to e
measured y comparing the change in fair value or cashflows of a hedging instrument and a specific hedged item2or group of similar items8.
A net position is not a specific item.
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Non=ualif)ing items
4wn sharesAn entity>s transactions in its own e#uity cannot ehedged ecause they do not e'pose the entity to aparticular ris& that could impact profit or loss.
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An e#ception
As an e'ception, the foreign currency ris& of anintragroup monetary item 2e.g. apayale0receivale etween two susidiaries8may #ualify as a hedged item in the consolidated
financial statements if it results in an e'posure toforeign e'change rate gains or losses that are notfully eliminated on consolidation in accordance
with IAS 1).
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An e#ception
In addition, the foreign currency ris& of a highlyproale forecast intragroup transaction may#ualify as a hedged item in consolidated financialstatements provided that the transaction is
denominated in a currency other than thefunctional currency of the entity entering into thattransaction and the foreign currency ris& will
affect consolidated profit or loss.
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ualif)ing hedging instruments
As with hedging items, there are specific rules governingwhich financial instruments can e used as hedginginstruments.
efinition
A hedging instrument is normally a derivative. But for ahedge of the ris& of changes in foreign currency e'changerates only, a hedging instrument can e/
a non9derivative financial asset or a non9derivativefinancial liaility, whose fair value or cash flows are
e'pected to offset changes in the fair value or cashflows of a designated hedged item so that the hedgeditem is effectively hedged
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Non=derivatives
Some e'amples of non9derivative hedginginstruments are loans and deposits denominated ina foreign currency.
A common e'ample of using a non9derivative
financial instrument as a hedging instrument is touse a foreign denominated det liaility as a hedgeof a net investment in a foreign operation.
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"#ception
There are some rules governing the use of derivatives ashedging instruments
erivatives
-nless it is a written option, a derivative carried at fair
value can always e used as a hedging instrumentprovided/
it meets the condition of effectiveness
the necessary documentation is in place
supporting the hedge relationship it is designated for the entirety of its duration to
maturity
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"#ception
:ritten optionsA written option cannot e designated as a hedginginstrument unless it is designated as an offset to apurchased option.
This is ecause where an entity writes an option, iteffectively ta&es on ris&. The potential loss on a writtenoption could e significantly greater than the potentialgain in value of the hedged item that an entity see&s to
hedge
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plitting a 0erivative
A hedging derivative cannote split into componentparts with one of those component parts designatedas the hedging instrument, e'cept as follows/
the intrinsic value and time value of an optioncan e separated, with only the intrinsicelement designated as the hedging instrument
the interest and spot elements of a forward can
e separated, with only the spot elementdesignated as the hedging instrument
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plitting a 0erivative
E'ample*loal Holdings plc enters into a forward contract to sell),, for JF$F,%G$ in three months> time to hedgethe foreign e'change translation ris& associated withmovements in the spot rate relating to its investment in its
-S susidiary, +anAmerica. +anAmerica has net assetsof ),, in *loal Holdings> consolidated groupaccounts*loal designates the hedged ris& as movements in spotrate only. ovements in the fair value of the premium or
discount 2the =forward points>8 implicit in the fair value ofthe forward contract will therefore not give rise to hedgeineffectiveness and are recognised separately in profit orloss
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.ther possi-le designations
Here are some other possiilities for thedesignation of hedging instruments/
Hedging more than one ris&
Hedging with more than one derivativeHedging with a comination of derivatives
and non9derivatives
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.ther possi-le designations
Hedging more than one ris&A hedging instrument can e designated as hedgingmore than one ris&, provided all other hedgeaccounting criteria are met.
Hedging with more than one derivativeTwo or more offsetting derivatives can e !ointlydesignated as a hedging instrument.
Hedging with a comination of derivatives and non9derivatives
A comination of a derivative and a non9derivativeinstrument 2for hedges of foreign currency ris& only8can e designated in comination as the hedginginstrument
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!euirements
IAS $% doesn>t prescrie a specific method forassessing hedge effectiveness. However, it doesre#uire an entity/
to specify at inception of the hedge relationshipthe method it will apply to assess theeffectivenessK and
to apply that method consistently for the
duration of the hedging relationship
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Assessing effectiveness
Here are some &ey #uestions aout hedgeeffectiveness
How is effectiveness assessed(
:hen is effectiveness assessed(Can effectiveness e assumed(
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Assessing effectiveness
HowSeveral mathematical techni#ues can e used toassess hedge effectiveness, including ratio analysisand various statistical methods li&e regression
analysis. The appropriateness of a given method willdepend on the nature of the ris& eing hedged andthe type of hedging instrument used. The methodspecified must e/ Consistent with management>s ris& management
strategy and o!ective. Applied consistently to all similar hedges unless
different methods are e'plicitly !ustified.
A i ff i
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Assessing effectiveness
:henEffectiveness must e assessed, at a minimum, at eachalance sheet date, including interim financial statements.
Can effectiveness e assumed(
Even where the principal terms of the hedging instrumentand of the entire hedged asset or liaility or hedgedforecast transaction are the same, an entity cannotassume hedge effectiveness under I
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8asis !isk
It is not always possile for an entity to find a hedginginstrument with e'actly the same terms as the item itwishes to hedge. This is where asis differences arise.
Basis differences result from using a hedging
instrument that is ased on a specific ris&, which issimilar, ut not identical, to the ris& eing hedged in thehedged item.
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8asis !isk
E'ampleeep and ar& plc has a forecast purchase of*rade A cocoa for use in its chocolate productionprocess.
E'change9traded cocoa futures are inde'ed to*rade B cocoa. Hence, there is a difference in=asis> or grade etween eep and ar&>s
hedged purchase and the futures availale to itfrom the mar&et to hedge its e'posure.
" l f th d t t t ff ti
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"#amples of methods to test effectiveness
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election of an Appropriate "ffectiveness esting/ethodolog)
L+erfectM or LalmostperfectM relationships
Asset0 liaility
mismatch hedging2eg. asset swaps8
+ortfolio hedging
2net position hedges8
5atio analysis
L+rice vs priceM
regression orvariance9reductionanalysis
LChange in price vs
change in priceMregression analysis
( "ff ti ti
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(ommon "ffectiveness esting/ethodologies !atio anal)sis9 calculates the ratio of the change in the fair value
of the hedged item to the change in the fair value of the hedging
instrument.
!egression anal)sis 9 a statistical techni#ue used to analye the
relationship etween one variale 2the dependent variale8 and one
or more other variales 2&nown as independent variales8. :ariance reduction anal)sis9 compares the statistical variance of
the fair value of the comined portfolio 2i.e. hedged item and
hedging derivative together8 with the statistical variance of the fair
value of the hedged item alone.
The entity can select the method depending on its ris& managementstrategy. ifferent methods can e used for different types of hedges.
NIAS $%.)GOP
"ffectiveness esting /ethodologies
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"ffectiveness esting /ethodologies F:ariations
Hypothetical derivative approach 9the measurement ofhedge effectiveness is ased on a comparison of thechange in the fair value of the actual swap and the changein fair value of a LperfectM hypothetical swap
Change in cash flows approach Q for a cash flowhedging relationship effectiveness may e tested yassessing the offset of variaility of cash flows.
VaR reduction analysis Q the measurement of hedgeeffectiveness is ased on e'isting ris& measures used ythe an&, ut would need to e performed on arelationship level
W t i ff ti
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Wa)s to improve effectiveness
To improve hedge effectiveness, entities can employone of the following methods.
Hedge ratio
esignate certain ris&sCertain ris&s in action
H d ! ti
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Hedge !atio
To improve the effectiveness of the hedge, anentity may choose a hedge ratio other than one9to9one.
If an entity hedges an item with a hedging
instrument with a different asis, a regressionanalysis can e performed to estalish astatistical relationship etween the two items. IAS$% uses the e'ample of a transaction ased on
Brailian coffee prices hedged with a transactionased on Colomian coffee prices to represent astatistical relationship.
Hedge !atio
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$%
Hedge !atio
If a valid statistical relationship such as historicalcorrelation etween the two variales 2fore'ample, etween the unit prices of Brailiancoffee and Colomian coffee8 can e
demonstrated, the slope of the regression line cane used to estalish the hedge ratio that wouldma'imise e'pected effectiveness. If the slope ofthe regression line is, say, ).1, a hedge ratio
ased on .%@ #uantities of hedged items to ).#uantities of the hedging instrument will ma'imisee'pected effectiveness.
0esignate (ertain !isks
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$&
0esignate (ertain !isks
To improve hedge effectiveness, an entity canelect to only designate certain ris&s inherent in ahedged item as eing hedged.
The concept of hedging portions, which involvesdesignating an identifiale and separale portionof the ris& on the financial asset or liaility as thehedged item, can result in considerale
ineffectiveness eing eliminated. This is ecausethe designated ris& is a specifically identifiale ris&inherent in the hedged item
(ertain !isks in Action
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(ertain !isks in Action
Smith9Rones plc reduced the ris& of ineffectiveness y doingthe following/ Smith9Rones plc entered into a receive9fi'ed pay9
variale 3IB45 interest rate swap to fair value hedgeissued fi'ed rate det. The interest rate inde' in the
hedging instrument was 3IB45. 3IB45 rate reflects thecredit #uality of AA financial institutions. Even thoughSmith9Rones plc was not an AA rated company, itdesignated the portion of ris& e#uivalent to this rate, i.e.it hedged the 3IB45 swap rate only
It purposely e'cluded from the designation fair value
movements of the det due to movements in its owncredit #uality.
Therefore, Smith9Rones reduced the ris& ofineffectiveness.
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Akuntansi Lindung Nilai
Accounting reatment
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%2
Accounting reatment
A hedge is accounted for as follows/ Effective portion
The portion of the gain or loss on the hedging instrumentthat is determined to e effective in hedging the hedgeditem is deferred in a separate reserve in e#uity.
The effective portion does not stay in e#uity without evereing recognised in profit or loss. It is moved out of e#uityand reclassified into profit or loss, or =recycled>, when thehedged item affects profit or loss
Ineffective portionThe ineffective portion of the gain or loss on the hedginginstrument is recognised immediately in profit or loss.
0eferred ains or Losses
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0eferred ains or Losses
The amount of gains or losses on the designatedhedging instrument that can e deferred in theseparate component of e#uity in cash flow hedge islimited to the lesser of the following 2in asolute
amounts8/ the cumulative gain or loss on the hedging instrument
from inception of the hedge and the cumulative change in fair value 2present value8 of
the e'pected future cash flows on the hedged item frominception of the hedge
0eferred ains or Losses
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0eferred ains or Losses
:here the cumulative change in value in the hedginginstrument for the hedged ris& is less than the cumulativechange in value of the hedged item for that ris&, the entityhas under9hedged its cash flow e'posure. Such adifference will not e reflected in profit or loss as hedge
ineffectiveness assuming the level of ineffectiveness is notso great so as to preclude hedge accounting.
This is different to fair value hedges where oth over9hedging and under9hedging will lead to ineffectiveness inprofit or loss, as oth gains and losses on the hedged itemand hedging instrument are recognised in profit or loss.
+orecast ransactions
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+orecast ransactions
:hen considering hedges of forecast transactionsyou need to ear in mind the following &ey facts/
The rules for forecast transactions
:hat does =highly proale> mean( +roaility/ some considerations
he rules for forecast transactions
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he rules for forecast transactions
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%$
What does highl) pro-a-le mean?
The following should e considered in determiningwhether a forecast transaction is highly proale/
the length of time until a forecast transaction ispro!ected to occur, and
the #uantity of the forecast transaction
7ro-a-ilit)E some considerations
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7ro-a-ilit)E some considerations
4ther factors eing e#ual, the more distant aforecast transaction is, the less li&ely it is that itcan e considered proale and the stronger theevidence would need to e to support an
assertion that it is highly proale. A transactionforecast to occur in five years may e less li&elythan a transaction forecast to occur in one year.
However, forecast interest payments for the ne't1 years on variale9rate det typically areproale if supported y an e'isting contract.
+orecast ransactionE A mini e#ample
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+orecast ransactionE A mini e#ample
3ess evidence is generally needed to supportforecast sales of ), units in a particularmonth than is needed to support forecast
sales of %, units in that month, even ifthe entity>s recent sales have averaged%, units per month for the past threemonths.
8asis Adustments
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8asis Adustments
An entity can choose etween two accountingpolicies regarding the gains and lossesdeferred in e#uity if a cash flow hedge of a
forecast transaction suse#uently results inthe recognition of a non9financial asset 2or anon9financial liaility8.
8asis Adustments
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8asis Adustments
An entity can either/). 5eclassify the associated gains and losses into
profit or loss in the same period, or periods, duringwhich the asset ac#uired or liaility assumed affectsprofit or loss 2such as in the periods that
depreciation e'pense or cost of sales is recognisedthat derives from the non9financial item8.
1. Basis ad!ust the carrying amount of the asset orliaility with the associated gains and lossesdeferred in e#uity. Basis9ad!usting involves
removing the associated gain or loss from e#uityand including it in the initial cost of the asset orliaility, in which case such gain or loss willautomatically impact profit or loss when the non9financial item is depreciated or sold.
8asis Adustments E "ffect
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&2
8asis Adustments E "ffect
The accounting policy that an entity choosesmust e applied consistently to all such hedges.
:hichever policy is chosen the impact ofrecycling deferred hedging gains or losses into
profit or loss will e the same. Hedging gains orlosses will e recycled into profit or loss whenthe hedged non9financial item is depreciated,sold, or otherwise impacts profit or loss.
However, if an entity e'pects that all or a portionof a loss recognised directly in e#uity will not erecovered in one or more future periods, it mustreclassifythe amount that is not e'pected to erecovered into profit or loss immediately
ualif)ing amounts of gainsIlosses
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ualif)ing amounts of gainsIlosses
:hat would e the amount of gains or losses on thedesignated hedging instrument that could e deferred in theseparate component of e#uity in a cash flow hedge in thefollowing circumstances(
Hedgingerivatives
E#uity IncomeStatement
) The fair value of future cash flows decreasesy 1$1? the fair value of the hedging instruments increasesy 11)
1The fair value of future cash flows increasesy G,G$1? the fair value of the hedging instruments decreasesy G,F1G
$ The fair value of future cash flows decreases y$,$G ? the fair value of the hedging instrumentsincreasesy G,FO
ualif)ing amounts of gainsIlosses
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&4
ualif)ing amounts of gainsIlosses
Hints/:here the entity has under9hedged its cash
flow ris& e'posure, so the change of in
value in hedging instrument for hedged ris&is less then change in value of the hedgeditem for that ris&, that difference will not e
reflected in in profit or loss as hedge in9effectiveness.
ualif)ing amounts of gainsIlosses
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&5
ualif)ing amounts of gainsIlosses
Answer/Hedging
0erivatives"uit) ncome
tatement
) The fair value of future cash flows decreases y1$1 ? the fair value of the hedging instrumentsincreasesy 11)
11) 11)
1 The fair value of future cash flows increases yG,G$1 ? the fair value of the hedging instrumentsdecreasesy G,F1G G,F1G G,G$1 )%1
$ The fair value of future cash flows decreases y$,$G ? the fair value of the hedging instrumentsincreasesy G,FO G,FO G,FO
The hedge relationship in "o. $ is not highly effective, hence does not#ualify for hedge accounting.
0iscontinuance ;1I2@
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7!.7"(:" 0(.NNBAN(" .+ H"0"
A((.BNN
THE HE*I"*I"ST5-E"T
ED+I5ES, IS S43,TE5I"ATE 45
EDE5CISE
5E;4CATI4" 4< THEESI*"ATI4"
;managementCs decision@
C5ITE5IA
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%O&$
+A! :ALB"
H"0"
(AH +L.W
H"0"
GAINS AND LOSSES ACCUMULATED
IN EQUITY REMAIN IN EQUITY UNTIL
THE DISPOSAL OF THE FOREIGN
OPERATION
GAINS AND LOSSES ACCUMULATED
IN EQUITY REMAIN IN EQUITY UNTILTHE HEDGED ITEM WILL IMPACT
PROFIT OR LOSS EXCEPT IF THE
FORECAST TRANSACTION NO LONGER
EXPECTED TO OCCUR
IF THE HEDGED ITEM IS A FINANCIAL
INSTRUMENT MEASURED ATAMORTISED COST, AMORTISATION OF
ANY ADJUSTMENT OF ITS CARRYING
AMOUNT
N" N:"/"N
H"0"
0iscontinuance ;2I2@
0iscontinuation
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0iscontinuation
:hen to discontinue(An entity must discontinue prospectively cash flow hedgeaccounting if/
the hedging instrument e'pires or is sold, terminated ore'ercised, or
the hedge no longer meets the hedge accountingcriteria 2for e'ample, if it is no longer highly effective orits effectiveness is no longer measurale8, or
the forecast transaction is no longer e'pected to occur,
or the entity de9designates the hedge relationship
0iscontinuation
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&&
0iscontinuation
If an entity discontinues hedge accounting y de9designating the hedging relationship, it may electto designate prospectively a new hedgingrelationship with the same hedging instrument,
provided the new hedging relationship meets there#uirements for hedge accounting.
But what>s the effect of discontinuing cash flowhedge accounting on hedging gains or losses thathave already een recognised in e#uity(
0iscontinuation
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0iscontinuation
The impact:hen a cash flow hedge is discontinued, thecumulative gain or loss on the hedging instrumentdeferred in e#uity/
continues to e separately recognised in e#uity2provided the forecast transaction is stille'pected to occur8, and
is then removed and included in profit or loss,when the forecast transaction occurs.
0iscontinuation
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0iscontinuation
The impactIf, however, the forecast transaction is nolonger e'pected to occur, the cumulative gain
or loss on the hedging instrument isrecognised immediatelyin profit or loss
(ommon sources of ineffectiveness
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(ommon sources of ineffectiveness
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(ommon sources of ineffectiveness
E'amples/ :here the forecast transaction is e'pected to occur in an
earlier period than originally anticipated ut the hedginginstrument must e designated for the whole of itsremaining period to maturity. 2changes in timing8
A 3IB45 swap that reprices every si' months when thehedged item is variale 3IB45 interest that reprices everythree months. 2Basis ris&8
If at inception of the hedge, the fair value of the hedging
derivative is not ero. 24ff9mar&et hedging derivatives8 Emedded call, prepayment or termination features
2 erivative8
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0efinition
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A cash flow hedge is a hedge of the e'posure tovariaility in cash flows that/
is attriutale to a particular ris& associatedwith a recognised asset or liaility 2such as all
or some future interest payments on varialerate det8 or a highly proale forecasttransaction and
could affect profit or loss
(ash flo* hedge e#posures
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1'$
g p
Here are some common assets, liailities, andforecast transactions that are hedged, using cashflow hedging/
;ariale rate liailities li&e loan payales
;ariale rate assets li&e investments in onds Highly proale forecast purchases
Highly proale forecast sales
(ash flo* hedge e#posures
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1'%
g p
;ariale rate liailityAn e'ample of this is hedging a variale rate detinstrument with a floating to fi'ed interest rate swap.
The cash flow hedge reduces future cash flow variailityof interest rates on the det.
;ariale rate assetsAn e'ample of this is hedging the forecast reinvestmentof interest and principal received on a fi'ed rate ond.
(ash flo* hedge e#posures
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g p
Highly proale forecast purchasesAn e'ample of this is a hedge of the forecast purchase of ),ushels of corn in 4ctoer to e used in an entity>s manufacturingprocess with a forward commodity contract to uy the same amountof corn in 4ctoer.
Highly proale forecast salesAn e'ample of this is a hedge of the forecast sale of an availale9for9sale investment at the end of the fourth #uarter with a put option withthe same e'ercise date.
Accounting for a cash flo* hedge
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g g
(ash +lo* Hedge
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g
Hedged Item $$
erivative 2$82$8
+?3
7eriod 7eriod1 2
otal
(ash flo*
hedge
2$8 2$8
(ash +lo* Hedge F "#ample ;1I5@
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g ; @
4n $0%0% a - company 2functional currency/ J8e'pects to uy e#uipment for -S )m. Thedelivery date should e $)0$0) and the paymentdate of $0F0).
The company enters into a forward e'changecontract to purchase -S )m at a fi'ed e'changerate, in order to hedge the foreign e'change ris&.The forward contract is designated as a cash flowhedge of the e'change ris& of the forecasttransaction.
(ash +lo* Hedge F "#ample ;2I5@
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Applicale e'change rates are as follows/0ate pot +or*ard
$0%0% ).11 ).1$
$)0)10% ).1$ ).1G$)0$0) ).1 ).1
$0F0) ).1F "0A
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;3I5@
ransaction
8alance heetncome
tatement
"uit)
0r (r 0r (r 0r (r
5ecognise gain in
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;4I5@
ransaction
8alance heetncome
tatement
"uit)
0r (r 0r (r 0r (r
5ecognisereceipt ofe#uipment at
spot
E#uipment
Asset
),1,
+ayales
),1,
5ecognise gainon fv of forwardsince $)0)1
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11
;5I5@
ransaction
8alance heet ncome tatement "uit)
0r (r 0r (r 0r (r
+ayment fore#uipment atspot rate ande'change loss
on the payalesince $)0$
+ayale
),1,
Cash
),1F,
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11$
Akuntansi Lindung Nilai
summar) of hedge accounting
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11%
Companies e'posed to financial ris&s can enterinto hedging transactions to hedge those ris&s.
:here the hedged item or transaction is either notrecognised in the alance sheet or is not
measured at fair value, there will e a mismatch inthe timing of recognition of gains and losses inprofit and loss etween the hedged item and thehedging derivative as the derivative is alwaysmeasured in the alance sheet at fair value.
summar) of hedge accounting
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11&
Hedge accounting achieves matching in thetiming of recognition of gains and losses on thehedged item and the hedging instrument in profitand loss.
There are three methods of hedge accounting/cash flow, fair value and net investment hedgeaccounting.
summar) of hedge accounting
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s ris& management strategy,
prospectively and retrospectively effective, itseffectiveness must e measureale, and anyineffectiveness must e recorded in profit andloss.
!ules of Hedge AccountingH d d t
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Hedged tems F ummar) Hedging a portion of the total instrument is
allowedK +artial term hedging is allowedK
Can only hedged
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A cash flow hedge is a hedge of an e'posure tovariaility in cash flows that could affect profit orloss. A forecast transaction must e highlyproale to #ualify for cash flow hedge
accounting. In a cash flow hedge the effective portion of the
change in fair value of the hedging instrument isrecognised outside profit and loss in e#uity andrecycled into profit and loss when the hedged itemaffects profit and loss.
ummar)
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