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CA Final · Financial Reporting · Hedge Accounting

Ananya Exports Ltd designated forward contracts as cash flow hedges of forecast USD sales. In the previous period it used hedge accounting for a forecast sale to a Gulf buyer, but in the current period management concluded that this sale is no longer expected to occur. What does Ind AS 107 require in this respect for cash flow hedges?

For cash flow hedges, Ind AS 107 requires a description of any forecast transaction for which hedge accounting was used in the previous period but which is no longer expected to occur. Discontinuing the hedge does not remove this requirement, and no ineffectiveness threshold applies.

  1. ANo disclosure is needed because the hedge relationship has been discontinued
  2. BDisclose a description of any forecast transaction for which hedge accounting had been used in the previous period but which is no longer expected to occurCorrect
  3. CDisclose only the amount of the forward contract's fair value, without describing the forecast transaction
  4. DDisclose the forecast transaction only if the hedge ineffectiveness exceeded 20%

Explanation

For cash flow hedges, the entity must disclose a description of any forecast transaction for which hedge accounting had been used in the previous period but which is no longer expected to occur. No ineffectiveness threshold exists. Discontinuation does not remove the disclosure.

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