CA Final · Financial Reporting · Hedge Accounting

Ganga Foods Ltd uses interest rate swaps to hedge its floating rate borrowings and applies hedge accounting. The audit committee asks what the overall objectives of the hedge accounting disclosures under Ind AS 107 are. Which set correctly reflects the information these disclosures should provide?

The disclosures should explain the entity's risk management strategy and how it is applied, how hedging may affect the amount, timing and uncertainty of future cash flows, and the effect of hedge accounting on the balance sheet, statement of profit and loss and statement of changes in equity.

1. AOnly the fair value of derivatives and the tax effect of hedging gains
2. BThe entity's risk management strategy and its application, how hedging may affect the amount, timing and uncertainty of future cash flows, and the effect of hedge accounting on the balance sheet, statement of profit and loss and statement of changes in equityCorrect
3. CThe entity's credit rating and the cost of hedging borne by each business unit
4. DOnly the effect on the statement of profit and loss, since hedge accounting does not affect the balance sheet