CA Final · Financial Reporting · Hedge Accounting

Godavari Chemicals Ltd has a cash flow hedge of forecast export sales. During the year, hedge ineffectiveness is expected to arise from differences in the critical terms of the forward and the sales. Later, a new source of ineffectiveness emerges, a change in the counterparty's credit quality that was not originally anticipated. Which combination of disclosures does Ind AS 107 require?

The entity must describe by risk category the sources of ineffectiveness expected during the hedge term, and must also disclose any other sources that emerge, by risk category, explaining the resulting ineffectiveness, under Ind AS 107 paragraphs 23D and 23E.

1. AOnly a description of expected sources at inception; later unexpected sources need not be disclosed
2. BDisclose by risk category the sources expected to affect the relationship during its term, and disclose the other sources that emerge, by risk category, with an explanation of the resulting ineffectivenessCorrect
3. CDisclose the new source only if it causes the hedge to be discontinued
4. DDisclose sources of ineffectiveness in aggregate across risk categories to avoid duplication