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CA Final · Financial Reporting · Hedge Accounting

Kaveri Auto Components Ltd designated forward contracts as cash flow hedges of forecast purchases of imported machinery in the previous year. In the current year, management concluded that the purchase will no longer occur and the entity is preparing disclosures. Which disclosure does Ind AS 107 specifically require in respect of this?

For cash flow hedges, the entity must describe 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 time threshold applies.

  1. AA description of any forecast transaction for which hedge accounting was used in the previous period but which is no longer expected to occurCorrect
  2. BOnly the amount reclassified from the cash flow hedge reserve, with no description of the transaction
  3. CA description of the forecast transaction, but only if it was expected to occur within three months
  4. DNo disclosure, as the hedge relationship has been discontinued

Explanation

Paragraph 23F requires, for cash flow hedges, a description of any forecast transaction for which hedge accounting was used in the previous period but which is no longer expected to occur. The requirement has no three-month condition, and discontinuation does not remove it. A description is needed, not just an amount.

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