CA Final · Financial Reporting · Hedge Accounting
Kaveri Polymers Ltd designated forward contracts as cash flow hedges of forecast purchases of raw material in the previous period. During the current review, management concluded that one forecast purchase programme is no longer expected to occur and hedge accounting for it was applied in the previous period. What does Ind AS 107 require specifically for this situation?
The entity must describe the forecast transaction for which hedge accounting was used in the previous period but which is no longer expected to occur. Non-occurrence does not remove the requirement, and a reserve figure alone is insufficient.
- ADisclosure of a description of the forecast transaction for which hedge accounting had been used in the previous period but which is no longer expected to occurCorrect
- BDisclosure only of the amount of the hedging reserve, with no description of the transaction
- CNo disclosure, because the transaction never took place
- DDisclosure of the forecast transaction only if the hedging instrument has also been sold
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. A reserve amount alone does not meet this, and non-occurrence does not remove the disclosure. The disclosure is not conditional on sale of the hedging instrument.
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