CA Final · Financial Reporting · Hedge Accounting

Kaveri Textiles Ltd applies hedge accounting to its forecast export sales and to its floating-rate borrowings. Its finance head asks how the entity should group the information when Ind AS 107 requires hedge accounting disclosures to be separated by risk category. Which approach is consistent with Ind AS 107?

Risk categories are determined from the risk exposures the entity decides to hedge and to which hedge accounting is applied, and the same categories are used consistently for all hedge accounting disclosures. Grouping by instrument type, or changing the grouping between disclosures, is not permitted by Ind AS 107.

1. ADetermine risk categories on the basis of the risk exposures the entity decides to hedge and for which hedge accounting is applied, and apply them consistently across all hedge accounting disclosuresCorrect
2. BDetermine risk categories by the type of hedging instrument used, and vary the grouping from one disclosure to the next to suit each table
3. CDetermine risk categories on the basis of all risks faced by the entity, including those for which hedge accounting is not elected
4. DDetermine risk categories by the balance sheet line item in which the hedged item is presented, reassessing the grouping each year