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CA Final · Financial Reporting · Hedge Accounting

Sundaram Auto Ltd applies hedge accounting to forward contracts hedging highly probable export sales in US dollars. For the previous reporting period, it had designated a forecast sale to a customer in the USA as a hedged item in a cash flow hedge. In the current period, management no longer expects that sale to occur. Under Ind AS 107, which disclosure is specifically required for cash flow hedges in this situation?

The entity must describe the forecast export sale for which hedge accounting was used in the previous period but which is no longer expected to occur. Ind AS 107 requires this for cash flow hedges, and discontinuing the hedge relationship does not remove the disclosure.

  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. BA description only of forecast transactions that actually occurred during the current period
  3. CNo disclosure, because the hedge relationship has been discontinued
  4. DA disclosure of the forward contract's fair value only, without describing the forecast transaction

Explanation

Ind AS 107 (para 23F) requires, for cash flow hedges, 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. Discontinuation does not remove this requirement, so the 'no disclosure' option is wrong.

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