CA Final · Financial Reporting · Hedge Accounting

Sundaram Textiles Ltd applies hedge accounting to forward contracts hedging forecast export sales (cash flow hedges) and to interest rate swaps hedging a fixed-rate loan (fair value hedge). It plans to prepare its Ind AS 107 hedge accounting disclosures separated by risk category. On what basis should it determine each risk category?

Risk categories are determined by the risk exposures that the entity decides to hedge and for which it applies hedge accounting, and the same categories must be used consistently across all hedge accounting disclosures, not by instrument type or balance sheet line item.

1. AOn the basis of the risk exposures the entity decides to hedge and for which hedge accounting is applied, applied consistently across all hedge accounting disclosuresCorrect
2. BOn the basis of the type of hedging instrument used, such as forwards or swaps, which may differ from one disclosure to another
3. COn the basis of the line item in the balance sheet where the hedged item is reported, chosen freshly for each disclosure
4. DOn the basis of all risks the entity is exposed to, whether or not they are hedged