CA Final · Financial Reporting · Hedge Accounting

Veda Textiles Ltd applies hedge accounting to its foreign currency and commodity price exposures. In preparing its Ind AS 107 hedge accounting disclosures, the finance head asks how the entity should decide the risk categories by which the information is separated. Which approach is consistent with Ind AS 107?

Risk categories for hedge accounting disclosures are determined from the risk exposures the entity chooses to hedge and for which it applies hedge accounting, and they must be used consistently across all hedge accounting disclosures, rather than being chosen per table or based on all exposures.

1. ADetermine each risk category on the basis of the risk exposures the entity decides to hedge and for which hedge accounting is applied, and apply the categories consistently across all hedge accounting disclosuresCorrect
2. BUse the risk categories of market risk, credit risk and liquidity risk for the hedge accounting disclosures, regardless of what is hedged
3. CDetermine risk categories separately for each disclosure table so that each table shows the most favourable grouping
4. DDetermine risk categories on the basis of all risk exposures the entity has, whether or not hedge accounting is applied