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 risk categories used to separate the information should be determined. Which approach is consistent with Ind AS 107?

Risk categories for hedge accounting disclosures are based on the exposures the entity chooses to hedge and applies hedge accounting to, and they must be applied consistently across all hedge accounting disclosures. They are not fixed by the standard or chosen table by table.

1. ADetermine each risk category from the risk exposures the entity decides to hedge and for which hedge accounting is applied, and use these categories consistently across all hedge accounting disclosuresCorrect
2. BUse the risk categories prescribed by the standard, namely currency, interest and equity price risk, whatever the entity hedges
3. CDetermine categories separately for each disclosure paragraph so that each table shows the most favourable grouping
4. DDetermine categories from the classification of the hedging instrument in the balance sheet rather than the exposure hedged