Hedge accounting excluded

Learning objectives

• Recognise that hedge accounting, including hedges of a net investment, falls within IFRS 9.L1, L2

Normative references

• IAS 21 §5Hedge accounting for foreign currency items, including the hedging of a net investment in a foreign operation, falls within IFRS 9, not IAS 21.
• IAS 21 §27Cross-reference: hedge accounting for foreign currency items falls within IFRS 9 (paras. 3(a) and 5), which may require some exchange differences to be treated differently from the treatment required by IAS 21; example: exchange differences on a monetary item designated as a hedging instrument in a cash flow hedge, recognised initially in other comprehensive income to the extent that the hedge is effective.

Original summaries of the paragraphs (reference register), never a quotation of the standard.

2 questions

• For the hedge of a net investment in a foreign subsidiary, Vexil writes in its accounting policies note: "The hedge accounting requirements are set by IAS 21." What is the error?L2
• Ardenne, whose functional currency is the euro, has a dollar borrowing (a monetary item). Case data: it designated the borrowing as the hedging instrument of the foreign currency risk on future dollar purchases, in a cash flow hedge that meets the IFRS 9 conditions; at the closing date, the hedge is fully effective. How is the exchange difference on the borrowing treated?L2