CFM16266 - Accounting for financial instruments: IAS 32 and IAS 39: hedge accounting: Introduction

Overview

An economic hedge is achieved when changes in value of a hedged item are offset by equal and opposite changes in the value of the hedge, which is frequently a derivative. Under IAS 39, derivatives are normally carried at fair value with changes going through profit and loss; but the hedged item – which might be a financial asset or liability, or a transaction yet to be undertaken - will not necessarily be treated in the same way.