Chapter 51

Financial instruments: Hedge accounting

1 Introduction

1.1 Background

1.2 What is hedge accounting?

1.3 Development of hedge accounting standards

2 Hedging Instruments and Hedged Items

2.1 Hedging instruments

2.1.1 Derivative financial instruments

2.1.1.A Options and collars

2.1.1.B Credit break clauses

2.1.2 Cash instruments

2.1.3 Combinations of instruments

2.1.4 Portions and proportions of hedging instruments

2.1.4.A Time value of options

2.1.4.B Interest elements of forwards

2.1.4.C Proportions of instruments

2.1.4.D Cash instruments

2.1.4.E Notional decomposition

2.1.4.F Restructuring of derivatives

2.1.5 Reduction of risk

2.1.6 Hedging different risks with one instrument

2.1.7 Own equity instruments

2.1.8 Pension scheme assets

2.2 Hedged items

2.2.1 Financial items: portions and proportions

2.2.1.A Portions of interest rate risk

2.2.1.B Foreign currency risk associated with publicly quoted shares

2.2.1.C Inflation risk

2.2.1.D Other portions

2.2.2 Non-financial items: portions

2.2.3 Groups of items as hedged items

2.2.4 Hedges of general business risk

2.2.5 Hedges of a firm commitment to acquire a business

2.2.6 Held-to-maturity investments

2.2.7 Derivatives and other financial instruments at fair value through profit or loss

2.2.8 Forecast acquisition or issuance of foreign currency monetary items

2.2.9 Own equity instruments

2.2.10 Recognised core deposit intangibles

2.2.11 Equity investments designated at fair value through other comprehensive income in accordance ...

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