CFM50770 - Derivative contracts: exclusions from regime: hedging relationship: meaning
What is a 바카라 사이트˜hedging relationship바카라 사이트™?
CTA09/S707 defines what is meant by 바카라 사이트˜hedging relationship바카라 사이트™, for the purposes of Part 7 generally. A company has a hedging relationship between a relevant contract and an asset (or a liability) if the contract is designated for accounting purposes as the hedging instrument in a hedge of the asset or liability.
CFM27000 onwards tells you about hedge accounting under IAS 39 or FRS 26. Since a hedge must be designated and documented right at the start, there is unlikely to be uncertainty as to whether this condition has been met.
Equity derivatives are most likely to be designated as the hedging instrument in a fair value hedge, but the legislation does not rule out cash flow hedges. Where the conditions of CTA09/S591(3) (바카라 사이트˜condition B바카라 사이트™ - CFM50760) or CTA09/S591(6) (바카라 사이트˜condition E바카라 사이트™ - CFM50810) are met as a result of a hedge being designated, gains or losses on the whole of the derivative, or the designated part of it, fall outside Part 7 - not just those on the effective portion.
Alternatively, the relevant contract may be intended to act as a hedge, but no hedge is designated. This may be because the company has not adopted IAS 39 or FRS 26, and no formal hedge designation is necessary. Or it may be that the company has been unable to designate a hedge, perhaps because the stringent criteria for hedge effectiveness have not been met.
There is nevertheless a hedging relationship for Part 7 purposes where the hedging instrument is intended to act as a hedge of changes in the fair value of a hedged item, where such changes are attributable to a particular risk and could affect the profit or loss of the company. The hedged item must be a recognised asset or liability of the company (not a firm commitment or forecast transaction), or part of such asset or liability.
바카라 사이트˜Liability바카라 사이트™ in this case includes a company바카라 사이트™s own share capital. However, changes in the fair value of a company바카라 사이트™s ordinary shares will, in most cases, not affect the company바카라 사이트™s profit or loss.
Whether or not a company intends a derivative to act as a hedge of an asset or liability is a question of fact in any particular case. Where there is any doubt about the company바카라 사이트™s intention, HMRC staff should take into account all of the circumstances, as well as any contemporaneous documentation prepared by the company. The guidance on 바카라 사이트˜hedging intention바카라 사이트™ in connection with the Disregard Regulations (CFM57060) is also relevant for Part 7.
CFM50780 gives examples of 바카라 사이트˜hedging relationships바카라 사이트™.