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Hedges guidance

1 Dec 08

The Accounting Standards Board (ASB) has issued its UITF Abstract 46, implementing the International Financial Reporting Interpretations Committee's Interpretation 16 Hedges of a Net Investment in a Foreign Operation in the UK and the Republic of Ireland

The Accounting Standards Board (ASB) has amended Financial Reporting Standard (FRS) 26 (IAS 39) Financial Instruments: Recognition and Measurement – Eligible Hedged Items.

The same amendment was issued in July by the International Accounting Standards Board (IASB).

The amendment clarifies how principles underlying hedge accounting should be applied in the designation of a one-sided risk in a hedged item, and that of inflation in a financial hedged item.

The amendment has been made in the light of responses to a 2007 exposure draft of proposed guidance from the IASB and the ASB, which indicated that diversity in practice existed, or was likely to exist, in these two situations.

The amendment provides additional application guidance to illustrate how the principles underlying hedge accounting should be applied in the two situations. Entities are required to apply the amendment for annual periods beginning on or after 1 July 2009, with earlier application permitted.

The amendment ensures that FRS 26 remains in line with International Accounting Standard 39.

Page No: 102

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