This free, guided checker walks your finance team through the key decision points for IFRS 9 Hedge Accounting Designation. Answer a few questions to see the likely treatment and the evidence to document.
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
This tool is a high-level IFRS screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
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Hedge accounting is optional under IFRS 9; without election both the hedging instrument and hedged item follow standard IFRS 9 measurement with volatility potentially in profit or loss.
Measure the hedging instrument at fair value through profit or loss and the hedged item under its normal IFRS 9 classification, with no hedge accounting offset (IFRS 9.6.1.1).
Official guidance: IFRS issued standards
Documentation must identify the hedging instrument, hedged item, nature of the risk hedged, and how effectiveness will be assessed; it must exist at inception of the hedge relationship.
Prepare the formal designation and documentation required by IFRS 9.6.4.1(b); hedge accounting can only start prospectively once it exists.
Official guidance: IFRS issued standards
Fair value hedges offset exposure to changes in fair value of recognised assets or liabilities or firm commitments; cash flow hedges offset variability in cash flows from forecast transactions or floating-rate exposures.
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Official guidance: IFRS issued standards
IFRS 9 requires an economic relationship such that the hedging instrument and hedged item respond to the same hedged risk in opposite directions; qualitative or quantitative analysis may support this.
Hedge accounting is not available: the economic-relationship criterion in IFRS 9.6.4.1(c)(i) is not met.
Official guidance: IFRS issued standards
The hedge ratio should align with the actual quantities of hedged item and hedging instrument unless IFRS 9 rebalancing criteria are met when the ratio changes.
Align the designated hedge ratio with actual risk management quantities or rebalance under IFRS 9.6.5.5 before applying hedge accounting.
Official guidance: IFRS issued standards
Effectiveness requires an economic relationship, credit risk not dominating, and an appropriate hedge ratio; IFRS 9 does not require a specific numerical threshold such as 80-125%.
Discontinue hedge accounting prospectively when the IFRS 9.6.4.1(c) effectiveness requirements are no longer met (IFRS 9.6.5.6).
Official guidance: IFRS issued standards
Fair value hedge accounting adjusts the carrying amount of the hedged item for the hedged risk with offsetting hedging instrument fair value changes recognised in the same profit or loss line item.
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Official guidance: IFRS issued standards
The effective portion of cash flow hedge gains or losses is deferred in the cash flow hedge reserve in OCI until the hedged item affects profit or loss; ineffectiveness is recognised immediately in P&L.
Split the effective and ineffective portions: cap the cash flow hedge reserve at the lower-of amount and recognise the excess in profit or loss (IFRS 9.6.5.11).
Official guidance: IFRS issued standards
When credit risk dominates the value changes of the hedging instrument or hedged item the economic relationship criterion fails and hedge accounting must be discontinued.
Discontinue hedge accounting: credit risk dominates the value changes, so the economic-relationship criterion in IFRS 9.6.4.1(c)(ii) fails.
Official guidance: IFRS issued standards
Rebalancing adjusts the hedge ratio without discontinuing the relationship when the risk management objective is unchanged; changing the objective requires discontinuation instead.
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Official guidance: IFRS issued standards
When a cash flow hedge is discontinued amounts in OCI remain until the hedged item affects P&L; for fair value hedges the hedged item adjustment is amortised if the hedged item is still recognised.
Continue hedge accounting with documented ongoing effectiveness testing (IFRS 9.6.4.1(c)) and the IFRS 7.21A-24F hedge disclosures. Apply the discontinuation rules: IFRS 9.6.5.12 for the cash flow hedge reserve and IFRS 9.6.5.10 amortisation of any fair value basis adjustment.
Official guidance: IFRS issued standards
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