Hedge Accounting

[Mrs Vanecamp]

Does anyone know the correct way to treat Hedges?

We are expecting a Dollar payment next year and a hedge has been put in place.

Should I recognise the loss now and adjust it up or down until the value date or take the whole gain/loss into the P&L on the day the dollars are sold?

 

[callybags]

from an accounting (and taxation) point of view, the gain or loss is only realised when the transaction is completed. However, if you know what this figure is then you should provide for it. "Prudence" is the accounting principle.

 

[Mrs Vanecamp]

Thanks Cally, so it is as simple as that?

I was prodding through IFRS 7 and getting no where

 

[callybags]

That's it. Charge any known losses as soon as they become known but don't credit any gains until they are realised.

 

[Padraigb]

Just to explore the idea a little: if an airline has hedged its fuel purchases involving many millions of euros in the forthcoming six months, and has a y/e of 31/12, there is no need to make any accounting provision?