IFRS 9 - Aggregated exposures v/s combination of derivatives

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Anushree.gupta
Posts: 8
Joined: 11 Nov 2021, 11:20

IFRS 9 - Aggregated exposures v/s combination of derivatives

Post by Anushree.gupta »

Hi

I was reading through some hedge accounting guidance and came across 2 scenarios :

Scenario 1. Aggregated Exposure - where a combination of financial and non financial instrument can be a hedged item and another derivative can be the instrument. i.e. say USD fixed rate debt + USD fixed to GBP float CCS are the aggregated exposure hedged item. GBP Float to GBP fixed IRS hedging instrument.

Scenario 2: Combination of 2 derivatives as the derivative instrument. In the same example as above if Fixed rate USD debt is the hedged item and CCIRS (USD Fixed to GBP Float) + IRS (GBP Float to fixed) are the hedging instruments.

Are both these scenarios allowed under IFRS 9 for hedge accounting ? Will there be any difference in the accounting under the above scenarios?

Thanks in advance
Leo
Posts: 908
Joined: 05 Apr 2020, 22:31

Re: IFRS 9 - Aggregated exposures v/s combination of derivatives

Post by Leo »

"Scenario 1. Aggregated Exposure - where a combination of financial and non financial instrument can be a hedged item and another derivative can be the instrument. i.e. say USD fixed rate debt + USD fixed to GBP float CCS are the aggregated exposure hedged item. GBP Float to GBP fixed IRS hedging instrument."

why CCS is to switch from USD fixed rate debt to GDP float? shoudn't it be USD fixed rate debt to GDP fixed rate?
Anushree.gupta
Posts: 8
Joined: 11 Nov 2021, 11:20

Re: IFRS 9 - Aggregated exposures v/s combination of derivatives

Post by Anushree.gupta »

It would be an ideal situation if it were just a USD fixed to GBP Fixed CCIRS but in this case we've got the derivatives as mentioned which need to be all designated in a hedging relationship and hence my question.
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