Cross-currency swaps

[pduc004]

Hello everyone
Our company intend to use cross currency products from bank as below:

Our company plans to borrow $20M (All-in 6.71%, Term SoFR+1.4%).
Purchase Woori Bank’s CCS product.
- In April 2024, Our company borrows $20M (Term SoFR+1.4%), which is converted to a fixed exchange rate ($1 = VND 24,500) by Bank, and VND 490B is deposited into Company's account.
- Quarterly interest is $335,500 ($20M*6.71%*3/12).
When making quarterly interest payments, The company pays VND 8,219,750,000 to Bank, which is then converted to a fixed exchange rate and treated as a payment of $335,500.
- At maturity, the company pays VND 490B to Bank, which is converted to a fixed exchange rate and ultimately repays the $20M loan.

Could you please help me to provided the accounting treatment under IFRS and if necessary, whether the valuation of the derivatives must be recognized even if the derivatives are purchased and canceled during the same quarter.

Many thanks and best regards

[Leo]

Are you going to elect for hedge accounting?

[pduc004]

Yess

[Leo]

you should follow the requirement of a cash flow hedge accounting.

[pduc004]

But I still not figured out the ways of booking, I would appreciate if you help me to illustrate the accounting treatment by my example

[Leo]

You need to record the swap instrument as a derivative instrument, in accordance with IFRS 9. All the fluctuation in fair value is recognised in OCI.