IFRS 9 - Off market derivative in a new hedging relationship
Posted: 11 Nov 2021, 12:43
Hi all,
I have a CCIRS designated against a debt in a cash flow hedge. The CCIRS was restructured (maturity and interest rate restructured) and as a result the existing hedging relationship was discontinued. Since the debt still exists (and the hedged item cash flows as a result are still highly probable to occur) the accumulated amounts in the OCI can stay crystallised till the time the debt does not mature.
The new restructured CCS however are now being designated into a new hedging relationship with the same existing debt. Because these are not brand new on market derivatives, they have an existing FV (i.e., these are non zero fair value derivatives at inception). My questions are:
1. Am I right in saying that the accumulated amounts in the OCI relating to the old hedging relationship can stay in the OCI till the hedged item (i.e., debt) matures?
2. Does all Day 1 FV relating to the off-market CCS in the new relationship have to be recycled to P/L immediately? Or can this be amortized over life of new CCS?
Can you point me to the accounting standards guidance (IFRS 9) that helps with this please as I've been unable to find a definitive answer.
Thanks in advance.
I have a CCIRS designated against a debt in a cash flow hedge. The CCIRS was restructured (maturity and interest rate restructured) and as a result the existing hedging relationship was discontinued. Since the debt still exists (and the hedged item cash flows as a result are still highly probable to occur) the accumulated amounts in the OCI can stay crystallised till the time the debt does not mature.
The new restructured CCS however are now being designated into a new hedging relationship with the same existing debt. Because these are not brand new on market derivatives, they have an existing FV (i.e., these are non zero fair value derivatives at inception). My questions are:
1. Am I right in saying that the accumulated amounts in the OCI relating to the old hedging relationship can stay in the OCI till the hedged item (i.e., debt) matures?
2. Does all Day 1 FV relating to the off-market CCS in the new relationship have to be recycled to P/L immediately? Or can this be amortized over life of new CCS?
Can you point me to the accounting standards guidance (IFRS 9) that helps with this please as I've been unable to find a definitive answer.
Thanks in advance.