Accounting for derivatives: advanced hedging under ifrs 9

Machine generated contents note: 1.1. Accounting Categories for Financial Assets --

1.1.1. Financial Asset Categories --

1.1.2. Financial Assets at Amortised Cost --

1.1.3. Financial Assets at Fair Value through Other Comprehensive Income --

1.1.4. Financial Assets at Fair Value through Profit or Loss --

1.1.5. Financial Assets [2014] Initial and Subsequent Recognition --

1.1.6. Reclassifications --

1.2. The Amortised Cost Calculation: Effective Interest Rate --

1.2.1. Example of Effective Interest Rate Calculation [2014] Fixed Rate Bond --

1.2.2. Effective Interest Rate Calculation [2014] Floating Rate Debt --

1.3. Examples of Accounting for Fixed Rate Bonds --

1.3.1. Example of a Fixed Rate Bond at Amortised Cost --

1.3.2. Example of a Fixed Rate Bond Recognised at FVOCI --

1.4. Accounting Categories For Financial Liabilities --

1.4.1. Financial Liability Categories --

1.4.2. Partial Repurchases of Financial Liabilities --

1.4.3. Changes in Credit Risk in Financial Liabilities at FVTPL --

1.5. The Fair Value Option --

1.6. Hybrid And Compound Contracts --

1.6.1. Embedded Derivatives in Assets or Liabilities [2014] Hybrid Instruments --

1.6.2. Liability Compound Instruments --

2.1. Hedge Accounting [2014] Types of Hedges --

2.1.1. Derivative Definition --

2.1.2. Hedge Accounting --

2.1.3. Accounting for Derivatives --

2.1.4. Undesignated or Speculative --

2.2. Types of Hedges --

2.2.1. Fair Value Hedge --

2.2.2. Cash Flow Hedge --

2.2.3. Net Investment Hedge --

2.3. Hedged Item Candidates --

2.3.1. Hedged Item Candidates --

2.3.2. Forecast Transaction versus Firm Commitment --

2.4. Hedging Instrument Candidates --

2.5. Hedging Relationship Documentation --

2.6. Hedge Effectiveness Assessment --

2.6.1. Qualifying Criteria for Hedge Accounting --

2.6.2. Hedge Ratio --

2.6.3. Effectiveness Assessment --

2.6.4. Effectiveness Assessment Methods --

2.6.5. The Critical Terms Method --

2.6.6. The Simple Scenario Analysis Method --

2.6.7. The Regression Analysis Method --

2.6.8. The Monte Carlo Simulation Method --

2.6.9. Suggestions Regarding the Assessment Methods --

2.7. The Hypothetical Derivative Simplification --

2.8. Rebalancing --

2.8.1. Accounting for Rebalancings --

2.9. Discontinuation of Hedge Accounting --

2.10. Options And Hedge Accounting --

2.10.1. Intrinsic Value versus Time Value --

2.10.2. In-, At- or Out-of-the-Money --

2.10.3. Accounting Treatment for the Time Value of Options --

2.10.4. Example of Option Hedging a Transaction Related Item [2014] Actual Time Value Exceeding Aligned Time Value --

2.10.5. Example of Option Hedging a Transaction Related Item [2014] Actual Time Value Lower Than Aligned Time Value --

2.10.6. Example of Option Hedging a Time-Period Related Item [2014] Actual Time Value Exceeding Aligned Time Value --

2.10.7. Example of Option Hedging a Time-Period Related Item [2014] Actual Time Value Lower Than Aligned Time Value --

2.10.8. Written Options --

2.11. Forwards and Hedge Accounting --

3.1. Fair Valuation [2014] Overview of IFRS 13 --

3.1.1. Definition of Fair Value --

3.1.2. Fair Value Hierarchy --

3.1.3. Level 1 Financial Instruments --

3.1.4. Level 2 Financial Instruments --

3.1.5. Level 3 Financial Instruments --

3.1.6. Mid-to-Bid and Mid-to-Offer Adjustments --

3.1.7. Credit and Debit Valuation Adjustment --

3.1.8. Funding Valuation Adjustment --

3.1.9. Model Uncertainty Adjustment --

3.1.10. Day 1 Profit (or Loss) --

3.2. Case Study [2014] Credit Valuation Adjustment of an Interest Rate Swap --

3.2.1. Simple One-Period Model of Default --

3.2.2. Working Example of CVA in a Swap --

3.2.3. Debit Valuation Adjustments --

3.2.4. Combining CVA and DVA --

3.2.5. Calculating CVA and DVA Using Monte Carlo Simulation --

3.3. Overnight Index Swap Discounting --

4.1. FX Forwards --

4.1.1. Product Description --

4.1.2. Forward Points --

4.2. Interest Rate Swaps --

4.2.1. Product Description --

4.2.2. IFRS 9 Accounting Implications --

4.3. Cross-Currency Swaps --

4.3.1. Product Description --

4.3.2. IFRS 9 Accounting Implications --

4.4. Standard (Vanilla) Options --

4.4.1. Product Description --

4.4.2. Standard Equity Options --

4.4.3. Standard Foreign Exchange Options --

4.4.4. Interest Rate Options [2014] Caps, Floors and Collars --

4.5. Exotic Options --

4.6. Barrier Options --

4.6.1. Knock-out Bather Options [2014] Product Description --

4.6.2. Knock-in Bather Options [2014] Product Description --

4.7. Range Accruals --

5.1. Types of Foreign Exchange Exposure --

5.2. Introductory Definitions --

5.2.1. Functional Currency and Presentation Currency --

5.2.2. Relevant Dates in an FX Transaction --

5.3. Summary of IAS 21 Translation Rates.

5.3.1. Monetary versus Non-monetary Items --

5.3.2. Translation Rates --

5.4. Foreign Currency Transactions --

5.4.1. Summary of Most Commonly Used FX Derivatives --

5.5. Case Study: Hedging A Forecast Sale and Subsequent Receivable with an FX Forward (Forward Element Included in Hedging Relationship) --

5.5.1. Background --

5.5.2. Setting the Hedging Relationship Term --

5.5.3. Hedging Relationship Documentation --

5.5.4. Hedge Effectiveness Assessment [2014] Hypothetical Derivative --

5.5.5. Hedge Effectiveness Assessment Performed at Hedge Inception --

5.5.6. Fair Valuation of Hedged Item and Hypothetical Derivative at the Relevant Dates --

5.5.7. Accounting Entries [2014] Hedge Objective Unchanged: No Discontinuation --

5.5.8. Accounting Entries [2014] Hedge Risk Management Objective Changed: Discontinuation --

5.6. Case Study: Hedging a Forecast Sale with an FX Forward --

5.6.1. Setting the Hedging Relationship Term --

5.6.2. Hedging Relationship Documentation --

5.6.3. Hedge Effectiveness Assessment --

5.6.4. Hedge Effectiveness Assessment Performed at Hedge Inception --

5.6.5. Fair Valuation of Hedged Item and Hypothetical Derivative at the Relevant Dates --

5.6.6. Accounting Entries When the Forward Element is Included in the Hedging Relationship --

5.6.7. Accounting Election When the Forward Element is Excluded from the Hedging Relationship --

5.6.8. Accounting When the Forward Element is Excluded from the Hedging Relationship and Recognised in Profit or Loss --

5.6.9. Accounting When the Forward Element is Excluded from the Hedging Relationship and Aligned Portion Temporarily Recognised in OCI --

5.6.10. Final Remarks: Inclusion versus Exclusion of the Forward Element --

5.7. Case Study: Hedging a Forecast Sale and Subsequent Receivable with a Tunnel --

5.7.1. Hedging Relationship Documentation --

5.7.2. Hedge Effectiveness Assessment --

5.7.3. Hedge Effectiveness Assessment Performed at Hedge Inception --

5.7.4. Fair Valuation of Hedged Item and Hypothetical Derivative at the Relevant Dates --

5.7.5. Calculation of Effective and Ineffective Amounts --

5.7.6. Accounting Entries --

5.7.7. Accounting Entries [2014] Discontinuation by Changing Risk Management Objective --

5.7.8. Final Remarks --

5.8. Case Study: Hedging A Forecast Sale and Subsequent Receivable with a Participating Forward --

5.8.1. Participating Forward Hedge Accounting Issues --

5.8.2. Alternative 1: Participating Forward Split into a Forward and an Option --

5.8.3. Alternative 2(a): Participating Forward in its Entirety --

5.8.4. Alternative 2(b): Participating Forward in its Entirety [2014] Readjusting the Hedge Ratio --

5.9. Case Study: Hedging a Highly Expected Foreign Sale with a Knock-In Forward (Introduction) --

5.9.1. Accounting Optimisation of the Knock-in Forward --

5.10. Case Study: Hedging a Forecast Sale And Subsequent Receivable with a Knock-In Forward (Splitting Alternative) --

5.10.1. Terms of the Split into a Forward and a Knock-out Option --

5.10.2. Hedging Relationship Documentation --

5.10.3. Hedge Effectiveness Assessment --

5.10.4. Hedge Effectiveness Assessment Performed at Hedge Inception --

5.10.5. Fair Valuations of Derivative Contracts and Hypothetical Derivative at the Relevant Dates --

5.10.6. Calculation of Effective and Ineffective Amounts --

5.10.7. Accounting Entries --

5.11. Case Study: Hedging A Forecast Sale and Subsequent Receivable with a Knock-In Forward (Instrument In Its Entirety) --

5.11.1. Hedging Relationship Documentation --

5.11.2. Hedge Effectiveness Assessment --

5.11.3. Hedge Effectiveness Assessment Performed at Hedge Inception --

5.11.4. Fair Valuations of Hedging Instrument and Hypothetical Derivative at the Relevant Dates --

5.11.5. Calculation of Effective and Ineffective Amounts --

5.11.6. Accounting Entries --

5.12. Case Study: Hedging A Forecast Sale and Subsequent Receivable with a Knock-In Forward (Rebalancing Approach) --

5.12.1. Quantity of Hedged Item Estimation --

5.12.2. Hedging Relationship Documentation --

5.12.3. Hedge Effectiveness Assessment --

5.12.4. Hedge Effectiveness Assessment Performed at Hedge Inception --

5.12.5. Fair Valuations at the Relevant Dates --

5.12.6. Effective and Ineffective Amounts at the Relevant Dates --

5.12.7. Accounting Entries --

5.13. Case Study: Hedging A Highly Expected Foreign Sale with a Kiko Forward --

5.13.1. Hedge Accounting Optimisation --

5.13.2. Hedge Accounting Application for Approach 1 [2014] Forward plus Residual Derivative --

5.13.3. Hedging Relationship Documentation --

5.13.4. Hedge Effectiveness Assessment Performed at Hedge Inception --

5.13.5. Fair Valuations of Derivative Contracts and Hypothetical Derivative at the Relevant Dates.

Note continued: 5.13.6. Accounting Entries --

5.13.7. Additional Remarks --

5.14. Case Study: Hedging A Forecast Sale and Subsequent Receivable with a Range Accrual (Part 1) --

5.15. Case Study: Hedging A Forecast Sale and Subsequent Receivable with a Range Accrual (Designation In Its Entirety) --

5.15.1. Hedging Relationship Documentation --

5.15.2. Hedge Effectiveness Assessment --

5.15.3. Hedge Effectiveness Assessment Performed at Hedge Inception --

5.15.4. Fair Valuations and Calculations of Effective/Ineffective Amounts --

5.15.5. Accounting Entries --

5.16. Case Study: Hedging Forecast Sale and Subsequent Receivable with a Range Accrual (Splitting Approach) --

5.16.1. Accounting Entries --

5.16.2. Final Remarks --

5.17. Hedging On A Group Basis [2014] The Treasury Centre Challenge --

5.17.1. Accounting Implications at Subsidiary Level --

5.17.2. Accounting Implications at Consolidated Level --

5.18. Hedging Forecast Intragroup Transactions --

5.18.1. Example of Hedge of Forecast Intragroup Transaction --

6.1. Stand-Alone Versus Consolidated Financial Statements --

6.1.1. Subsidiary Financial Statements --

6.1.2. Parent-Only Financial Statements --

6.1.3. Consolidated Financial Statements --

6.2. The Translation Process --

6.2.1. Basic Procedures prior to Translation --

6.2.2. Specific Translation Procedures --

6.2.3. Hyperinflationary Economies --

6.3. The Translation Differences Account --

6.4. Special Items That Are Part of a Net Investment --

6.4.1. Goodwill and Fair Value Adjustments --

6.4.2. Long-Term Investments in a Foreign Subsidiary --

6.4.3. Disposal of a Foreign Operation --

6.5. Effect Of Minority Interests on Translation Differences --

6.6. Hedging Net Investments In Foreign Operations --

6.6.1. Net Investment Hedge Issuing Foreign Currency Debt --

6.6.2. Net Investment Hedge Using Derivatives --

6.7. Case Study: Accounting for Net Investments In Foreign Operations --

6.7.1. Elements of the Net Assets of a Foreign Subsidiary --

6.7.2. Translation Process on Acquisition Date --

6.7.3. Translation Process on First Reporting Date --

6.8. Case Study: Net Investment Hedge with a Forward --

6.8.1. Hedging Relationship Documentation --

6.8.2. Hedge Effectiveness Assessment --

6.8.3. Hedge Effectiveness Assessment Performed at Hedge Inception --

6.8.4. Fair Values and Calculation of Effective and Ineffective Amounts --

6.8.5. Accounting Entries [2014] Forward Points Included in Hedging Relationship --

6.8.6. Accounting Entries [2014] Forward Points Excluded from Hedging Relationship --

6.8.7. Implications of the FX Forward Points --

6.9. Case Study: Net Investment Hedge Using Foreign Currency Debt --

6.9.1. Hedging Relationship Documentation --

6.9.2. Hedge Effectiveness Assessment --

6.9.3. Hedge Effectiveness Assessment Performed at Hedge Inception --

6.9.4. Other Relevant Information --

6.9.5. Accounting Entries --

6.9.6. Final Remarks --

6.10. Net Investment Hedging With Cross-Currency Swaps --

6.11. Case Study: Net Investment Hedge with a Floating-To-Floating Cross-Currency Swap --

6.11.1. Hedging Relationship Documentation --

6.11.2. Hedge Effectiveness Assessment --

6.11.3. Hedge Effectiveness Assessment Performed at Hedge Inception --

6.11.4. Other Relevant Information --

6.11.5. Accounting Entries --

6.11.6. Final Remarks --

6.12. Case Study: Net Investment Hedge with a Fixed-To-Fixed Cross-Currency Swap --

6.12.1. Hedging Relationship Documentation --

6.12.2. Hedge Effectiveness Assessment --

6.12.3. Hedge Effectiveness Assessment Performed at Hedge Inception --

6.12.4. Other Relevant Information --

6.12.5. Accounting Entries --

6.13. Case Study: Hedging Intragroup Foreign Dividends --

6.13.1. Effects of Intercompany Foreign Dividends on Individual and Consolidated Statements --

6.13.2. Hedging Intercompany Foreign Dividends with an FX Forward --

6.14. Case Study: Hedging Foreign Subsidiary Earnings --

6.14.1. Hedging Relationship Documentation --

6.14.2. Hedge Effectiveness Assessment --

6.14.3. Hedge Effectiveness Assessment Performed at Hedge Inception --

6.14.4. Other Relevant Information --

6.14.5. Accounting Entries --

6.14.6. Final Remarks --

6.15. Case Study: Integral Hedging of an Investment in a Foreign Operation --

7.1. Common Interest Rate Hedging Strategies --

7.2. Separation Of Embedded Derivatives in Structured Debt Instruments --

7.3. Interest Accruals --

7.4. Most Common Interest Rate Derivative Instruments --

7.5. Case Study: Hedging a Floating Rate Liability With -- an Interest Rate Swap --

7.5.1. Hedging Relationship Documentation --

7.5.2. Hedge Effectiveness Assessment --

7.5.3. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

7.5.4. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations.

7.5.5. Accounting Entries --

7.5.5. Final Remarks --

7.6. Case Study: Hedging A Floating Rate Liability With a Zero-Cost Collar --

7.6.1. Hedging Relationship Documentation --

7.6.2. Hedge Effectiveness Assessment --

7.6.3. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

7.6.4. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

7.6.5. Accounting Entries --

7.6.6. Final Remarks --

7.7. Implications of Interest Accruals and Credit Spreads --

7.7.1. Background Information --

7.7.2. Credit Spread and Hedge Accounting --

7.7.3. Interest Accruals and Fair Valuations --

7.8. Case Study: Hedging a Fixed Rate Liability With an Interest Rate Swap --

7.8.1. Background Information --

7.8.2. Hedging Relationship Documentation --

7.8.3. Hedge Effectiveness Assessment --

7.8.4. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

7.8.5. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

7.8.6. Accounting Entries --

7.8.7. Concluding Remarks --

7.9. Case Study: Hedging A Future Fixed Rate Issuance with an Interest Rate Swap --

7.9.1. Background Information --

7.9.2. Hedging Relationship Documentation --

7.9.3. Hedge Effectiveness Assessment --

7.9.4. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

7.9.5. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

7.9.6. Accounting Entries --

7.9.7. Concluding Remarks --

7.10. Case Study: Hedging A Future Floating Rate Issuance with an Interest Rate Swap --

7.10.1. Background Information --

7.10.2. Hedging Relationship Documentation --

7.10.3. Hedge Effectiveness Assessment --

7.10.4. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

7.10.5. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

7.10.6. Accounting Entries --

7.10.7. Concluding Remarks --

7.11. Case Study: Hedging A Fixed Rate Liability with a Swap In Arrears --

7.11.1. Background Information --

7.11.2. Hedging Relationship Documentation --

7.11.3. Hedge Effectiveness Assessment --

7.11.4. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

7.11.5. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

7.11.6. Accounting Entries --

7.11.7. Concluding Remarks --

7.12. Case Study: Hedging A Floating Rate Liability with a Kiko Collar --

7.12.1. Background Information --

7.12.2. Split between Hedge Accounting Compliant Derivative and Residual Derivative --

7.12.3. Hedging Relationship Documentation --

7.12.4. Hedge Effectiveness Assessment --

7.12.5. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

7.12.6. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

7.12.7. Accounting Entries --

7.12.8. Concluding Remarks --

8.1. Case Study: Hedging a Floating Rate Foreign Currency Liability with a Receive-Floating Pay-Floating Cross-Currency Swap --

8.1.1. Background Information --

8.1.2. Determining Risk Components to Include in the Hedging Relationship --

8.1.3. Hedging Relationship Documentation --

8.1.4. Hedge Effectiveness Assessment --

8.1.5. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

8.1.6. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

8.1.7. Accounting Entries --

8.1.8. Concluding Remarks --

8.2. Case Study: Hedging a Fixed Rate Foreign Currency Liability with a Receive-Fixed Pay-Floating Cross-Currency Swap --

8.2.1. Background Information --

8.2.2. Hedging Relationship Documentation --

8.2.3. Hedge Effectiveness Assessment --

8.2.4. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

8.2.5. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

8.2.6. Accounting Entries --

8.2.7. Concluding Remarks --

8.3. Case Study: Hedging A Floating Rate Foreign Currency Liability with a Receive-Floating Pay-Fixed Cross-Currency Swap --

8.3.1. Background Information --

8.3.2. Hedging Relationship Documentation --

8.3.3. Hedge Effectiveness Assessment --

8.3.4. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

8.3.5. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

8.3.6. Accounting Entries --

8.3.7. Concluding Remarks --

8.4. Case Study: Hedging A Fixed Rate Foreign Currency Liability with a Receive-Fixed Pay-Fixed Cross-Currency Swap --

8.4.1. Background Information --

8.4.2. Hedging Relationship Documentation --

8.4.3. Hedge Effectiveness Assessment.

Note continued: 8.4.4. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

8.4.5. Fair Valuations, Effective/Ineffective Amounts and Cash Flow Calculations --

8.4.6. Accounting Entries --

8.4.7. Concluding Remarks --

9.1. Recognition of Equity Investments In Other Companies --

9.1.1. Hedging Investments Consolidated under Equity Method --

9.1.2. Impairment of Equity Investments --

9.2. Debt Versus Equity Classification of Own Instruments --

9.2.1. Recognition as a Liability --

9.2.2. Recognition as an Equity Instrument --

9.3. Hybrid Securities [2014] Preference Shares From an Issuer's Perspective --

9.3.1. Contractual Discretion --

9.3.2. Economic Compulsion --

9.3.3. Degree of Subordination --

9.3.4. Legal Form --

9.3.5. Entity's Historical Trend or Ability to Make Distributions --

9.4. Convertible Bonds [2014] Issuer's Perspective --

9.4.1. Convertible Bonds Denominated in the Entity's Functional Currency [2014] Fixed for Fixed --

9.4.2. Convertible Bonds Denominated in the Entity's Functional Currency [2014] Fixed for Variable --

9.4.3. Convertible Bonds Denominated in a Foreign Currency --

9.5. Convertible Bonds [2014] Investor's Perspective --

9.6. Derivatives on Own Equity Instruments --

9.6.1. Hedging Own Equity Instruments --

9.6.2. Derivatives on Own Equity Instruments --

9.7. Case Study: Accounting For A Stock Lending Transaction --

9.7.1. Accounting Entries --

9.7.2. Final Remarks --

9.8. Case Study: Accounting for a Mandatory Convertible Bond from an Issuer's Perspective --

9.8.1. Accounting for a Fixed Parity Mandatory Convertible Bond --

9.8.2. Accounting for a Variable Parity Mandatory Convertible Bond --

9.9. Case Study: Accounting for a Convertible Bond from an Issuer's Perspective --

9.9.1. Accounting for a Fixed-for-Fixed Convertible Bond --

9.9.2. Accounting for a Fixed-for-Variable Convertible Bond --

9.10. Case Study: Hedging Step-Up Callable Perpetual Preference Shares --

9.10.1. Accounting versus Credit Impact --

9.10.2. The Hedging Problem --

9.10.3. Accounting Entries --

9.10.4. Concluding Remarks --

9.11. Case Study: Base Instruments Linked To Debt Instruments --

9.12. Case Study: Parking Shares Through a Total Return Swap --

9.12.1. Asset Monetisation Strategy --

9.12.2. Accounting Entries --

9.13. Case Study: Hedging an Equity Investment with a Put Option --

9.13.1. Accounting Treatment of the Put Time Value when Excluded from the Hedging Relationship --

9.13.2. Accounting Treatment of the Put Time Value when Included in a Hedging Relationship --

9.14. Case Study: Selling A Forward on Own Shares --

9.14.1. Accounting Treatment of a Physically Settled Only Forward on Own Shares --

9.14.2. Accounting Treatment of a Forward on Own Shares Treated as a Derivative --

10.1. Types And Terminology of Stock-Based Compensation Plans --

10.1.1. Main Equity-Based Compensation Plans --

10.1.2. Terminology --

10.2. Accounting for Equity-Based Compensation Plans --

10.2.1. Vesting and Non-vesting Conditions --

10.2.2. Accounting for Stock Option Plans --

10.2.3. Accounting for Stock Appreciation Rights --

10.3. Case Study: ABC's Share-Based Plans --

10.3.1. Main Terms --

10.3.2. Accounting for ABC's Stock Option Plan --

10.3.3. Accounting for ABC's Stock Appreciation Rights --

10.4. Main SOP/SAR Hedging Strategies --

10.4.1. Underlying Risks in SOPs and SARs --

10.4.2. Hedging with Treasury Shares --

10.4.3. Hedging with Equity Swaps --

10.4.4. Hedging with an Enhanced Equity Swap --

10.4.5. Hedging with Standard Call Options --

10.5. Case Study: Hedging a Stock Option Plan with an Equity Swap --

10.6. Case Study: Hedging an SAR Plan with a Call --

11.1. Main Commodity Underlyings --

11.2. Lease, Derivative and Own-Use Contracts --

11.2.1. Definitions of Lease, Derivative and Own-Use Contracts --

11.2.2. Use of Similar Contracts for both Own-Use and Trading Purposes --

11.3. Categorisation According to Settlement Terms --

11.3.1. Physically Settled Commodity Contracts --

11.3.2. Net Settled Commodity Contracts --

11.3.3. Commodity Contracts with Choice of Physical Delivery or Net Settlement --

11.4. Case Study: Hedging Gold Production with a Forward [2014] Own-Use Application --

11.5. Case Study: Raising Financing Through a Gold Loan --

11.6. Case Study: Hedging a Silver Purchase Firm Commitment with a Forward [2014] Fair Value Hedge --

11.6.1. Hedging Strategy --

11.6.2. Hedging Relationship Documentation --

11.6.3. Hedge Effectiveness Assessment --

11.6.4. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

11.6.5. Fair Valuations of Hedging Instrument and Hedged Item --

11.6.6. Accounting Entries --

11.7. Case Study: Hedging Commodity Inventory with Futures --

11.7.1. Recognition of Inventories according to IAS 2 --

11.7.2. Applying Hedge Accounting to Inventory --

11.7.3. Background Information --

11.7.4. Hedging Relationship Documentation --

11.7.5. Hedge Effectiveness Assessment --

11.7.6. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

11.7.7. Fair Valuations of Hedging Instrument and Hedged Item --

11.7.8. Accounting Entries --

11.8. Case Study: Hedging a Highly Expected Purchase Of Oil With Futures and an FX Forward [2014] Cash Flow Hedge --

11.8.1. Background Information --

11.8.2. Hedging Relationship Documentation --

11.8.3. Hedge Effectiveness Assessment --

11.8.4. Hedge Effectiveness Assessment Performed at Hedging Relationship Inception --

11.8.5. Fair Valuations of Hedging Instrument and Hedged Item --

11.8.6. Accounting Entries --

11.9. Case Study: Airline Jet Fuel Consumption Hedge With Jet Fuel and Crude Oil [2014] Risk Component --

11.9.1. Background Information --

11.9.2. Hedging Risk Components --

11.9.3. Hedging Relationship Documentation --

11.9.4. Hedge Effectiveness Assessment --

11.9.5. Hedge Effectiveness Assessment Performed at the Start of the Hedging Relationship --

11.9.6. Fair Valuations and Accounting Entries on 30 June 20X5 --

11.9.7. Concluding Remarks --

12.1. Inflation Markets [2014] Main Participants and Indices --

12.1.1. Inflation Market Participants --

12.1.2. Measuring Inflation from Indices --

12.1.3. Main Inflation Indices --

12.1.4. Components of a Bond Yield and the Fisher Equation --

12.1.5. Breakeven Inflation --

12.2. Inflation-Linked Bonds --

12.3. Inflation Derivatives --

12.3.1. Zero-Coupon Inflation Swaps --

12.3.2. Non-cumulative Periodic Inflation Swaps --

12.3.3. Cumulative Periodic Inflation Swaps --

12.3.4. Inflation Caps and Floors --

12.4. Inflation Risk Under IH(S 9 --

12.4.1. Hybrid Instruments --

12.4.2. Hedging Inflation as a Risk Component --

12.5. Case Study: Hedging Revenues Linked To Inflation --

12.5.1. Background --

12.5.2. Hedging Relationship Documentation --

12.5.3. Hedge Effectiveness Assessment [2014] Hypothetical Derivative --

12.5.4. Hedge Effectiveness Assessment Performed at Start of the Hedging Relationship --

12.5.5. Fair Valuations of the ILS and the Hypothetical Derivative --

12.5.6. Accounting Entries --

12.5.7. Concluding Remarks --

12.6. Matching An Inflation-Linked Asset with a Floating Rate Liability --

13.1. Positive Influence on The Profit or Loss Statement --

13.2. Substantial Operational Resources --

13.3. Limited Access to Hedging Alternatives --

13.4. Risk of Reassessment of Highly Probable Transactions --

13.5. Low Compatibility With Portfolio Hedging --

13.6. Final Remarks.