(IFRS) for Small and Medium-sized Entities (SMEs)

IFRS FOR SMES – JULY 2009hedged itemFor the purpose of special hedge accounting by SMEs underSection 12 of this IFRS, a hedged item is:(a)(b)(c)(d)interest rate risk of a debt instrument measured atamortised cost;foreign exchange or interest rate risk in a firmcommitment or a highly probable forecast transaction;price risk of a commodity that it holds or in a firmcommitment or highly probable forecast transaction topurchase or sell a commodity; orforeign exchange risk in a net investment in a foreignoperation.hedging instrumentFor the purpose of special hedge accounting by SMEs underSection 12 of this IFRS, a hedging instrument is a financialinstrument that meets all of the following terms andconditions:(a)(b)(c)(d)it is an interest rate swap, a foreign currency swap, aforeign currency forward exchange contract or acommodity forward exchange contract that is expected tobe highly effective in offsetting a risk identified inparagraph 12.17 that is designated as the hedged risk.it involves a party external to the reporting entity(ie external to the group, segment or individual entitybeing reported on).its notional amount is equal to the designated amount ofthe principal or notional amount of the hedged item.it has a specified maturity date not later than(i)(ii)(iii)the maturity of the financial instrument beinghedged,the expected settlement of the commodity purchaseor sale commitment, orthe occurrence of the highly probable forecastforeign currency or commodity transaction beinghedged.(e)it has no prepayment, early termination or extensionfeatures.An entity that chooses to apply IAS 39 in accounting forfinancial instruments shall apply the definition of hedginginstrument in that standard rather than this definition.highly probableSignificantly more likely than probable.© IASCF 217