ipsas 29—financial instruments: recognition and measurement - IFAC

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FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT remaining FC200 of anticipated cash outflow in B and the anticipated cash inflow of FC200 in A. This relationship does not qualify for hedge accounting under IPSAS 29 and this time there is only a partial offset between gains and losses on the internal derivatives that hedge these amounts. At the end of months 1 and 2, the following entries are made in the individual or separate financial statements of A, B and TC. Entries reflecting transactions or events within the economic entity are shown in italics. A’s entries (all at the end of month 1) Dr Foreign exchange loss LC10 Cr Receivables LC10 Dr Internal contract TC LC10 Cr Internal gain TC LC10 Dr Internal contract TC LC20 Cr Net assets/equity LC20 B’s entries At the end of month 1: Dr Payables LC5 Cr Foreign exchange gain LC5 Dr Internal loss TC LC5 Cr Internal contract TC LC5 Dr Net assets/equity LC50 Cr Internal contract TC LC50 At the end of month 2: Dr Inventory LC50 Cr Net assets/equity LC50 TC’s entries (all at the end of month 1) Dr Internal loss A LC10 Cr Internal contract A LC10 Dr Internal loss A LC20 Cr Internal contract A LC20 Dr Internal contract B LC5 Cr Internal gain B LC5 Dr Internal contract B LC50 Cr Internal gain B LC50 Dr Foreign exchange loss LC25 Cr Forward LC25 1207 IPSAS 29 IMPLEMENTATION GUIDANCE PUBLIC SECTOR
FINANCIAL INSTRUMENTS: RECOGNITION AND MEASUREMENT TOTAL (for the internal derivatives) A B Total LC LC TC Surplus or deficit (fair value hedges) 10 (5) 5 Net assets/equity (cash flow hedges) 20 – 20 Basis adjustment (inventory) – (50) (50) Total 30 (55) (25) Combining these amounts with the external transactions (i.e., those not marked in italics above) produces the total net balances before elimination of the internal derivatives as follows: IPSAS 29 IMPLEMENTATION GUIDANCE 1208 Debit Credit Receivables – LC10 Payables LC5 – Forward contract – LC25 Net assets/equity – LC20 Basis adjustment (inventory) LC50 – Gains and losses – – Internal contracts – – For the consolidated financial statements, the following designations are made at the beginning of month 1: • The payable of FC50 in B is designated as a hedge of the first FC50 of the highly probable future revenues in A. Therefore, at the end of month 1, the following entry is made in the consolidated financial statements: Dr Payables LC5; Cr Net assets/equity LC5. • The receivable of FC100 in A is designated as a hedge of the first FC100 of the highly probable future expenses in B. Therefore, at the end of month 1, the following entries are made in the consolidated financial statements: Dr Net assets/equity LC10; Cr Receivable LC10; and at the end of month 2, Dr Inventory LC10; Cr Net assets/equity LC10. • The external forward contract on FC250 in TC is designated as a hedge of the next FC250 of highly probable future expenses in B. Therefore, at the end of month 1, the following entry is made in the consolidated financial statements: Dr Net assets/equity LC25; Cr External forward contract LC25; and at the end of month 2, Dr Inventory LC25; Cr Net assets/equity LC25. The total net balances after elimination of the accounting entries relating to the internal derivatives are as follows:
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IPSAS 29—FINANCIAL INSTRUMENTS: R
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FINANCIAL INSTRUMENTS: RECOGNITION
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Introduction FINANCIAL INSTRUMENTS:
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ipsas 29—financial instruments: recognition and measurement - IFAC

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