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Amendment to IAS 39 on intragroup hedges

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14 Apr 2005

The IASB has issued an amendment to IAS 39 'Financial Instruments: Recognition and Measurement' to permit the foreign currency risk of a highly probable intragroup forecast transaction to qualify as the hedged item in a cash flow hedge in consolidated financial statements – provided that the transaction is denominated in a currency other than the functional currency of the entity entering into that transaction and the foreign currency risk will affect consolidated financial statements.

The amendment also specifies that if the hedge of a forecast intragroup transaction qualifies for cash flow hedge accounting, any gain or loss that is recognised directly in equity in accordance with the hedge accounting rules in IAS 39 must be reclassified into profit or loss in the same period or periods during which the foreign currency risk of the hedged transaction affects consolidated profit or loss.

The amendment is effective 1 January 2006, although earlier application is encouraged. This amendment removes a difference with US GAAP that was created when IAS 39 was amended in December 2003, because that amendment did not permit hedge accounting for forecast intragroup transactions.

Click for Press Release (PDF 55k).


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