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GAAP.RUNewsIFRIC issues guidance on hedges of a net investment in a foreign operation

IFRIC issues guidance on hedges of a net investment in a foreign operation

Publication date: 4 July 2008

The IFRIC was asked for guidance on accounting for the hedge of a net investment in a foreign operation in an entity’s consolidated financial statements. Practice has diverged as a result of differing views on which risks are eligible for hedge accounting according to International Financial Reporting Standards (IFRSs).

The International Financial Reporting Interpretations Committee (IFRIC) issued an Interpretation, IFRIC 16 “Hedges of a Net Investment in a Foreign Operation”, desciribing how to account hedging instruments and hedged items under existing International Financial Reporting Standards (IFRSs), like IAS 39 “Financial Instruments: Recognition and Measurement” and IAS 21 “The Effects of Changes in Foreign Exchange Rates”, for example, because some aspects of consolidated financial statements concerning interrelation of functional currency and presentation currency, were unclear - Robert Garnett commented.