Hedging instruments (paragraphs 72-77)U.K.
Qualifying instruments (paragraphs 72 and 73)U.K.
AG94The potential loss on an option that an entity writes could be significantly greater than the potential gain in value of a related hedged item. In other words, a written option is not effective in reducing the profit or loss exposure of a hedged item. Therefore, a written option does not qualify as a hedging instrument unless it is designated as an offset to a purchased option, including one that is embedded in another financial instrument (for example, a written call option used to hedge a callable liability). In contrast, a purchased option has potential gains equal to or greater than losses and therefore has the potential to reduce profit or loss exposure from changes in fair values or cash flows. Accordingly, it can qualify as a hedging instrument.U.K.
[F1AG95 A financial asset measured at amortised cost may be designated as a hedging instrument in a hedge of foreign currency risk.] U.K.
Textual Amendments
F1 Substituted by Commission Regulation (EU) 2016/2067 of 22 November 2016 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 9 (Text with EEA relevance).
F2AG96. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.
Textual Amendments
F2 Deleted by Commission Regulation (EU) 2016/2067 of 22 November 2016 amending Regulation (EC) No 1126/2008 adopting certain international accounting standards in accordance with Regulation (EC) No 1606/2002 of the European Parliament and of the Council as regards International Financial Reporting Standard 9 (Text with EEA relevance).