Part 7Derivative contracts

Chapter 13General and supplementary provisions

Other general definitions

707“Hedging relationship”

1

This section applies for the purposes of this Part.

2

A company has a “hedging relationship” between a relevant contract (“the hedging instrument”) and an asset or liability (“the hedged item”) so far as condition A or B is met.

3

Condition A is that the hedging instrument and the hedged item are designated as a hedge by the company.

4

Condition B is that—

a

the hedging instrument is intended to act as a hedge of the exposure to changes in fair value of the hedged item which is attributable to a particular risk and could affect the profit or loss of the company, and

b

the hedged item is an asset or liability recognised for accountancy purposes or is an identified portion of such an asset or liability.

5

For the purposes of subsections (2) and (4), the liabilities of a company include its own share capital.