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.