Practical guide on general hedge accounting Dec 2013 | Page 7

Practical guide

2.2.3. Net investment hedge
What remains the same?
An entity might have overseas subsidiaries, associates, joint ventures or branches (‘foreign operations’). It
might hedge the currency risk associated with the translation of the net assets of these foreign operations into
the parent entity’s functional currency.
The amount of a net investment in a foreign operation under IAS 21 is the reporting entity’s interest in the net
assets of that operation, including any recognised goodwill. Exchange differences arising on the consolidation of
these net assets are deferred in equity until the foreign operation is disposed of or liquidated. They are
recognised in P&L, on disposal or liquidation, as part of the gain or loss on disposal.
The foreign currency gains or losses on the hedging instrument are deferred in OCI, to the extent that the hedge
is effective, until the subsidiary is disposed of or liquidated, when they become part of the gain or loss
on disposal.
What has changed?
No changes are introduced by IFRS 9.

General hedge accounting

PwC  5