IFRIC 16 Hedges of a Net Investment in a Foreign Operation
Published July 2008. Effective 1 October 2008 (1 July 2009 for EU preparers).
Contents
Free to view
- Synopsis (including link to unaccompanied version of IFRIC 16)
- IFRSs referred to
Financial Reporting Faculty members only
Synopsis
IFRIC 16 provides guidance on three main issues:
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Foreign currency risk
A parent company may designate as a hedged risk only those exchange differences which arise from a foreign operation using a different functional currency from its own. The presentation currency does not expose an entity to risks which may be hedged.
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Hedging instrument
The hedging instrument in a hedge of a net investment in a foreign operation may be held by any entity or entities within the group.
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Reclassification adjustments on disposal of the investment
IFRIC 16 requires that IAS 21 should be applied to determine the amount which is reclassified to profit or loss in respect of the hedged item and IFRS 9 must be applied to determine the amount in respect of the hedging instrument.
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Which version of the interpretation?
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IFRSs referred to by IFRIC 16
- IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors
- IAS 21 The Effects of Changes in Foreign Exchange Rates
- IFRS 9 Financial Instruments
This page was last updated 4 February 2022.