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IFRIC 16 Hedges of a Net Investment in a Foreign Operation

Published July 2008. Effective 1 October 2008 (1 July 2009 for EU preparers).

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Synopsis

IFRIC 16 provides guidance on three main issues:

  1. 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.

  2. 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.

  3. 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 IAS 39 must be applied to determine the amount in respect of the hedging instrument.

Which version of the interpretation?

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Annual period starts Effective version of standard Notes on amendments
On or after 1 January 2018 IFRIC 16 2019 Required Standards Includes amendment 1
1 January 2016 – 31 December 2017 IFRIC 16 2017 Required Standards Does not include the amendment

Required Standards book for a particular year assumes that there is no early application of issued but not yet effective IFRSs; The Issued Standards book assumes early application of all issued IFRSs.

For the latest version of the interpretation, and where the amendment is to be adopted early, refer to IFRIC 16 2019 Required Standards.

Recent amendments

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1. IFRS 9 Financial Instruments amendment to IFRIC 16

Effective for annual periods beginning on or after 1 January 2018. Earlier application is permitted.

IFRS 9 amends IFRIC 16 to refer to IFRS 9 and its requirements rather than IAS 39.