UITF Abstract 46 Hedges of a Net Investment In a Foreign Operation

UITF Abstract 46 has been superseded by FRS 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland for accounting periods beginning on or after 1 January 2015. For more information visit:

• icaew.com/newukgaap

Synopsis

Abstract 46 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

   The consensus requires that FRS 23 should be applied to determine the amount which is reclassified to profit or loss in respect of the hedged item and FRS 26 must be applied to determine the amount in respect of the hedging instrument.

• Read UITF Abstract 46 summary (PDF 79KB/24 pages)

Last updated 21 June 2015