Implementation of hedge accounting is aimed to reduce the earning volatility of the Company and to comply with the matching of the principle. However, there are some disadvantages in associated with Hedge Accounting:
- the hedge relationship has to be highly effective in order to qualify for hedge accounting
- high monitoring costs incurred from closely and constant moniotoring
- high documentation costs ( substantive documentations are required to support the hedge)
These factors are discouraging the Company from adopting hedge accounting.
Showing posts with label Auditing- Hedge Accounting. Show all posts
Showing posts with label Auditing- Hedge Accounting. Show all posts
Wednesday, September 10, 2008
Tuesday, June 19, 2007
#8 Impact of IAS 39/FRS 39 on Staff Loan & Inter-co Loan
After the implementation of FRS 39, inter-company loans & staff loans borrowed at preferential rates, the fair value of the consideration given would not be the same as the actual amount (cash) given. In fact, the fair value of such loans is the present value (NPV) of all expected future cash receipts discounted at market interest rate ( estimated at the time of disbursement) for a similar loan.
After the discounting process with market interest rate, the present value will be lower than its actual amount given; the difference is not a financial asset unless it qualifies for recognition as an asset under another applicable standard (e.g. FRS 38 Intangible Assets)
After the discounting process with market interest rate, the present value will be lower than its actual amount given; the difference is not a financial asset unless it qualifies for recognition as an asset under another applicable standard (e.g. FRS 38 Intangible Assets)
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