Hedge accounting principle

Hedge accounting principles of the GN is not mandatory. If an entity decides not to use
hedge accounting principles, it should account for derivatives at fair value with changes in fair value (gains or losses) being recognised in the statement of profit and loss.Fair value in the context of derivative contracts represents the ‘exit price’ i.e. the price that would be paid to transfer a liability or the price that would be received when transferring an asset to a knowledgeable, willing counterparty.If an entity decides to apply hedge accounting principles of the GN, it should be able to clearly identify its risk management objective, the risk that it is hedging, how it will measure the derivative instrument if its risk management.






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