What is a highly probable forecast transaction?

What is a highly probable forecast transaction?
It is important to note that not all forecast transactions qualify for hedge accounting. Forecasts must be highly probable to qualify for hedge accounting (highly probable indicates a much greater likelihood of happening than the term ‘more likely than not’). An assessment based on management intention is not sufficient to prove that forecast is highly probable. This has to be assessed based on verifiable facts such as the history of executing the transactions, amount of the forecast transaction involved, the financial and operating capacity of the entity, the penalty/loss for non-execution of the forecast transaction, the percentage of the forecast transaction in terms of the entity’s historical transactions.




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