IFRIC Interpretation 16: Hedges of a net investment in a foreign operation

IFRIC 16 Hedges of a Net Investment in a Foreign Operation was developed by the International Financial Reporting Interpretations Committee and issued by the International Accounting Standards Board in July 2008. Its effective date was 1 October 2008. | IFRIC 16 IFRIC Interpretation 16 Hedges of a Net Investment in a Foreign Operation IFRIC 16 Hedges of a Net Investment in a Foreign Operation was developed by the International Financial Reporting Interpretations Committee and issued by the International Accounting Standards Board in July 2008. Its effective date was 1 October 2008. © IASCF 2631 IFRIC 16 CONTENTS paragraphs IFRIC INTERPRETATION 16 HEDGES OF A NET INVESTMENT IN A FOREIGN OPERATION REFERENCES BACKGROUND 1–6 SCOPE 7–8 ISSUES 9 CONSENSUS 10–17 Nature of the hedged risk and amount of the hedged item for which a hedging relationship may be designated 10–13 Where the hedging instrument can be held 14–15 Disposal of a hedged foreign operation 16–17 EFFECTIVE DATE 18 TRANSITION 19 APPENDIX Application guidance ILLUSTRATIVE EXAMPLE BASIS FOR CONCLUSIONS 2632 © IASCF IFRIC 16 IFRIC Interpretation 16 Hedges of a Net Investment in a Foreign Operation (IFRIC 16) is set out in paragraphs 1–19 and the Appendix. IFRIC 16 is accompanied by an illustrative example and a Basis for Conclusions. The scope and authority of Interpretations are set out in paragraphs 2 and 7–17 of the Preface to International Financial Reporting Standards. © IASCF 2633 IFRIC 16 IFRIC Interpretation 16 Hedges of a Net Investment in a Foreign Operation References • IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors • IAS 21 The Effects of Changes in Foreign Exchange Rates • IAS 39 Financial Instruments: Recognition and Measurement Background 1 Many reporting entities have investments in foreign operations (as defined in IAS 21 paragraph 8). Such foreign operations may be subsidiaries, associates, joint ventures or branches. IAS 21 requires an entity to determine the functional currency of each of its foreign operations as the currency of the primary economic environment of that operation. When translating the results and financial position of a foreign operation into a .