Document ID: chunk:federal_register_of_legislation:F2021C00192:body:0:p45
Version: federal_register_of_legislation:F2021C00192
Segment Type: other
Provision Reference: 
Character Range: 113970–117989

designates CU8 million as the hedged amount.
IE20 Entity A decides to adjust the hedging instrument by designating only a proportion of the original swap as the hedging instrument. Accordingly, it designates as the hedging instrument CU8 million or 40 per cent of the notional amount of the original swap with a remaining life of two months and a fair value of CU18,963.[14]  It also complies with the other designation requirements in paragraphs 88(a) and AG119 of the Standard. The CU12 million of the notional amount of the swap that is no longer designated as the hedging instrument is either classified as held for trading with changes in fair value recognised in profit or loss, or is designated as the hedging instrument in a different hedge.[15]
IE21 As at 1 February 20X1 and after accounting for the sale of assets, the separate line item in the statement of financial position is CU41,718 (CU45,511 – CU3,793), which represents the cumulative change in fair value of CU17.6 million[16] of assets. However, as at 1 February 20X1, Entity A is hedging only CU8 million of assets that have a cumulative change in fair value of CU18,963.[17] The remaining separate line item in the statement of financial position of CU22,755[18] relates to an amount of assets that Entity A still holds but is no longer hedging. Accordingly Entity A amortises this amount over the remaining life of the time period, ie it amortises CU22,755 over two months.
IE22 Entity A determines that it is not practicable to use a method of amortisation based on a recalculated effective yield and hence uses a straight-line method.
 End of month 2 (28 February 20X1)
IE23 On 28 February 20X1 when Entity A next tests effectiveness, LIBOR is unchanged. Entity A does not revise its prepayment expectations. The fair value of the designated interest rate swap with a notional principal of CU8 million is (CU9,518)[19] (the swap is a liability). Also, Entity A calculates the fair value of the CU8 million of the hedged assets as at 28 February 20X1 as CU8,009,518.[20]
IE24 Entity A makes the following accounting entries relating to the hedge in this time period:

Dr                                                                                                                                             Cash                               CU71,707
                                                                                                                                               Cr                                 Profit or loss (interest income)                              CU71,707
To recognise the interest received on the hedged amount (CU8 million).
Dr                                                                                                                                             Profit or loss (interest expense)  CU71,707
                                                                                                                                               Cr                                 Profit or loss (interest income)                              CU62,115
                                                                                                                                               Cr                                 Cash                                                          CU9,592
To recognise the interest received and paid on the portion of the swap designated as the hedging instrument (CU8 million).
Dr                                                                                                                                             Derivative liability               CU9,445
                                                                                                                                               Cr                                 Profit or loss (gain)                                         CU9,445
To recognise the change in the fair value of the portion of the swap designated as the hedging instrument (CU8 million) (CU9,518