All entities apply hedging strategies to reduce their interest rate risks and foreign currency exchange risks.

Survey findings

Consumer product companies in our survey showed the following trends about hedge accounting:

• All entities apply hedging strategies to reduce their interest rate risks and foreign currency exchange risks. Some entities also engage in hedging commodity price risks.
• Although all the entities in our survey are involved in some economic hedging, not all entities apply hedge accounting, due to either the strict requirements of IAS 39 or to the administrative burden of hedge accounting and documentation requirements. The proposed changes by IFRS 9 will enable some entities to apply hedge accounting to more hedged items.
• Those entities applying hedge accounting currently present comprehensive information about the types of risks hedged and the instruments used for hedging.
• A number of entities also present information about derivative financial instruments used in hedging commodity price risks.
• Only a few CP entities provide information on accounting for embedded derivatives, and even fewer present details about the testing of hedge effectiveness.

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