Notes on IFRS vs ASPE Hedge Accounting (ASPE 42.5 and 42.5a)

Which of the following statements best describes hedge accounting for ASPE and IFRS when the gross method is used?

Under ASPE, a forward contract is not recognized until it matures. under IFRS, a forward contract is recognized when it is initiated.

Which of the following statements best describes accounting for hedges under IFRS and ASPE?

The conditions to use hedge accounting are different between IFRS and ASPE, and there are some differences in accounting treatment

Under ASPE, in which of the following situations is hedge accounting permitted?

An interest rate swap used to hedge interest rate risk in a recognized interest-bearing loan payable

Which of the following best describes the conditions that must be met to use hedge accounting for an entity that reports under ASPE?

The hedging relationship must be documented AND the hedging instrument and hedged item must have the same critical terms AND for anticipated transactions, the expected transaction must be probable

On October 15, Fun Foam Inc. (FFI) ordered €250,000 of inventory from a supplier in Bulgaria. The goods are scheduled to be delivered on November 15, and payment in full is due at that time. FFI immediately entered into a forward contract to purchase €250,000 on the scheduled delivery date. The inventory was received, and payment made on November 15. FFI’s year end is October 31, and the company prepares its financial statements in accordance with ASPE. Exchange rate information follows:

Date	Spot rate	Forward rate for delivery on November 15
October 15	€1 = C$1.40	€1 = C$1.3925
October 31	€1 = C$1.38	€1 = C$1.3775
November 15	€1 = C$1.35	€1 = C$1.3500

What is the amount of net foreign exchange gain or loss to be reported on FFI’s income statement for the year ended October 31? FFI elects to use hedge accounting and this transaction meets the required conditions.

No foreign exchange gain or loss will be reported