Effectiveness assessment
BC6.230 To qualify for hedge accounting in accordance with IAS 39, a hedge had to be highly effective, both prospectively and retrospectively. Consequently, an entity had to perform two effectiveness assessments for each hedging relationship. The prospective assessment supported the expectation that the hedging relationship would be effective in the future. The retrospective assessment determined that the hedging relationship had been effective in the reporting period. All retrospective assessments were required to be performed using quantitative methods. However, IAS 39 did not specify a particular method for testing hedge effectiveness.
BC6.231 The term ‘highly effective’ referred to the degree to which the hedging relationship achieved offsetting between changes in the fair value or cash flows of the hedging instrument and changes in the fair value or cash flows of the hedged item attributable to the hedged risk during the hedge period. In accordance wit
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