Hedge of a foreign currency risk of a firm commitment
BC6.272 IAS 39 allowed an entity to choose fair value hedge accounting or cash flow hedge accounting for hedges of the foreign currency risk of a firm commitment. When developing the 2010 Hedge Accounting Exposure Draft, the IASB considered whether it should continue to allow this choice.
BC6.273 The IASB noted that requiring an entity to apply cash flow hedge accounting for all hedges of foreign currency risk of a firm commitment could result in what some regard as ‘artificial’ other comprehensive income and equity volatility (see paragraphs BC6.353–BC6.354). The IASB also noted that, by requiring an entity to apply cash flow hedge accounting, the lower of test would apply to transactions that already exist (ie firm commitments).
BC6.274 However, the IASB also noted that requiring an entity to apply fair value hedge accounting for all hedges of foreign currency risk of a firm commitment would require a change in the type of h
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