Whether to permit hedge accounting using cash instruments (paras. BC144-BC145)

BC144 In finalising the amendments to IAS 39, the Board discussed whether an entity should be permitted to designate a financial asset or financial liability other than a derivative (ie a 'cash instrument') as a hedging instrument in hedges of risks other than foreign currency risk. The original IAS 39 precluded such designation because of the different bases for measuring derivatives and cash instruments. The Exposure Draft did not propose a change to this limitation. However, some commentators suggested a change, noting that entities do not distinguish between derivative and non‑derivative financial instruments in their hedging and other risk management activities and that entities may have to use a non‑derivative financial instrument to hedge risk if no suitable derivat

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