FINANCIAL

INSTRUMENTS
HEDGING

• Hedging is a method of offsetting a potential financial loss or the structuring of a transaction to

reduce riak involving financial instrument

Par. 96 of PPSAS 29 provides the 3 types of hedging relationships:

A. Fair value hedge
B. Cash flow hedge
C. Hedge of a net investment in a foreign cporporation

A hedge or hedging relationship has two components, namely hedging instruments and
hedged item/
HEDGING INSTRUMENT

• A designated derivative or a designated non-derivative financial asset or non-derivative

financial liability whose fair value or cash flows are expected to offset changes in the fair value
or cash flows of designated hedged item.
HEDGING ITEM

Hedged item is an asset, liability, firm commitment, highly probable forecast transaction or net
investment in a foreign operation that (a) exposes that entity to risk of changes in fair value or future
cash flows and (b) is designated as being hedged.
PRESENTATION OF FINANCIAL
INSTRUMENTS
• The issuer of a financial instrument shall classify the instrument, or its component parts, on
initial recognition as a financial asset, a financial liability or an equity instrument in accordance
with the substance of the contractual arrangement and the definitions of a financial asset, a
financial liability and an equity instrument. (Par. 13, PPSAS 28)
ILLUSTRATIVE ACCOUNTING ENTRIES
ON FINANCIAL ASSETS
PRESENTATION IN THE FINANCIAL
STATEMENTS
Financial instruments accounts shall appear in the Statement of Financial Position as follows.

ABC Company
Condensed Statement of Financial Position
As at December 31, 2014
Assets Note 2015

Current Assets
Cash and Cash Equivalents 6 xxx

Investments 7 xxx

Receivables 8 xxx
Non-Current Assets

Investments 7 xxx

Receivables 8 xxx

Liabilities

Current Liabilities

Financial Liabilities 5 xxx

Non-Current Liabilities

Financial Liabilities 15 xxx

FORMS AND REPORTS TO BE
PREPARED AND MAINTAINED
• The following schedules and forms shall be prepared and maintained by the agencies relative to
their financial instruments accounts:

a.To be prepared by all National Government Agencies

1. Schedule of Accounts Payable
2. Schedule of Accounts Receivable
3. Registry of Accounts Written-Off

b. The BTr shall maintain records on loan availments and repayments, grant availments and
utilizations, and guaranteed loans using its computerized application.