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HMRC internal manual

Corporate Finance Manual

Accounting for corporate finance: hedging: non-qualifying hedged items:

This guidance applies to companies which apply IFRS, New UK GAAP or FRS 26.

Items which cannot be designated hedged items

Certain items cannot be designated as hedged items.

  • An entity’s own equity instruments;
  • Derivatives (except purchased options as the hedged item in a fair value hedge where a written option is the hedging instrument);
  • A net position (e.g. the net of all fixed rate assets and fixed rate liabilities), rather than a specific item;
  • General business risks - for example a firm commitment to acquire a business in a business combination cannot be a hedged item, except for foreign exchange risk, because these other risks cannot be specifically identified and measured.