Investor Presentaiton
HKAS 1.51(a)
HKAS 1.49
HK Listco Ltd
Financial statements for the year ended 31 December 2023
HKFRS 7.22A
HKFRS 7.22B
(i) Hedges of foreign currency risk in forecast transactions 275
At any point in time the group hedges up to [•]% of its estimated foreign currency exposure in
respect of highly probable forecast sales and purchases, excluding those transactions denominated
in United States dollars which are expected to be entered into by operations with a functional
currency of Hong Kong dollars. Such transactions are currently not hedged under the group's foreign
currency risk management strategy as the group currently considers the risk of movements in
exchange rates between the Hong Kong dollar and the United States dollar to be insignificant.
The group uses forward exchange contracts to manage its currency risk until the settlement date of
foreign currency receivables or payables. The group designates those forward exchange contracts as
hedging instruments in cash flow hedges and does not separate the forward and spot element of a
forward exchange contract but instead designates the forward exchange contract in its entirety279 in
a hedging relationship. Correspondingly, the hedged item is measured based on the forward
exchange rate.
The group applies a hedge ratio of 1:1 and determines the existence of an economic relationship
between the forward exchange contracts and the highly probable forecast transactions based on
their currency amounts and the timing of their respective cash flows. The main sources of
ineffectiveness in these hedging relationships are:
(i) the effect of the counterparty's and the group's own credit risk on the fair value of the
forward exchange contracts which is not reflected in the change in the value of the hedged
cash flows attributable to the forward rate; and
HKFRS 7.23A & 23B
HKFRS 9.6.2.4(b)
279
(ii)
changes in the timing of the hedged transactions.
The following table details the forward exchange contracts that have been designated as cash flow
hedges of the group's highly probable forecast transactions at the end of the reporting period:
2023
2022
Foreign
currency
Hong Kong
'000
dollar
$'000
Foreign
currency
Hong Kong
dollar
'000
$'000
Notional amount
- Buy [foreign currency X]
[●]
[♥]
[●]
Carrying amount (note)
-Asset
- Liability
Note:
2023
2022
$'000
$'000
804
1,465
(40)
(20)
Forward exchange contract assets and liabilities are included in the "Derivative financial instruments" (note 18).
The forward exchange contracts have a maturity of less than one year from the reporting date and
have an average exchange rate of [●] between [foreign currency X) and Hong Kong dollar (2022: [●]).
Entities may also choose to separate the spot and forward element of a forward contract and designate only the change in
the value of the spot element as the hedging instrument.
180
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