Income Tax Assessment Act 1997



Division 230 - Taxation of financial arrangements  

Subdivision 230-E - Hedging financial arrangements method  

SECTION 230-355   Recording requirements  

The requirement of this section is that you must make, or have in place, a record that:

(a) contains a description of the following:

(i) the *hedging financial arrangement in relation to which the election is made;

(ii) the nature of the risk or risks being hedged;

(iii) the *hedged item or items;

(iv) how you will assess the effectiveness of hedging the risk in reducing your exposure to changes in the fair value of the hedged item or items or cash flows or foreign currency exposure attributable to them;

(v) the risk management objective for, and the risk management strategy to be followed in, acquiring, creating or applying the arrangement; and

(b) contains any further details that the *accounting principles require, by way of documentation, for an arrangement to be recorded in a financial report as a hedging instrument; and

(c) sets out the terms of the determinations you make under section 230-360 .

To avoid doubt, paragraph (b) applies even if the arrangement is not recorded in your financial report as a hedging instrument.

To avoid doubt, the record may consist of a single document or 2 or more documents.

The record must be made or in place:

(a) at, or soon after, the time when you create, acquire or apply the *hedging financial arrangement; or

(b) at such other time as is provided for in the regulations for the purposes of this paragraph.

The description must be sufficiently precise and detailed that the following are clear:

(a) that the risk in respect of the particular *hedged item or items was the one hedged by the *hedging financial arrangement;

(b) the extent to which the risk was hedged;

(c) that the rights and/or obligations comprising the hedging financial arrangement were in fact those created, acquired or applied for the purpose of hedging the risk.

If a *financial arrangement is a *hedging financial arrangement under subsection 230-335(2) or (3) , the following requirements must be met in addition to the requirements of subsections (1), (3) and (4):

(a) you must make or have in place, at, or soon before or soon after, the time when you create, acquire or apply the arrangement, a record that sets out:

(i) a statement of why, and the way in which, the arrangement operates commercially or economically as a hedge of the *hedged item or items; and

(ii) the reasons why the arrangement does not satisfy the requirements of the principles or standards referred to in paragraph 230-315(2)(a) to be a hedging instrument;

(b) you must, at the end of each income year during which you have the arrangement, make a record of the accumulated gains and/or losses (whether realised or unrealised) as at the end of that income year from the arrangement or arrangements relating to the hedged item or items that are yet to be included in your assessable income or allowed to you as deductions;

(c) you must have, at the time when you create, acquire or apply the arrangement, a record that sets out your risk management policies and practices;

(d) you must have in place, at the time when you create, acquire or apply the arrangement, internal risk management systems and controls that record the arrangement and the hedged item or items.

For the purposes of paragraph (5)(b), you must assume that:

(a) all the gains from the *financial arrangement would be assessable income; and

(b) all the losses from the financial arrangement would be allowed to you as deductions.

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