This paper covers the application of the TOFA hedging method to hedging of net investments in foreign operations, exempt dividend income and interest rate hedges through worked examples to illustrate:
- identification of the appropriate hedged item
- the contemporaneous documentation required
- how effectiveness is tested
- what the different book and tax treatment means for the ineffective portion
- other differences between book and tax treatment
- what happens when things change: effectiveness, consolidation and accounting changes.