# Hedge Designation Documentation: [Hedge relationship ID]

> Formal designation and documentation of one hedging relationship at
> its inception, as required for hedge accounting under IFRS 9
> Financial Instruments (paragraph 6.4.1(b)) and, for US GAAP
> reporters, ASC 815 Derivatives and Hedging (paragraph 815-20-25-3).
> It records the risk management objective and strategy, the hedged
> item and risk, the hedging instrument, the hedge ratio, how
> effectiveness is assessed, the sources of ineffectiveness, excluded
> components, accounting entries, ongoing assessment, rebalancing and
> discontinuation. It notes ASU 2025-09 Hedge Accounting Improvements
> (effective for public business entities for fiscal years beginning
> after 2026-12-15) and treats the IASB Risk Mitigation Accounting
> exposure draft (December 2025) as a proposal only. Standards are cited
> by name and paragraph number only. Replace every `[bracketed]` value
> and every row marked *Example*. The worked example is a cash flow
> hedge of forecast USD platform-fee receipts of Corvid Commerce GmbH,
> the German operating subsidiary and treasury centre of the fictional
> Corvid Commerce Group (parent Corvid Commerce Group plc; EUR functional
> currency; IFRS reporter), which carry the group's net long USD
> position from US subscription sales. This is a
> document format, not accounting, financial, tax or legal advice.
> Obtain the standard for the normative text.

<!--
Guidance: How to use this template
- Complete one document per hedging relationship, signed and dated on
  or before the trade date of the hedging instrument. Documentation
  prepared after inception does not support hedge accounting from the
  trade date. Check ASC 815-20-25-3 and ASC 815-20-25-139 to 25-143 for
  any timing relief available to US GAAP reporters (for example private
  companies and the timing of the first quantitative assessment).
- Fill sections 1 to 6 before the trade; sections 7 to 9 at the same
  time; section 10 at each reporting date; section 11 when an event
  occurs. Keep every version in the hedge file.
- Quote the risk management strategy from the FX and Interest Rate
  Hedging Policy (`finance/fx-interest-rate-hedging-policy`) and link
  the Treasury Policy (`finance/treasury-policy`). The strategy is the
  long-term framework; the objective in section 2 is specific to this
  relationship.
- Read the standard itself for every requirement cited here. This
  template gives fields and practice questions; it does not restate the
  standards.
- Related documents: Technical Accounting Memo
  (`finance/technical-accounting-memo`) for judgements that need a full
  analysis, Accounting Policy Manual (`finance/accounting-policy-manual`)
  for the group's policy choices, Financial Statement Disclosure
  Checklist (`finance/financial-statement-disclosure-checklist`),
  Month-End Close Checklist (`finance/month-end-close-checklist`).
-->

## Document control

<!-- Guidance: The designation date and time matter. Record the trade date and time of the instrument and the date and time this document was approved, and keep evidence (system timestamps or signed copies). -->

| Field | Value |
|---|---|
| Document ID | [HDG-DES-2026-001] |
| Hedge relationship ID | [CFH-FX-2026-014] |
| Reporting entity | [Legal entity that applies hedge accounting] *Example:* Corvid Commerce Group plc, consolidated financial statements; the forward is held and the USD platform fee is received by Corvid Commerce GmbH (CC-DE) from Corvid Commerce Inc (CC-US) |
| Accounting framework | [IFRS / US GAAP] |
| Risk management strategy reference | [RMS-FX-01 in TRS-HDG-001] |
| Designation date and time | YYYY-MM-DD hh:mm |
| Trade date of hedging instrument | YYYY-MM-DD |
| Version | [1.0] |
| Status | [Draft / Designated / Rebalanced / Discontinued] |
| Owner | [@group-treasurer] |
| Approvers/reviewers | [@group-financial-controller], [@cfo], [@external-auditor (informed)] |
| Last updated | YYYY-MM-DD |
| Classification | [Internal, confidential] |

### Approvals

| Role | Name | Decision | Date and time |
|---|---|---|---|
| Group treasurer (prepares, confirms risk management objective) | [@name] | [Prepared] | YYYY-MM-DD hh:mm |
| Group financial controller (confirms accounting) | [@name] | [Approve / Reject] | YYYY-MM-DD hh:mm |
| CFO (where required by the hedging policy) | [@name] | [Approve / Reject] | YYYY-MM-DD hh:mm |

### Revision history

| Version | Date | Author | Change |
|---|---|---|---|
| 1.0 | YYYY-MM-DD | [@group-treasurer] | Designation at inception |
| 1.1 | YYYY-MM-DD | [@group-treasurer] | [Rebalancing / Discontinuation / Annual review note] |

## Contents

- [1. Relationship summary](#1-relationship-summary)
- [2. Risk management objective and strategy](#2-risk-management-objective-and-strategy)
- [3. Hedge type and qualifying criteria](#3-hedge-type-and-qualifying-criteria)
- [4. Hedged item and hedged risk](#4-hedged-item-and-hedged-risk)
- [5. Hedging instrument](#5-hedging-instrument)
- [6. Hedge ratio](#6-hedge-ratio)
- [7. Effectiveness assessment](#7-effectiveness-assessment)
- [8. Sources of ineffectiveness](#8-sources-of-ineffectiveness)
- [9. Excluded components and cost of hedging](#9-excluded-components-and-cost-of-hedging)
- [10. Measurement and accounting entries](#10-measurement-and-accounting-entries)
- [11. Rebalancing and discontinuation](#11-rebalancing-and-discontinuation)
- [12. US GAAP supplement](#12-us-gaap-supplement)
- [13. Disclosure links and requirement traceability](#13-disclosure-links-and-requirement-traceability)
- [14. Glossary and references](#14-glossary-and-references)
- [Appendix A. Fields for other hedge types](#appendix-a-fields-for-other-hedge-types)
- [Standard and licence note](#standard-and-licence-note)

## 1. Relationship summary

<!-- Guidance: One table a reviewer can read in a minute. Questions to answer: What is hedged, with what, for which risk, from when to when? Pitfall: a summary that disagrees with the detailed sections; fill it last and check it against them. -->

| Field | Value | Worked example *(Example)* |
|---|---|---|
| Hedge relationship ID | [ID] | CFH-FX-2026-014 |
| Hedge type | [Fair value / Cash flow / Net investment] | Cash flow hedge |
| Hedged risk | [Risk] | Variability in the EUR value of forecast USD receipts caused by changes in the EUR/USD forward rate |
| Hedged item | [Item] | The first USD 1,000,000 of the highly probable April 2027 USD platform fee that CC-US pays CC-DE on 2027-04-30 (forecast about USD 1,333,000, one third of the Q2 2027 forecast of USD 4,000,000) |
| Hedging instrument | [Instrument, ID] | FX forward FWD-26-0871: sell USD 1,000,000, buy EUR 904,322.66 at 1.1058, settlement 2027-04-30 |
| Hedge ratio | [Ratio] | 1:1 (USD 1,000,000 instrument to USD 1,000,000 hedged item) |
| Designation date | YYYY-MM-DD | 2026-11-02 (trade executed 10:42, designation approved 10:15 the same day) |
| Expected end of relationship | YYYY-MM-DD | 2027-04-30 |
| Effectiveness method | [Method] | Qualitative critical terms match; hypothetical derivative for measuring ineffectiveness |
| Excluded components | [None / Forward element / Time value / Currency basis] | None: forward rate method (whole forward designated) |

## 2. Risk management objective and strategy

<!-- Guidance: The strategy is the board-approved framework; the objective is what this relationship achieves within it. Questions to answer: Which policy band does this hedge implement? Why this instrument? What would end the objective? Pitfall: copying the whole hedging policy here; quote the strategy reference and write two to four sentences for the objective. -->

| Field | Entry |
|---|---|
| Risk management strategy | [Quote the strategy ID and summary from the hedging policy] |
| Risk management objective for this relationship | [Specific objective] |
| How the relationship implements the strategy | [Band, layer, instrument choice] |
| Conditions under which the objective would change | [Events] |

*Example:*

| Field | Entry |
|---|---|
| Risk management strategy | RMS-FX-01: hedge forecast foreign-currency receipts and payments of the group's EUR-functional entities (for Corvid, the net long USD position from US subscription sales that reaches CC-DE as the monthly USD platform fee) in layered bands over up to 18 months, using FX forwards and bought options, to give certainty over the budget rate |
| Risk management objective | Fix the EUR value of the first USD 1,000,000 of the April 2027 platform fee received on 2027-04-30. With the May and June forwards of USD 1,000,000 each, the Q2 2027 hedge ratio becomes 3,000,000 / 4,000,000 = 75% (band B2 at the 2026-12-31 report date: 50% to 80%) |
| How it implements the strategy | Monthly layering under the Treasury Committee's November 2026 hedge plan; one forward per monthly fee date; forward chosen because the fee date is fixed by the intragroup agreement and the amount is known with high confidence |
| Conditions that would change the objective | The platform fee switching to EUR invoicing or its rate changing under a transfer pricing review; the April 2027 fee forecast falling below USD 1,000,000 or its settlement moving out of the 30-day window; the hedging policy changing the band |

## 3. Hedge type and qualifying criteria

<!-- Guidance: Confirm each qualifying criterion explicitly, with a short reason. Questions to answer: Is the hedged item eligible? Is the instrument eligible? Is there formal documentation (this document)? Are the effectiveness requirements met? Pitfall: designating a hedge of an intragroup forecast transaction in the consolidated accounts without checking that the FX risk affects consolidated profit or loss. -->

| Criterion | Reference | Met? | Reason *(Example)* |
|---|---|---|---|
| Eligible hedging instrument and hedged item | IFRS 9 para 6.4.1(a); IFRS 9 paras 6.2.1 and 6.3.1 | Yes | External FX forward with a bank; the hedged item is a forecast intragroup transaction, see the next row |
| Forecast intragroup transaction in the consolidated statements | IFRS 9 paras 6.3.5, 6.3.6 and B6.3.5 | Yes (judgement JDG-HDG-01) | The fee is denominated in USD, which is not CC-DE's functional currency (EUR). Its amount is set each month as a fixed share of CC-US's external USD subscription billings, so it is tied to a related external transaction and the FX risk reaches consolidated profit or loss through the EUR value of US subscription revenue. A fixed management charge would not qualify; see 3.1 |
| Formal designation and documentation at inception | IFRS 9 para 6.4.1(b) | Yes | This document, approved before the trade |
| Effectiveness requirements: economic relationship, credit risk not dominant, hedge ratio consistent with risk management | IFRS 9 para 6.4.1(c) and B6.4.1 onwards | Yes | Section 7 |
| Forecast transaction highly probable | IFRS 9 para 6.3.3 | Yes | Section 4.2 |
| Hedge type | IFRS 9 para 6.5.2(b) | Cash flow hedge | Variability in cash flows from a forecast transaction |

### 3.1 Judgement on the intragroup hedged item *(Example)*

JDG-HDG-01. Corvid is net long USD because Corvid Commerce Inc (CC-US) sells subscriptions in USD (FY2027 budget USD 24,640k against USD 4,107k of USD costs, a net USD 20,533k, assumption ASM-014 in the Annual Budget, `finance/annual-budget`). CC-US has USD as its functional currency, so its own sales create no transaction exposure in its books, and in the consolidated statements their EUR value moves only through translation, which cannot be a cash flow hedged item. The exposure becomes a transaction exposure for a EUR entity when CC-US pays CC-DE the monthly USD platform fee under the intragroup licence agreement (forecast USD 16,000k for FY2027). The group financial controller concluded that the fee qualifies as a hedged item in the consolidated statements because it is denominated in a currency other than CC-DE's functional currency and it is directly linked to CC-US's external subscription sales, which are the related external transaction. The reserve is therefore reclassified to revenue in the month in which the related external subscription revenue is recognised (section 10.4).

Record this conclusion in a Technical Accounting Memo (`finance/technical-accounting-memo`) and agree it with the auditor before the first designation, because the qualifying conditions for forecast intragroup transactions are narrow: an intragroup fee that is not tied to an external transaction does not qualify in the consolidated statements, and the group would then either accept the FX result in profit or loss or consider a net investment hedge (Appendix A.2). Review the judgement whenever the intragroup agreement, the fee basis or the transfer pricing policy changes.

## 4. Hedged item and hedged risk

<!-- Guidance: Describe the hedged item precisely enough that, when transactions occur, anyone can tell which ones are hedged. Questions to answer: Which transactions, in which period, how is the layer defined? Is the risk a component (for example only the spot element)? Pitfall: "USD purchases in Q2" without a rule for which transactions count first. -->

### 4.1 Description

| Field | Entry | Worked example *(Example)* |
|---|---|---|
| Nature | [Recognised asset or liability / firm commitment / forecast transaction / net investment] | Forecast transaction |
| Description | [Precise description] | Monthly USD platform fee invoiced by CC-DE to CC-US under intragroup licence agreement ICA-US-2025-01, set as a fixed share of CC-US's external subscription billings for the month and settled on the last business day of the month through the USD intragroup settlement account; April 2027 fee forecast about USD 1,333,000 (Q2 2027 forecast USD 4,000,000) |
| Amount designated | [Amount and layer] | First USD 1,000,000 of the April 2027 fee (a layer of 75% of the month's forecast) |
| Timing | [Date or window] | 2027-04-30; a delay of up to [30] days is treated as the same transaction |
| Hedged risk | [Risk and component] | EUR/USD foreign exchange risk on the forward rate |
| Identification rule | [How actual transactions are matched] | First USD platform-fee receipts from CC-US on or after 2027-04-30 under invoices for the April 2027 billing month, in time order, until USD 1,000,000 is reached |
| Expected accounting on occurrence | [Effect] | No non-financial asset arises; the amount in the cash flow hedge reserve is reclassified to revenue as a reclassification adjustment when the related April 2027 external subscription revenue affects profit or loss (IFRS 9 para 6.5.11(d)(ii)) |

### 4.2 Highly probable evidence

| Evidence | Detail *(Example)* |
|---|---|
| Source of forecast | FY2027 budget v3 and November 2026 rolling forecast: CC-US subscription billings USD 6,160,000 for Q2 2027 and a platform fee of USD 4,000,000 (exposure EXP-USD-2027Q2 in the hedging policy register), of which April about USD 1,333,000 |
| Track record | Last eight quarters: actual platform fee between 95% and 106% of forecast; subscription billings are recurring, with gross revenue retention of about 94% |
| Contractual support | Intragroup licence agreement ICA-US-2025-01 (fee basis and monthly settlement), and the CC-US subscription contracts in force at 2026-10-31 |
| Business confirmation | CC-US finance lead and the head of tax confirmed on 2026-10-30 that no change of fee basis, fee currency or settlement date is planned |
| Hedged share | 75% of the month's forecast, leaving a buffer of about USD 333,000 that absorbs a shortfall of up to 25% in April billings (INEF-02 and INEF-03) |

### 4.3 Writing a hedged item description that works

Write the description for the person who will match receipts to the hedge six months from now, not for the person who traded it. That person needs to know which entity receives, from whom, in which currency, in which window and in which order transactions are counted. A description such as "USD receipts in Q2" fails this test because it does not say whether a May fee paid early counts before an April fee paid late, whether receipts by another subsidiary count at all, or whether an intragroup flow is meant rather than an external one.

Prefer a layer ("the first USD 1,000,000") over a percentage of a total ("75% of the April fee"). A layer stays fully designated if the total falls but remains above the layer, while a percentage shrinks with every change in the forecast and forces a partial discontinuation. Keep a buffer between the layer and the forecast that reflects the forecast's track record; the evidence in 4.2 should justify the size of the buffer, not only the existence of the forecast.

State the timing window and what happens outside it. If settlement can slip, say how many days of slippage still count as the same transaction, and record in section 8 that a slip changes the forward points and is a source of ineffectiveness. Finally, link the description to the exposure register entry used by treasury (here EXP-USD-2027Q2), so that the hedge file, the register and the monthly hedge report all describe the same thing.

## 5. Hedging instrument

<!-- Guidance: Identify the exact trade. Questions to answer: Which trade ID, counterparty and terms? Is the whole instrument designated, or a proportion? Pitfall: designating a net written option or a derivative whose fair value at inception is significantly different from zero without analysing the effect. -->

| Field | Entry | Worked example *(Example)* |
|---|---|---|
| Trade ID | [ID] | FWD-26-0871 |
| Instrument | [Type] | Deliverable FX forward |
| Counterparty and master agreement | [Bank, agreement] | [Bank A], ISDA 2002 Master Agreement, no credit support annex |
| Trade date | YYYY-MM-DD | 2026-11-02 |
| Notional | [Amounts] | Sell USD 1,000,000; buy EUR 904,322.66 |
| Contract rate | [Rate] | 1.1058 USD per EUR (equal to the market forward rate at execution) |
| Settlement date | YYYY-MM-DD | 2027-04-30 |
| Proportion designated | [100% / x%] | 100% |
| Fair value at inception | [Amount] | Nil |
| Dealing entity | [Legal entity that is party to the trade] | Corvid Commerce GmbH (CC-DE), group treasury centre |
| EMIR or other reporting | [Who reports, under which regime] | Reported by [Bank A], an EU financial counterparty, on behalf of CC-DE as a non-financial counterparty below the clearing thresholds under EMIR Article 9(1a); CC-DE provides its LEI and static data. If the dealing entity were the UK parent, the trade would fall under UK EMIR instead |

Contract rate check (Hedging Policy section 7.2): spot 1.0950, USD rate 4.00%, EUR rate 2.00%, 179 days from 2026-11-02 to 2027-04-30.

$$
F = 1.0950 \times \frac{1 + 0.04 \times \frac{179}{360}}{1 + 0.02 \times \frac{179}{360}} = 1.1058
$$

EUR leg: 1,000,000 / 1.1058 = EUR 904,322.66.

## 6. Hedge ratio

<!-- Guidance: The hedge ratio is the quantity of instrument relative to the quantity of hedged item, and it should be the ratio the entity actually uses for risk management. Questions to answer: Why this ratio? Would a different ratio create an imbalance that produces ineffectiveness inconsistent with the purpose of hedge accounting? Pitfall: designating a deliberately skewed ratio to avoid recognising ineffectiveness. -->

| Field | Entry | Worked example *(Example)* |
|---|---|---|
| Quantity of hedging instrument | [Amount] | USD 1,000,000 |
| Quantity of hedged item | [Amount] | USD 1,000,000 |
| Hedge ratio | [Ratio] | 1:1 |
| Basis | [Why] | Same currency pair, notional and date; the risk is identical |
| Consistency with risk management | [Statement and reference] | The Treasury Committee manages the same quantities (IFRS 9 para 6.4.1(c)(iii)) |

## 7. Effectiveness assessment

<!-- Guidance: Assessment is forward-looking and happens at inception and at least at each reporting date or on a significant change in circumstances. Questions to answer: Which method, and why is it appropriate for this hedge? What results would indicate a problem? Pitfall: applying an 80% to 125% test as if it were an IFRS 9 requirement; under IFRS 9 it is not a threshold, though many entities still compute the ratio as information. -->

### 7.1 Requirements and evidence

| Requirement | Method | Result at inception *(Example)* |
|---|---|---|
| Economic relationship between hedged item and instrument | Critical terms comparison (currency pair, notional, date, underlying) | Terms match: values expected to move in opposite directions |
| Effect of credit risk does not dominate value changes | Counterparty rating and exposure review | [Bank A] rated A+; exposure within Treasury Policy limit; credit risk not dominant |
| Hedge ratio consistent with risk management | Section 6 | 1:1, as managed |

### 7.2 Methods available

| Method | When to use | How |
|---|---|---|
| Qualitative critical terms match | Terms of instrument and hedged item match | Compare notional, currency, dates and underlying at inception and each assessment date |
| Dollar offset | Terms differ slightly; need a quantitative indicator | Ratio of cumulative changes in value (below) |
| Regression | Hedged risk and instrument are related but not identical (proxy hedges) | Regress changes in hedged item value on changes in instrument value over a defined history |
| Scenario analysis | Options or complex terms | Simulate both values under market scenarios |

Dollar offset ratio (cumulative, from inception):

$$
\text{DO} = -\frac{\Delta V_{\text{instrument}}}{\Delta V_{\text{hedged item}}}
$$

where $\Delta V_{\text{hedged item}}$ is measured with a hypothetical derivative whose terms match the hedged item and whose fair value at inception is nil.

Regression (practice): estimate $\Delta V_{\text{item}} = \alpha + \beta \, \Delta V_{\text{instrument}} + \varepsilon$ and record the slope, coefficient of determination and the number and frequency of observations. Many US GAAP reporters apply ranges for "highly effective" such as a slope magnitude between 0.80 and 1.25 and a coefficient of determination of at least 0.80; record the thresholds the group uses and their source in its accounting policy.

### 7.3 Assessment schedule

| Date | Method | Result | Prepared by | Reviewed by |
|---|---|---|---|---|
| 2026-11-02 *(Example)* | Critical terms | Terms match; effectiveness requirements met | [@treasury-analyst] | [@group-financial-controller] |
| 2026-12-31 *(Example)* | Critical terms; dollar offset as information | Terms still match; DO 99.6% (section 10) | [@treasury-analyst] | [@group-financial-controller] |
| 2027-03-31 *(Example)* | Critical terms | [Result] | [@name] | [@name] |

## 8. Sources of ineffectiveness

<!-- Guidance: List every expected source, even small ones, because disclosure requires a description by risk category. Questions to answer: What could make the instrument and hedged item move differently? Pitfall: forgetting counterparty credit risk, which affects the derivative's fair value but not the hedged item. -->

| ID | Source | Effect | Mitigation *(Example)* |
|---|---|---|---|
| INEF-01 | Counterparty and own credit risk (credit and debit valuation adjustments) in the forward's fair value | Instrument value differs from hypothetical derivative | Rated counterparty; monitored against limits |
| INEF-02 | Timing difference if the fee is settled on a different date | Different forward points | Identification rule allows up to 30 days; reassess if later |
| INEF-03 | April billings fall so that the fee is below USD 1,000,000 | Over-hedge; part of hedge no longer highly probable | 25% buffer; monthly forecast review |
| INEF-04 | Fair value of instrument not nil at inception (off-market rate) | Initial difference flows through the comparison | Traded at market rate 1.1058 |
| INEF-05 | Discounting differences between instrument and hypothetical derivative | Small differences | Same curves used for both |
| INEF-06 | Transfer pricing adjustment changes the fee rate or the billing base after designation | Fee below the layer, or the link to the external sales weakened | Head of tax informs treasury before any change; reassess JDG-HDG-01 |

## 9. Excluded components and cost of hedging

<!-- Guidance: Decide at inception whether to exclude forward points, option time value or foreign currency basis spread. Questions to answer: Does group policy exclude a component? How is the excluded component accounted for? Pitfall: changing the choice part way through a relationship; the choice is made relationship by relationship at designation. -->

| Component | Choice | Accounting reference | Worked example *(Example)* |
|---|---|---|---|
| Forward element of a forward contract | [Included / Excluded] | IFRS 9 para 6.5.16 (cost of hedging option) | Included (forward rate method) |
| Time value of an option | [Included / Excluded] | IFRS 9 para 6.5.15 | Not applicable |
| Foreign currency basis spread | [Included / Excluded] | IFRS 9 para 6.5.16 | Included |
| US GAAP excluded components | [Amortisation approach / Mark-to-market in earnings] | ASC 815-20 (excluded components) | Not applicable |

## 10. Measurement and accounting entries

<!-- Guidance: Show the numbers at each reporting date: cumulative change in the instrument, cumulative change in the hedged item (hypothetical derivative), the amount in the reserve and any ineffectiveness. Questions to answer: Are the reserve and the ineffectiveness computed on a cumulative basis? Where does the reserve go when the hedged transaction occurs? Pitfall: recycling to profit or loss under IFRS when the hedged transaction creates a non-financial asset; IFRS requires a basis adjustment instead. -->

### 10.1 Conventions

All amounts in EUR to two decimals. EUR/USD quoted as USD per EUR. Discounting at the EUR rate on an ACT/360 basis. Fair values exclude settlement-date bid-offer.

### 10.2 Cash flow hedge reserve (IFRS)

Under IFRS 9 para 6.5.11(a), the reserve is adjusted to the lower, in absolute terms, of the cumulative gain or loss on the instrument and the cumulative change in fair value of the hedged item (both from inception). Any remaining gain or loss on the instrument is ineffectiveness in profit or loss.

$$
\text{CFHR}_{t} = \min\left( \left| \Delta V^{\text{cum}}_{\text{instrument}} \right| , \left| \Delta V^{\text{cum}}_{\text{hedged item}} \right| \right)
$$

with the sign of the instrument's gain or loss.

### 10.3 Worked example at 2026-12-31 *(Example)*

Market forward rate for 2027-04-30: 1.0800; 120 days to settlement; EUR discount rate 2.00%; discount factor 1 / (1 + 0.02 x 120/360) = 0.99337748 (used unrounded below). The USD has strengthened since the trade (fewer USD per EUR), so the forecast receipt is worth more in EUR and the forward, which sells USD at 1.1058, has lost value.

| Line | Calculation | EUR |
|---|---|---|
| USD 1,000,000 at 1.0800 | 1,000,000 / 1.0800 | 925,925.93 |
| USD 1,000,000 at 1.1058 | 1,000,000 / 1.1058 | 904,322.66 |
| Undiscounted difference | 925,925.93 - 904,322.66 | 21,603.27 |
| Hypothetical derivative fair value (loss; the hedged item gained the same amount) | 21,603.27 x 0.99337748 | (21,460.20) |
| Debit valuation adjustment on the actual forward (own credit reduces the liability) | From valuation model | 90.00 |
| Actual forward fair value (loss) | (21,460.20) + 90.00 | (21,370.20) |
| Dollar offset | 21,370.20 / 21,460.20 | 99.6% |
| Reserve: lower of 21,370.20 and 21,460.20, with the sign of the instrument | | (21,370.20) |
| Ineffectiveness in profit or loss | 21,370.20 - 21,370.20 | 0.00 |

The instrument lost less than the hedged item gained (an under-hedge), so the whole loss goes to the reserve and no ineffectiveness is recognised.

| Date | Entry | Debit | Credit |
|---|---|---|---|
| 2026-12-31 | Cash flow hedge reserve (OCI) / Derivative liability | 21,370.20 | 21,370.20 |

### 10.4 Settlement and reclassification at 2027-04-30 *(Example)*

Spot EUR/USD 1.0750 on 2027-04-30; debit valuation adjustment nil at settlement. The April 2027 platform fee received on 2027-04-30 is USD 1,330,000, so the first USD 1,000,000 (the designated layer) occurs on that date and the remaining USD 330,000 is converted at spot outside the hedge. For simplicity the example assumes that the April average rate used to translate CC-US's April subscription revenue equals the 2027-04-30 spot rate; any difference is a translation difference outside the hedge.

| Line | Calculation | EUR |
|---|---|---|
| USD 1,000,000 at spot 1.0750 | 1,000,000 / 1.0750 | 930,232.56 |
| Forward fair value at settlement (loss) | 904,322.66 - 930,232.56 | (25,909.90) |
| Movement since 2026-12-31, to reserve | 25,909.90 - 21,370.20 | (4,539.70) |
| Cumulative hedged item change | Same as instrument (terms match, no credit adjustment) | 25,909.90 |
| Revenue for the hedged layer at the translation rate | 1,000,000 / 1.0750 | 930,232.56 |
| Reclassification from reserve to revenue | | (25,909.90) |
| Revenue for the hedged layer after the hedge | 930,232.56 - 25,909.90 | 904,322.66 |
| Check: equals the EUR value locked in by the forward, USD 1,000,000 at 1.1058 | 1,000,000 / 1.1058 | 904,322.66 |

| Date | Entry | Debit | Credit |
|---|---|---|---|
| 2027-04-30 | Cash flow hedge reserve (OCI) / Derivative liability | 4,539.70 | 4,539.70 |
| 2027-04-30 | Cash (EUR) and Derivative liability / Cash (USD account, USD 1,000,000 at spot) | 904,322.66 and 25,909.90 | 930,232.56 |
| 2027-04-30 | Revenue (subscription) / Cash flow hedge reserve (reclassification adjustment through OCI, IFRS 9 para 6.5.11(d)(ii)) | 25,909.90 | 25,909.90 |

The fee itself is eliminated on consolidation, so the reclassification is presented in the revenue line that carries the related external subscription revenue, as the group's accounting policy states. Unlike a hedge of a purchase of inventory, no non-financial asset is recognised, so no basis adjustment arises and the amount passes through OCI as a reclassification adjustment. Under US GAAP the amount is also reclassified from accumulated OCI to the same earnings line when the hedged transaction affects earnings (section 12).

### 10.5 Reporting-date routine

At each reporting date, work through the same steps in the same order and file the results with this document. First, confirm the hedged item is still highly probable: refresh the evidence in 4.2 from the latest rolling forecast and note any change in the fee basis, currency or timing. Second, repeat the effectiveness assessment in section 7 and record it in 7.3, even when the critical terms still match. Third, obtain the instrument's fair value from the valuation source named in the hedging policy, including the credit adjustment, and rebuild the hypothetical derivative with the same curves. Fourth, compute the cumulative amounts, apply the lower-of test, and post the reserve and any ineffectiveness. Fifth, agree the reserve balance for this relationship to the hedge reserve reconciliation used for the disclosures.

The reviewer should recompute at least one line of the table independently, check that the dates and day counts match the trade confirmation, and confirm that no event in section 11 has occurred without being logged. A reporting-date file that only contains the valuation statement from the bank is not enough: it shows what the derivative is worth, not whether the relationship still qualifies.

## 11. Rebalancing and discontinuation

<!-- Guidance: Decide in advance what events lead to rebalancing or discontinuation, and record each event when it happens. Questions to answer: What if the forecast falls? What if the fee settlement is delayed beyond the window? What if the counterparty is downgraded? Pitfall: under IFRS 9, voluntary de-designation while the risk management objective is unchanged is not permitted; check IFRS 9 para 6.5.6 and its application guidance before ending a relationship. -->

### 11.1 Triggers and responses

| ID | Trigger | Response | Reference |
|---|---|---|---|
| REB-01 | Hedge ratio no longer reflects risk management, but objective unchanged | Rebalance: adjust designated quantity of item or instrument; record ineffectiveness first | IFRS 9 para 6.5.5 |
| DIS-01 | Forecast no longer highly probable but still expected to occur | Discontinue prospectively; reserve stays until the transaction occurs | IFRS 9 paras 6.5.6 and 6.5.12 |
| DIS-02 | Forecast no longer expected to occur | Discontinue; reclassify reserve to profit or loss immediately | IFRS 9 para 6.5.12(b) |
| DIS-03 | Instrument expires, is sold or terminated (unless replaced as documented) | Discontinue prospectively | IFRS 9 para 6.5.6 |
| DIS-04 | Credit risk starts to dominate | Discontinue prospectively | IFRS 9 para 6.4.1(c)(ii) |
| DIS-05 | Risk management objective changes (for example hedging policy band reduced) | Discontinue the affected part | IFRS 9 para 6.5.6 |

### 11.2 Event log

| Date | Event | Decision | Accounting effect | Approved by |
|---|---|---|---|---|
| YYYY-MM-DD | [Event] | [Rebalance / Discontinue / No change] | [Entry] | [@group-financial-controller] |

### 11.3 Review points and common errors

Review the document twice: once before the trade, for design, and once after the first reporting date, for operation. The design review asks whether a reader with no other information could identify the hedged transactions, the instrument and the method from this document alone, and whether every field in the summary table agrees with the detailed sections. The operation review asks whether the numbers in section 10 can be rebuilt from the confirmation, the valuation and the forecast.

The errors auditors find most often are predictable. The first is late documentation: a designation signed after the trade, or a draft approved by email with no time stamp, which cannot support hedge accounting from the trade date. The second is an over-hedge that nobody noticed because the forecast was updated in the planning system but not in the hedge file; when the forecast falls below the designated layer, part of the relationship must be discontinued and the reserve for that part treated under section 11. The third is a mismatch between the policy and the designation, for example a forward that exceeds the band maximum or a dealer who traded above their authority; the relationship may still qualify for hedge accounting, but the breach must be reported under the hedging policy. The fourth is a hypothetical derivative built with different curves, dates or notional from the hedged item, which creates ineffectiveness that does not exist in the economics.

Two further points deserve attention in groups. When the instrument is held by one entity and the hedged item belongs to another, record clearly in which financial statements the relationship is designated (consolidated, individual or both) and whether an internal back-to-back contract exists. When a relationship is discontinued, keep this document and add the event to the log rather than deleting it; the reserve can remain in equity for months after the instrument has gone, and the trail must explain why.

## 12. US GAAP supplement

<!-- Guidance: Complete this section only for US GAAP reporters, or when a subsidiary reports under US GAAP to lenders or a parent. Questions to answer: Does the relationship meet the documentation, probability and highly effective requirements of ASC 815? Is ASU 2025-09 adopted, and does it change this relationship? Pitfall: assuming IFRS and US GAAP give the same answer; probability thresholds, reserve mechanics and discontinuation rules differ. -->

| Topic | Field | Entry |
|---|---|---|
| Documentation at inception | ASC 815-20-25-3 items covered | [Yes, sections 1 to 9 / list gaps] |
| Timing relief used | ASC 815-20-25-139 to 25-143 (private companies) or relief for the first quantitative assessment | [None / Describe] |
| Forecasted transaction | "Probable" assessment (ASC 815-20-25-15) | [Evidence, cross-reference section 4.2] |
| Highly effective assessment | Method and thresholds | [Critical terms match (ASC 815-20-25-84) / Dollar offset / Regression] |
| Subsequent assessments | At least quarterly and when financial statements are issued | [Schedule] |
| Forecasted intra-entity transaction | Whether an intra-entity foreign-currency fee can be the hedged item in the consolidated statements (ASC 815-20, hedged items) | [Conclusion; US GAAP and IFRS conditions differ, so record each separately] |
| Amounts in accumulated OCI | Reclassification to earnings when the hedged transaction affects earnings | [Line item, for example revenue] |
| Voluntary de-designation | Permitted under US GAAP | [Policy] |
| ASU 2025-09 status | Effective for public business entities for fiscal years beginning after 2026-12-15, other entities after 2027-12-15; early adoption permitted; applied prospectively; check the transition elections for existing relationships in the ASU | [Adopted from YYYY-MM-DD / Not yet adopted] |
| ASU 2025-09 relevance | Groups of forecasted transactions with similar (not shared) risk; choose-your-rate variable debt; components of nonfinancial forecasted purchases and sales; net written option test for certain compound instruments; foreign-currency debt as both net investment hedge and fair value hedged item | [Not relevant / Relevant: describe] |

## 13. Disclosure links and requirement traceability

<!-- Guidance: Link this relationship to the disclosure working papers and show that every documentation requirement is covered. Questions to answer: Which risk category and disclosure table does this relationship feed? Pitfall: disclosures prepared from the treasury system without reconciling to the hedge files. -->

### 13.1 Disclosure feed

| Disclosure | Reference | Data from this document |
|---|---|---|
| Risk management strategy | IFRS 7 paras 22A to 22C | Section 2 |
| Amount, timing and uncertainty of future cash flows | IFRS 7 paras 23A to 23F | Sections 4 and 5, maturity and average rate |
| Effects on financial position and performance | IFRS 7 paras 24A to 24F | Section 10 |
| Sources of ineffectiveness | IFRS 7 para 23D | Section 8 |

Use the Financial Statement Disclosure Checklist (`finance/financial-statement-disclosure-checklist`) to confirm completeness.

### 13.2 Traceability matrix

| Requirement | Reference | Section |
|---|---|---|
| Hedging instrument identified | IFRS 9 para 6.4.1(b); ASC 815-20-25-3 | 5 |
| Hedged item identified | IFRS 9 para 6.4.1(b); ASC 815-20-25-3 | 4 |
| Nature of risk hedged | IFRS 9 para 6.4.1(b); ASC 815-20-25-3 | 1, 4 |
| Risk management objective and strategy | IFRS 9 para 6.4.1(b); ASC 815-20-25-3 | 2 |
| How effectiveness will be assessed, including sources of ineffectiveness and the hedge ratio | IFRS 9 para 6.4.1(b); ASC 815-20-25-3 | 6, 7, 8 |
| Effectiveness requirements met | IFRS 9 para 6.4.1(c) | 7 |
| Forecast transaction probability | IFRS 9 para 6.3.3; ASC 815-20-25-15 | 4.2 |
| Excluded components | IFRS 9 paras 6.5.15 and 6.5.16; ASC 815-20 | 9 |
| Accounting for reserve | IFRS 9 para 6.5.11 | 10 |
| Rebalancing and discontinuation | IFRS 9 paras 6.5.5 and 6.5.6 | 11 |

## 14. Glossary and references

<!-- Guidance: Keep definitions consistent with the hedging policy. -->

### 14.1 Glossary

| Term | Meaning in this document |
|---|---|
| Basis adjustment | Removing the reserve amount from equity and including it in the initial carrying amount of a non-financial asset or liability |
| Cash flow hedge reserve (CFHR) | Equity component holding the effective part of cash flow hedge gains and losses |
| Critical terms match | A qualitative assessment that the key terms of instrument and hedged item are the same |
| Dollar offset | Ratio of cumulative value changes of the instrument and the hedged item |
| Forward rate method | Designating the whole forward contract, including forward points |
| Hypothetical derivative | A derivative with terms matching the hedged item and nil fair value at inception, used to measure the hedged item |
| Layer | A designated amount of a larger group of transactions, such as the first USD 1,000,000 |
| Reclassification adjustment | Moving an amount from the cash flow hedge reserve through OCI to profit or loss when the hedged cash flows affect profit or loss |
| Rebalancing | Adjusting quantities to restore a hedge ratio consistent with risk management, without ending the relationship |

### 14.2 References

- IFRS 9 Financial Instruments, Chapter 6 and Appendix B (paras B6.x); IFRS 7 Financial Instruments: Disclosures; IFRS 13 Fair Value Measurement (IFRS Foundation; names and paragraph numbers only).
- IASB Exposure Draft, Risk Mitigation Accounting, proposed amendments to IFRS 9 and IFRS 7 (December 2025; comment deadline extended to 2026-11-30). Proposal only; not applicable until issued as a standard.
- FASB ASC 815 Derivatives and Hedging (subtopics 815-20, 815-25, 815-30, 815-35); ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements, issued November 2025 (topic and paragraph numbers only).
- FX and Interest Rate Hedging Policy (`finance/fx-interest-rate-hedging-policy`) and Treasury Policy (`finance/treasury-policy`).

## Appendix A. Fields for other hedge types

<!-- Guidance: Replace the cash flow hedge fields in sections 4, 9 and 10 with these when the relationship is a fair value or net investment hedge. -->

### A.1 Fair value hedge (for example fixed-rate debt with a receive-fixed swap)

| Field | Entry |
|---|---|
| Hedged item | [Fixed-rate borrowing ID, notional, coupon, maturity] |
| Hedged risk | [Benchmark interest rate component, for example EUR swap rate] |
| Accounting | Hedged item carrying amount adjusted for the hedged risk; instrument and adjustment both in profit or loss (IFRS 9 para 6.5.8; ASC 815-25) |
| Amortisation of adjustment | [Start date and method] |

### A.2 Net investment hedge (for example GBP borrowing hedging a UK subsidiary)

| Field | Entry |
|---|---|
| Hedged item | [Amount of net assets of the foreign operation, entity, functional currency] |
| Hedged risk | [Spot exchange rate between the foreign operation's and the parent's functional currency] |
| Hedging instrument | [Foreign-currency debt / FX forwards / cross-currency swap] |
| Accounting | Effective portion in the foreign currency translation reserve, reclassified on disposal (IFRS 9 para 6.5.13; ASC 815-35) |
| Board approval | [Reference, required by the hedging policy section 5.5] |

## Standard and licence note

Structure aligned with the hedge documentation requirements of IFRS 9 (paragraph 6.4.1(b)) and FASB ASC 815 (paragraph 815-20-25-3). IFRS 9, IFRS 7, IFRS 13, the IASB Risk Mitigation Accounting exposure draft, FASB ASC 815 and ASU 2025-09 are cited by name and paragraph or topic number only; no text from IFRS Foundation or FASB material is reproduced or paraphrased, and neither body endorses this template. IFRS is a trade mark of the IFRS Foundation. The fields, methods, worked example and wording are original; regression thresholds are described as common practice, not as requirements. Check the current official version of each standard, any amendments and the group's adoption status before use. Corvid Commerce Group and every figure are fictional. Template licence: MIT.