Commonwealth Consolidated Acts Commonwealth Consolidated Acts(1) A * financial arrangement that you have that is a * derivative financial arrangement, or is not a derivative financial arrangement but is a * foreign currency hedge, is a hedging financial arrangement if:
(a) you create, acquire or apply the arrangement for the purpose of hedging a risk or risks in relation to a * hedged item or items; and
(b) at the time you create, acquire or apply the arrangement, the arrangement satisfies the requirements of the principles or standards referred to in paragraph 230 - 315(2)(a) to be a hedging instrument; and
(c) the arrangement is recorded as a hedging instrument in:
(i) your financial report (including documents and records on which the report is based); or
(ii) if the arrangement hedges a risk in relation to * foreign currency--your financial report or the financial report of a consolidated entity in which you are included (including documents and records on which the report is based);
for the income year in which the rights and/or obligations are created, acquired or applied.
Note: For document and record , see section 2B of the Acts Interpretation Act 1901 .
(2) If:
(a) the * financial arrangement would not be a financial arrangement if the following provisions were disregarded:
(i) Division 9A of Part III of the Income Tax Assessment Act 1936 (which deals with offshore banking units);
(ii) Part IIIB of that Act (which deals with Australian branches of foreign banks etc.); and
(b) paragraphs (1)(b) and (c) would be satisfied in relation to the financial arrangement if the arrangement had been between 2 separate entities;
paragraphs (1)(b) and (c) are taken to be satisfied in relation to the arrangement.
(3) A * financial arrangement that is a * derivative financial arrangement, or is not a derivative financial arrangement but is a * foreign currency hedge, is a hedging financial arrangement if:
(a) you create, acquire or apply the arrangement for the purpose of hedging a risk or risks in relation to something; and
(b) one or more of subsections (4), (5), (6) or (7) is satisfied; and
(c) the requirements of paragraphs (1)(b) or (c) are not able to be satisfied:
(i) because of the requirements of the principles or standards referred to in paragraph 230 - 315(2)(a); and
(ii) not because of any act or omission on your part to deliberately fail to satisfy those requirements; and
(d) in a case in which none of subsections (5), (6) and (7) are satisfied--you satisfy the additional recording requirements of subsection 230 - 355(5); and
(e) in any case--you satisfy the requirements (if any) prescribed by the regulations for the purposes of this paragraph.
(3A) Disregard paragraph (3)(d) if subsection (4) is satisfied and:
(a) a * hedging financial arrangement election applies to the * financial arrangement (because you previously satisfied the additional recording requirements mentioned in that paragraph at a time when the election applied); or
(b) all of the following subparagraphs apply:
(i) a hedging financial arrangement election would apply to the financial arrangement if you satisfied the additional recording requirements mentioned in paragraph (3)(d);
(ii) the election and subsection (3) apply to another financial arrangement;
(iii) subsection (4) is or was satisfied in relation to that other arrangement at a time when the election applied to that other arrangement.
(4) This subsection is satisfied if:
(a) the * financial arrangement hedges a foreign currency risk in relation to an anticipated * foreign equity distribution from a * connected entity; and
(b) the distribution is * non - assessable non - exempt income under section 768 - 5.
(5) This subsection is satisfied if:
(a) you enter into a * financial arrangement with a * connected entity; and
(b) the principles or standards referred to in paragraph 230 - 315(2)(a) require that a consolidated financial report be prepared that deals with both your affairs and the affairs of the connected entity; and
(c) the report properly reflects your affairs; and
(d) the arrangement satisfies the requirements of paragraph (1)(a); and
(e) the arrangement would satisfy the requirements of paragraph (1)(b) or (c) but for the fact that the consolidated report disregards the arrangement.
(6) This subsection is satisfied if:
(a) the period for which the risk or risks are hedged does not straddle 2 or more income years; and
(b) the * financial arrangement satisfies the requirements of paragraph (1)(a); and
(c) the arrangement would satisfy the requirements of paragraph (1)(c) if the period for which the risk or risks that are hedged did straddle 2 or more income years.
(7) This subsection is satisfied if the requirements prescribed by the regulations for the purposes of this subsection are satisfied.
Financial arrangement hedging more than one type of risk
(8) A * financial arrangement that hedges more than one type of risk may only be a hedging financial arrangement if the principles or standards referred to in paragraph (1)(b) allow the arrangement to be designated as a hedge of those risks.
More than one financial arrangement hedging the same risk or risks
(9) If 2 or more * financial arrangements hedge the same risk or risks, each of the arrangements may only be a hedging financial arrangement if the principles or standards referred to in paragraph (1)(b) allow those arrangements to be viewed in combination and jointly designated as hedging that risk or those risks.
(10) If a * financial arrangement that you have hedges a risk in relation to:
(a) an asset or a part of an asset; or
(b) a liability or a part of a liability; or
(c) a firm commitment (within the meaning of the * accounting principles) or a part of such a commitment; or
(d) a highly probable forecast transaction (within the meaning of the accounting principles) or a part of such a transaction; or
(e) a net investment in a foreign operation (within the meaning of the accounting principles) or a part of such an investment; or
(f) something prescribed by the regulations for the purposes of this paragraph;
the asset (or that part of the asset), the liability (or that part of the liability), the commitment (or that part of the commitment), the transaction (or that part of the transaction) or the investment (or that part of the investment) is a hedged item for the arrangement.
(11) If a * financial arrangement is a * hedging financial arrangement because of paragraph (4)(a), the anticipated dividend referred to in that subparagraph is a hedged item for the arrangement even if subsection (10) is not satisfied in relation to the anticipated dividend.