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Discontinuance of a foreign currency fair value hedge or a foreign currency cash flow hedge follows the respective fair value hedge or cash flow hedge discontinuance guidance in DH 10.3 and DH 10.4.
Discontinuance of a hedge of the foreign currency exposure of a net investment in a foreign operation should be accounted for in a manner consistent with the provisions of ASC 830-30, Foreign Currency—Translation of Financial Statements. ASC 830-30-40 requires reporting entities to reclassify the amount attributable to a particular foreign entity from the cumulative translation adjustment (CTA) in equity to earnings upon sale or complete or substantially complete liquidation of an investment in the foreign entity.
A reporting entity must discontinue hedge accounting prospectively upon sale or complete or substantially complete liquidation of the foreign entity or through the deconsolidation of a subsidiary from a change in control, as provided in ASC 810-10, Consolidation-Overall. The reporting entity must also discontinue hedge accounting if the hedging relationship no longer qualifies or no longer is highly effective, or if the derivative expired or was sold, terminated, or exercised.
Consistent with fair value and cash flow hedges, a reporting entity may elect to voluntarily discontinue a net investment hedge.
See DH 8.6 for discussion of net investment hedges.

10.5.1 Net investment hedge is no longer effective

If a net investment hedging relationship does not pass the prospective effectiveness test, hedge accounting should be discontinued going forward.
If a net investment hedging relationship does not pass the retrospective effectiveness test, hedge accounting should be discontinued as of the last date when the hedged item was assessed and demonstrated high effectiveness, unless it can determine a specific point that it failed to be effective.
Assume a reporting entity determines that a net investment hedging relationship did not pass the prospective and retrospective effectiveness assessments during its monthly effectiveness assessment on July 31, 20X1. Hedge accounting should be discontinued as of June 30, 20X1, the last date on which the hedged item was assessed and demonstrated high effectiveness. The reporting entity would stop hedge accounting as of that date, unless it can determine a specific day in July on which it ceased being effective.
If the net investment hedge is no longer effective, any amounts that have not yet been recognized in earnings remain in CTA until the net investment is sold, completely liquidated, or substantially liquidated. ASC 815-35-40-1 provides that this would also apply to amounts related to excluded components not yet recognized using the amortization approach if the entity assessed effectiveness using the spot method.

10.5.2 Hedging instrument is sold, terminated, exercised, or expires

If a net investment hedging instrument is sold, extinguished, terminated, exercised, or expires, it is derecognized and the amounts that have not yet been recognized in earnings remain in CTA until the net investment is sold, completely liquidated, or substantially liquidated. ASC 815-35-40-1 provides that this would also apply to amounts remaining related to excluded components not yet recognized using the amortization approach if the entity assessed effectiveness using the spot method.

10.5.3 Hedging instrument is dedesignated

When a reporting entity dedesignates or voluntarily discontinues a net investment hedge, any amounts that have not yet been recognized in earnings remain in CTA until the net investment is sold, completely liquidated, or substantially liquidated. ASC 815-35-40-1 provides that this would also apply to amounts related to excluded components not yet recognized using the amortization approach if the entity assessed effectiveness using the spot method.
Future changes in the derivative’s fair value after discontinuance of hedge accounting, however, will be recorded in current-period earnings if the derivative is not terminated or redesignated in a qualifying hedge.

10.5.4  Hedging instrument is dedesignated and redesignated

If the hedging instrument is dedesignated and subsequently redesignated in a new hedging relationship, the amount in CTA related to the first hedging relationship would remain there until the sale or complete or substantial liquidation of the foreign entity. ASC 815-35-40-1 provides that this would also apply to amounts remaining related to excluded components that were not yet recognized through an amortization approach if the entity assessed effectiveness of the dedesignated hedging relationship using the spot method.
The hedging instrument would be accounted for in its new hedging relationship from the point of redesignation onward.
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