Interactive tool
Hedge Effectiveness Checker
Enter, period by period, the change in fair value of the hedging instrument and of the hedged item. It computes the dollar-offset ratio — per period and cumulatively — against the historical 80–125% reference band, plus a regression (slope, R², correlation). It's the working companion to the hedge effectiveness testing guide.
| Period | Hedged item Δ FV | Instrument Δ FV | Offset ratio | Band | |
|---|---|---|---|---|---|
| — | n/a | ||||
| — | n/a | ||||
| — | n/a | ||||
| — | n/a | ||||
| Cumulative | 0 | 0 | — | n/a |
Regression
Enter two or more periods (with variation) to fit a regression of the instrument's value changes on the hedged item's.
Enter each side's change in fair value for the hedged risk, with its own sign — an effective hedge shows the instrument moving equal and opposite to the item, so the offset ratio sits near 100% and the regression slope near −1. A negative ratio means both moved the same way. Nothing you enter leaves your browser.
Worked example
A fair-value hedge over three periods — the period movements behind the worked example in the effectiveness testing guide. Each row is that period's movement, not the running total: the tool adds the rows up itself. Illustrative figures to show the arithmetic — not a benchmark, and not accounting advice.
Inputs
- Period 1 — item / instrument Δ FV+100,000 / −92,000
- Period 2 — item / instrument Δ FV+40,000 / −38,000
- Period 3 — item / instrument Δ FV−115,000 / +111,000
- Cumulative hedged item+25,000
- Cumulative instrument−19,000
Result
- Period 1 offset ratio92% — in band
- Period 2 offset ratio95% — in band
- Period 3 offset ratio96.5% — in band
- Cumulative offset ratio76% — out
- Regression slope−0.95
- Regression R²1.00
- Correlation−1.00
Read it as: every single period offsets comfortably inside the 80–125% reference band, and the regression across the three points is close to a straight −1 line — yet the cumulative ratio lands outside the band. The market largely round-tripped in period 3, so both cumulative changes collapsed toward zero, and a residual mismatch of 6,000 that was invisible against 140,000 is enormous against 25,000. That is a shrinking-denominator artefact, not a change in the hedge's economics — and under IFRS 9 there is no fixed pass mark for it to fail.
How this works
Methodology
Two standard quantitative tests. Dollar-offset compares the change in fair value of the hedging instrument with the change in the hedged item — each period and cumulatively — where a perfect hedge sits at 100%. Regression fits the instrument's value changes against the hedged item's across periods, reading slope (near −1 for a good hedge), R² and correlation.
Assumptions
- Each figure is the change in fair value attributable to the hedged risk, entered with its own sign.
- A perfectly offsetting hedge shows the instrument moving equal and opposite to the item — ratio 100%, slope −1.
- The 80–125% band shown is the historical IAS 39 (and US-GAAP-practice) bright line, surfaced for reference only.
Limitations
- IFRS 9 has no fixed pass mark — it asks for an economic relationship, credit risk not dominating, and a hedge ratio that reflects what you actually do. This computes indicative numbers, not an accounting determination.
- It does not measure the ineffectiveness to book, isolate credit-risk effects, or test the hedge ratio — those need your accounting policy and system.
- Dollar-offset can mislead on very small value changes; regression needs enough varied periods to be meaningful. Confirm any conclusion with your accountants.
Frequently asked questions
What exactly does this checker compute?
Two standard quantitative measures, from the figures you enter. Dollar-offset divides the negated instrument change by the hedged-item change, per period and on the cumulative totals, so a perfectly offsetting hedge reads 100%; a period where the hedged item didn't move shows no ratio rather than a zero, because the ratio is undefined there. The regression fits the instrument's value changes against the hedged item's across all periods and reports slope (near −1 for a good hedge), R² and correlation. It needs at least two periods with variation before a regression can be fitted.
How should I enter the figures, and what does the band mean?
One row per period, each figure being the change in fair value attributable to the hedged risk, entered with its own sign — a hedge that works has the instrument moving opposite the item. The 80–125% band shown against the cumulative ratio is the historical IAS 39 and US-GAAP-practice bright line, surfaced as reference context only; the page describes your number as inside or outside it and stops there. Add or remove periods as you go; at least one row always stays.
Does this checker tell me whether my hedge qualifies for hedge accounting?
No. Under IFRS 9 there is no numeric pass mark to hit: a hedge qualifies when there is an economic relationship between the instrument and the hedged item, credit risk does not dominate the value changes arising from that relationship, and the hedge ratio reflects the quantities you actually use to manage the risk. The dollar-offset ratio and regression here are quantitative evidence, and the 80–125% band is historical and comparative context rather than a test you must pass. This is a plain calculation, not accounting advice for a specific situation — the exact rules live in standards like IFRS 9 and their equivalents, and applying them to your book needs your accountants.
Do my valuation figures leave my browser?
No. These are a company's actual valuation numbers, so the tool has no share link at all: nothing can be encoded into a URL, and nothing is posted to a server — the dollar-offset and regression maths runs in the page. Your periods are held in this browser's local storage only. Consent-gated analytics records that the checker was used or exported and whether the cumulative ratio landed inside the reference band, never the figures themselves.
How do I get the workings out for my file?
Export CSV downloads hedge-effectiveness.csv: one row per period with its label, the hedged-item and instrument changes and that period's dollar-offset ratio, then a cumulative row over the same columns, then a regression row carrying slope, R² and correlation. It opens in Excel or Google Sheets, and it is the numbers as this page computed them — supporting workings for your own documentation, not a determination.
Will my periods still be here when I come back?
Yes, in the same browser. Period labels and figures are saved locally moments after you stop typing and restored on your next visit, so following a link out of the page no longer costs you the re-keying; a notice says they were restored and Start fresh clears them. Nothing is synced to an account or another device, and a private window or cleared site data starts you from four empty periods.
These answers are about the checker. What effectiveness testing is, what IFRS 9 actually requires and what causes ineffectiveness are covered in the hedge effectiveness testing guide and hedge accounting explained. Neither they nor this page are accounting advice for a specific situation.