A company borrows on a floating rate loan, but wishes to hedge against interest variations so swaps

Question:

A company borrows on a floating rate loan, but wishes to hedge against interest variations so swaps the interest for fixed rate. The swap should be perfectly effective and has zero fair value at inception. Interest rate increase and therefore the swap becomes a financial asset to the company at fair value of £5 million.

Required:
Describe the impact on the for the following situations:
(a) The swap is accounted for under IAS 39, but is not designated as a hedge.
(b) The swap is accounted for under IAS 39, and is designated as a hedge.

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...