Asked by Cooper Lumsden on Jul 22, 2024
Verified
Under IFRS, which of the following statements is true?
A) The hedge of a forecasted transaction is accounted for using a fair-value hedge.
B) The hedge of a firm commitment is accounted for using a cash-flow hedge.
C) The gain or loss on a hedging instrument under a cash-flow hedge is first reported as other comprehensive income and then reclassified to income when the hedged item affects income.
D) The gain or loss on a hedging instrument under a fair-value hedge is first reported as other comprehensive income and then reclassified to income when the hedged item affects income.
Cash-flow Hedge
A form of hedge that protects against the variability in cash flows resulting from changes in currency rates, interest rates, or commodities prices.
Fair-value Hedge
A hedging strategy aimed at offsetting changes in the fair value of an asset or liability or an identified portion of such an asset or liability.
Other Comprehensive Income
Earnings that are not part of net income, arising from activities outside of the ordinary operations, and reported separately in equity.
- Acquire knowledge on the theory and utilization of hedge accounting in accordance with IFRS, highlighting the differences between cash-flow and fair-value hedges.
Verified Answer
Learning Objectives
- Acquire knowledge on the theory and utilization of hedge accounting in accordance with IFRS, highlighting the differences between cash-flow and fair-value hedges.
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