Perkle Co. owned a subsidiary in Belgium; the subsidiary's functional currency was the Belgian franc. During 2021, Perkle engaged in hedging transactions to offset part of the subsidiary's net asset position. How should the effects of exchange rate fluctuations on the currency hedge be accounted for?

Hedging Transactions

Financial strategies used by companies to protect against potential losses caused by fluctuations in market prices, interest rates, or currency exchange rates.

Functional Currency

The primary currency of the primary economic environment in which an entity operates and carries out its transactions.

Exchange Rate Fluctuations

Variations in the value of one currency in relation to another, affecting the relative price of goods and services between countries and impacting international trade and investments.