FAQs – Hedge Accounting

Rebalancing to achieve hedge effectiveness What do you mean by rebalancing and how does it help achieve hedge effectiveness? Rebalancing is a new concept introduced by a major amendment to...

Voluntary discontinuation of hedge accounting Can a hedge accounting be voluntarily discontinued and why? As per the new requirements, hedge accounting cannot be voluntarily discontinued. Hedge accounting can be discontinued...

Is hedge accounting mandatory? Is hedge accounting mandatory or optional? Hedge accounting is not mandatory. However, considering the benefits of complying with hedge accounting, entities would want to follow hedge...

Cash flow hedge Vs fair value hedge What is a cash flow hedge and how is it different from a fair value hedge? A cash flow hedge is a hedge...

Reasons for revamping hedge accounting by IASB What prompted the hedge accounting standard to be revamped by IASB? The main reason for revamping the accounting standards relating to financial instruments...

Accounting for a cash flow hedge How would you account for a cash flow hedge? Get the lower of the cumulative fair value changes to the hedging instrument and the...

Difference between hedging and speculation What is the basic difference between hedging and speculation? If an investor takes a derivative position by holding the corresponding underlying, it is called hedging....

Rebalancing and discontinuation of cash flow hedge Briefly explain rebalancing and discontinuation of cash flow hedge. If the hedge effectiveness requirements are not met, the entity should adjust the hedge...

Difference between speculation and gambling Is there any difference between speculation and gambling? Both speculation and gambling involves taking a position in the derivative segment without having any corresponding underlying....

Link between hedge accounting & risk management objective What is the link between hedge accounting and the risk management objective of an entity? The objective of hedge accounting is to...