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CPA AUD Flashcards > AUD 3 Internal Control 16 - 5 Operating Cycles - Investing and Financing Cycle > Flashcards

AUD 3 Internal Control 16 - 5 Operating Cycles - Investing and Financing Cycle Flashcards

1
Q

Investing and Financing Cycle
Internal Controls

Substantive Procedures

Substantive procedures in the area of derivatives investments should be designed to test management’s assertions with regard to (PERCV):

  • Presentation and Disclosure
  • Existence
  • Rights and Obligations
  • Completeness
  • Valuation

• Presentation and Disclosure

– This will involve

  • reading disclosures to make certain they are in compliance with GAAP;
  • determining if securities have been pledged as collateral for indebtedness through inquiries and inspection of documents; and
  • determining that investments are appropriately classified through inquiries of management.

• Existence

– This may involve the

  • inspection of securities on hand;
  • confirmations with brokers or other third parties either holding securities or who may be counter-parties;
  • reviewing documents; and,
  • when appropriate, inspecting documentation of settlement or realization.

• Rights and Obligations

– This may involve the review of documents and confirmations with counter parties.

• Completeness

– This may involve

  • review of minutes of the board of directors or others responsible for governance;
  • tests of subsequent transactions for evidence of realization or settlement;
  • confirmations with counter parties, financial institutions, brokers, and others; and
  • evaluating beginning amounts for disposition of inclusion in ending amounts.

• Valuation:

 o For valuation based on cost:
      ▪ Inspection of documentation
      ▪ Confirmation

 o For valuation based on financial results of investee:
      ▪ Obtaining audit evidence supporting investee’s results
      ▪ Reading available financial statements of investee

 o For valuation based on fair value:
      ▪ Obtaining quoted market prices on exchanges when available
      ▪ Obtaining quoted market prices from broker-dealers for unlisted securities
      ▪ Obtaining estimates, including those using models like Black-Scholes
A

Investing and Financing Cycle
Internal Controls

Substantive Procedures

Substantive procedures in the area of derivatives investments should be designed to test management’s assertions with regard to (PERCV):

  • Presentation and Disclosure
  • Existence
  • Rights and Obligations
  • Completeness
  • Valuation

• Presentation and Disclosure

– This will involve

  • reading disclosures to make certain they are in compliance with GAAP;
  • determining if securities have been pledged as collateral for indebtedness through inquiries and inspection of documents; and
  • determining that investments are appropriately classified through inquiries of management.

• Existence

– This may involve the

  • inspection of securities on hand;
  • confirmations with brokers or other third parties either holding securities or who may be counter-parties;
  • reviewing documents; and,
  • when appropriate, inspecting documentation of settlement or realization.

• Rights and Obligations

– This may involve the review of documents and confirmations with counter parties.

• Completeness

– This may involve

  • review of minutes of the board of directors or others responsible for governance;
  • tests of subsequent transactions for evidence of realization or settlement;
  • confirmations with counter parties, financial institutions, brokers, and others; and
  • evaluating beginning amounts for disposition of inclusion in ending amounts.

• Valuation:

 o For valuation based on cost:
      ▪ Inspection of documentation
      ▪ Confirmation

 o For valuation based on financial results of investee:
      ▪ Obtaining audit evidence supporting investee’s results
      ▪ Reading available financial statements of investee

 o For valuation based on fair value:
      ▪ Obtaining quoted market prices on exchanges when available
      ▪ Obtaining quoted market prices from broker-dealers for unlisted securities
      ▪ Obtaining estimates, including those using models like Black-Scholes
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2
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

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3
Q

Investing and Financing Cycle

An e____y uses derivatives as hedges to protect itself against various risks

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks

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4
Q

Investing and Financing Cycle

An entity uses der______es as hedges to protect itself against various risks

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks

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5
Q

Investing and Financing Cycle

An entity uses derivatives as h___es to protect itself against various risks

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks

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6
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to pro____ itself against various risks

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks

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7
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various r___s that may be inherent in the assets or liabilities they hold,

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold,

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8
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be in_______ in the assets or liabilities they hold,

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold,

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9
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the a____s or liabilities they hold,

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold,

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10
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or l______ies they hold,

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold,

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11
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they h___, in anticipated transactions,

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions,

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12
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in an_______ed transactions,

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions,

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13
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated tra________s, or other aspects of their business.

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

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14
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other a_____s of their business.

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

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15
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their b______ss.

The purpose of the hedge is to shift the risk to a counter-party.

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

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16
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The pur____ of the hedge is to shift the risk to a counter-party.

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

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17
Q

Investing and Financing Cycle

The purpose of the he___ is to shift the risk to a counter-party.

A

Investing and Financing Cycle

The purpose of the hedge is to shift the risk to a counter-party.

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18
Q

Investing and Financing Cycle

The purpose of the hedge is to sh___ the risk to a counter-party.

A

Investing and Financing Cycle

The purpose of the hedge is to shift the risk to a counter-party.

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19
Q

Investing and Financing Cycle

The purpose of the hedge is to shift the r___ to a counter-party.

A

Investing and Financing Cycle

The purpose of the hedge is to shift the risk to a counter-party.

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20
Q

Investing and Financing Cycle

The purpose of the hedge is to shift the risk to a co_____-party.

A

Investing and Financing Cycle

The purpose of the hedge is to shift the risk to a counter-party.

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21
Q

Investing and Financing Cycle

An entity uses derivatives as h____s to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the h____ is to shift the risk to a counter-party.

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

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22
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various r___s that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the r___ to a counter-party.

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

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23
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

For example:

1) Fair Value Hedge
2) Cash Flow Hedge

A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

For example:

1) Fair Value Hedge
2) Cash Flow Hedge

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24
Q

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

For example:

1) Fair Value Hedge
2) Cash Flow Hedge

Fair Value Hedge

• An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.

They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate.

 o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge.

 o This would be considered a fair value hedge.
A

Investing and Financing Cycle

An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business.

The purpose of the hedge is to shift the risk to a counter-party.

For example:

1) Fair Value Hedge
2) Cash Flow Hedge

Fair Value Hedge

• An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.

They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate.

 o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge.

 o This would be considered a fair value hedge.
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25
Investing and Financing Cycle The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An e____y with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.
Investing and Financing Cycle The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.
26
Investing and Financing Cycle Fair Value Hedge • An entity with a f__ed rate receivable
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable
27
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate re________ may be concerned that
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that
28
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be con___ed that fluctuations in interest rates will affect its fair value.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.
29
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fl________ns in interest rates will affect its fair value.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.
30
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in in______ rates will affect its fair value.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.
31
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will af____ its fair value.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.
32
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value.
33
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its f___ value.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. e.
34
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair va___. They might enter into an interest rate swap
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap
35
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might en___ into an interest rate swap
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap
36
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an in_______ rate swap
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap
37
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate s___ in which they will pay out interest at a fixed rate,
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate,
38
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will p__ out interest at a fixed rate,
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate,
39
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay o__ interest at a fixed rate,
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate,
40
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a f__ed rate, to offset the interest received,
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received,
41
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed r___, to offset the interest received,
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received,
42
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to of____ the interest received,
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received,
43
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the in_______ received, and receive interest
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest
44
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest re______d, and receive interest
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest
45
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and re_____ interest from the counter-party at a variable rate.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate.
46
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive in_______ from the counter-party at a variable rate.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate.
47
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the c_______-party at a variable rate.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate.
48
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a va______ rate.
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate.
49
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a re____, they will always be paying the market rate of interest
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest
50
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will al___s be paying the market rate of interest
Investing and Financing Cycle Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest
51
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be p__ing the market rate of interest
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest
52
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the m_____ rate of interest
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest
53
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of int_______ and changes in the fair value of the note
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note
54
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and ch___es in the fair value of the note
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note
55
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the f___ value of the note will be offset
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset
56
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the n___ will be offset
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset
57
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be o____t by changes in the fair value of the derivative
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative
58
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by ch____s in the fair value of the derivative
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative
59
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the f___ value of the derivative
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative
60
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the de______ used as a hedge.
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge.
61
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a h___e.
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge.
62
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be con______ed a fair value hedge.
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
63
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair va___ hedge.
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
64
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value h___e.
Investing and Financing Cycle Fair Value Hedge o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
65
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge F___ Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
66
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a f__ed r___ receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
67
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be con_____d that flu________s in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
68
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in in______ r___s will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
69
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might en___ into an interest rate s___ in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
70
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will p__ out interest at a f___d rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
71
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to of___t the interest rec___ed, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
72
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and re______ interest from the counter-party at a va_____e rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
73
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the ma___t r___ of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
74
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and ch___es in the f___ value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
75
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be of___t by ch___es in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
76
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the de_______ used as a h___e. o This would be considered a fair value hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Fair Value Hedge • An entity with a fixed rate receivable may be concerned that fluctuations in interest rates will affect its fair value. They might enter into an interest rate swap in which they will pay out interest at a fixed rate, to offset the interest received, and receive interest from the counter-party at a variable rate. o As a result, they will always be paying the market rate of interest and changes in the fair value of the note will be offset by changes in the fair value of the derivative used as a hedge. o This would be considered a fair value hedge.
77
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
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Investing and Financing Cycle The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Cash Flow Hedge • An e____y with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate.
Investing and Financing Cycle The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate.
79
Investing and Financing Cycle Cash Flow Hedge • An entity with a va_____ rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate.
80
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable r___ receivable
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable
81
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate rec_______ may be concerned about the uncertainty
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty
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Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be con____ed about the uncertainty
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty
83
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the un_______y of future cash inflows
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows
84
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of fu____ cash inflows
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows
85
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future c__h inflows due to fluctuations in the interest rate.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate.
86
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash in____s due to fluctuations in the interest rate.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate.
87
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to flu_______s in the interest rate.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate.
88
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the in______ rate.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate.
89
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest r___. They might enter into an interest rate swap
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap
90
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might e_____ into an interest rate swap
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap
91
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate s___ in which they will pay out interest at a variable rate,
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate,
92
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will p__ out interest at a variable rate,
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate,
93
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out in______ at a variable rate,
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate,
94
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a va______ rate, to offset the interest received,
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received,
95
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to off___ the interest received,
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received,
96
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the in_______ received,
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received,
97
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest re____ed, and receive interest
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest
98
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and re_____ interest from the counter-party at a fixed rate.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate.
99
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive int______ from the counter-party at a fixed rate.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate.
100
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the co_____-party at a fixed rate.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate.
101
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a f__ed rate.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate.
102
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed r___. o As a result, regardless of changes in the market interest rate,
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate,
103
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of c_______es in the market interest rate,
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate,
104
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the m_____t interest rate,
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate,
105
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest r___, the entity will receive a steady and predictable stream of interest cash inflows.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows.
106
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will re_____ a steady and predictable stream of interest cash inflows.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows.
107
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a s_______ and predictable stream of interest cash inflows.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows.
108
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and pred______ stream of interest cash inflows.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows.
109
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable str___ of interest cash inflows.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows.
110
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of in_______ cash inflows.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows.
111
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest c___ inflows.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows.
112
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inf___s.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows.
113
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be c________ed a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
114
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a c__h flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
115
Investing and Financing Cycle C___ Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
116
Investing and Financing Cycle Cash Flow H____ • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
117
Investing and Financing Cycle Cash Flow Hedge • An entity with a va____le r___ receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
118
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate rec_____ may be con____ed about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
119
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the un_______ty of fu___ cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
120
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future c__h inf___s due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
121
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to flu______s in the in______ rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
122
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate s___ in which they will p__ out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
123
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out int______ at a var_____ rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
124
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to of____ the interest re_____d, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
125
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a f__ed r__e. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
126
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will rec____ a steady and predictable stream of interest c__h inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
127
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a st__dy and pre______e stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
128
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable str___ of interest cash in____s. o This would be considered a cash flow hedge.
Investing and Financing Cycle Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
129
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge C__h Fl__ Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
Investing and Financing Cycle An entity uses derivatives as hedges to protect itself against various risks that may be inherent in the assets or liabilities they hold, in anticipated transactions, or other aspects of their business. The purpose of the hedge is to shift the risk to a counter-party. For example: 1) Fair Value Hedge 2) Cash Flow Hedge Cash Flow Hedge • An entity with a variable rate receivable may be concerned about the uncertainty of future cash inflows due to fluctuations in the interest rate. They might enter into an interest rate swap in which they will pay out interest at a variable rate, to offset the interest received, and receive interest from the counter-party at a fixed rate. o As a result, regardless of changes in the market interest rate, the entity will receive a steady and predictable stream of interest cash inflows. o This would be considered a cash flow hedge.
130
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the transaction.
131
Investing and Financing Cycle A c___ flow hedge may also be used to transfer risk associated with a forecasted transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction.
132
Investing and Financing Cycle A cash f__w hedge may also be used to transfer risk associated with a forecasted transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction.
133
Investing and Financing Cycle A cash flow h___e may also be used to transfer risk associated with a forecasted transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction.
134
Investing and Financing Cycle A cash flow hedge may also be u__d to transfer risk associated with a forecasted transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction.
135
Investing and Financing Cycle A cash flow hedge may also be used to tr____er risk associated with a forecasted transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction.
136
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a fo_______ed transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction.
137
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted tr_______ion.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction.
138
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A co_____y planning to purchase goods or services from a foreign supplier
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier
139
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to pu______ goods or services from a foreign supplier
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier
140
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a for_____ supplier may enter into a forward exchange contract
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract
141
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign su___ier may enter into a forward exchange contract
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract
142
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a for____ exchange contract
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract
143
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exc_____ contract to make certain that
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that
144
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange con_____ to make certain that
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a
145
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a ch___e in the foreign currency exchange rates
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates
146
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign cu____cy exchange rates
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates
147
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange r___s does not adversely affect the cash flows
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows
148
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely af____ the cash flows associated with the transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the transaction.
149
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the c__h flows associated with the transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the transaction.
150
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash f___s associated with the transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the transaction.
151
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows as_______ed with the transaction.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the transaction.
152
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the tr______on.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the transaction.
153
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the transaction. In order to apply hedge accounting to a derivative instrument, at the inception management must designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle A cash flow hedge may also be used to transfer risk associated with a forecasted transaction. A company planning to purchase goods or services from a foreign supplier may enter into a forward exchange contract to make certain that a change in the foreign currency exchange rates does not adversely affect the cash flows associated with the transaction. In order to apply hedge accounting to a derivative instrument, at the inception management must designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
154
Investing and Financing Cycle In order to apply h___e accounting to a derivative instrument,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument,
155
Investing and Financing Cycle In order to a__ly hedge accounting to a derivative instrument,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument,
156
Investing and Financing Cycle In order to apply hedge ac_______ing to a derivative instrument,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument,
157
Investing and Financing Cycle In order to apply hedge accounting to a der_______ instrument,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument,
158
Investing and Financing Cycle In order to apply hedge accounting to a derivative ins_______, at the inception
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception
159
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inc______ management must 1) designate the derivative as a hedge;
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge;
160
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception ma_________ must 1) designate the derivative as a hedge;
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge;
161
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) de_______ the derivative as a hedge;
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge;
162
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the de_______ as a hedge;
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge;
163
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a he___; formally document the hedging relationship,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship,
164
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally do_______ the hedging relationship,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship,
165
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the h___ing relationship,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship,
166
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging rel_______p, the entity’s risk management strategy for using the hedge,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge,
167
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the en___y’s risk management strategy for using the hedge,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge,
168
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s r__k management strategy for using the hedge,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge,
169
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk ma_________ strategy for using the hedge,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge,
170
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management st______y for using the hedge,
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge,
171
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the h___e, and the method of assessing its effectiveness;
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness;
172
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the met___ of assessing its effectiveness;
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness;
173
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of as____ing its effectiveness;
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness;
174
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its eff________ss; and 2) have the expectation that the hedge will be highly effective.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective.
175
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the exp_______n that the hedge will be highly effective.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective.
176
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the h___e will be highly effective.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective.
177
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be hi__ly effective.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective.
178
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly eff_____. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
179
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The au_____ should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
180
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather ev______ that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
181
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that ma________ has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
182
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has m__ these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
183
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these re_________s.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
184
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the in________ management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
185
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception ma_________ m___ - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
186
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) de_______ the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the exp_______ that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
187
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the de_______ as a h___e; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
188
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally do_______ the h___ing relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
189
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s r___ management st____gy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
190
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the me____ of a______ing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
191
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of as____ing its ef________s; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
192
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and h___ the exp________ that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
193
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be h___ly eff_______. The auditor should gather evidence that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
194
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should g______ evi______ that management has met these requirements.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements.
195
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements. In addition: Fair Value Hedges • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements. In addition: Fair Value Hedges • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk.
196
Investing and Financing Cycle In addition: • For f__r value hedges, the auditor should obtain evidence
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence
197
Investing and Financing Cycle In addition: • For fair va___ hedges, the auditor should obtain evidence
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence
198
Investing and Financing Cycle In addition: • For fair value hedges, the au_____ should obtain evidence
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence
199
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain ev______ to support the recorded change in the hedged item
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item
200
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to su______ the recorded change in the hedged item
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item
201
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the re____ed change in the hedged item
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item
202
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded ch_____ in the hedged item
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item
203
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the h___ed item that is attributable to the hedged risk.
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk.
204
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged i___ that is attributable to the hedged risk.
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk.
205
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is att______le to the hedged risk.
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk.
206
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the h___ed risk.
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk.
207
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged ri__.
Investing and Financing Cycle In addition: • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk.
208
Investing and Financing Cycle In addition: Fair Value Hedges • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk. Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence:
Investing and Financing Cycle In addition: Fair Value Hedges • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk. Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence:
209
Investing and Financing Cycle In addition: • For a c__h flow hedge of a forecasted transaction,
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction,
210
Investing and Financing Cycle In addition: • For a cash fl__ hedge of a forecasted transaction,
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction,
211
Investing and Financing Cycle In addition: • For a cash flow hedge of a fore____ed transaction,
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction,
212
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted tra________, the auditor should obtain evidence
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence
213
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evi_______ that supports management’s determination
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination
214
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that sup____s management’s determination
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination
215
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s de_________ that the forecasted transaction will probably occur.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur.
216
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the fore____ed transaction will probably occur.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur.
217
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted tra________ will probably occur.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur.
218
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will pro____ly occur.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur.
219
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably oc___.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur.
220
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include ev_______: o Regarding the frequency of similar past transactions.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions.
221
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the fre____cy of similar past transactions.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions.
222
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of si______ past transactions.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions.
223
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar p__t transactions.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions.
224
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past tra_________s.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions.
225
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Su_____ing the entity’s ability to execute the transaction.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction.
226
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the e___ty’s ability to execute the transaction.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction.
227
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s a_____y to execute the transaction.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction.
228
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to e______ the transaction.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction.
229
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the tra________.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction.
230
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o In_____ng the loss that might result if the transaction does not occur.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur.
231
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the l__s that might result if the transaction does not occur.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur.
232
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might re____ if the transaction does not occur.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur.
233
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the tr_________ does not occur.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur.
234
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does n__ occur.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur.
235
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not oc___.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur.
236
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Sup____ing the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
237
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the li___ihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
238
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that sub_______lly different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
239
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially di_______ transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
240
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different tra________s might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
241
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be u__d to achieve the same business purpose.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
242
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business pur____.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction Support may include evidence: o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
243
Investing and Financing Cycle In addition: • For a c__h fl__ hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
244
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a fore____ed tra_______, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
245
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evi______ that supports management’s de_________ that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
246
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will pr_____ly oc___. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
247
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the fre____cy of similar past tr__________s. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
248
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ab____y to ex______ the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
249
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the l__s that might result if the transaction does n__ occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
250
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the li________ that substantially di________ transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
251
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to ac_____ the s___ business purpose.
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
252
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Su_____ may include evi______: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In addition: Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
253
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements. In addition: F__r Value Hedges • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk. C__h Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements. In addition: Fair Value Hedges • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk. Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
254
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements. In addition: Fair Va___ Hedges • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk. Cash F___ Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.
Investing and Financing Cycle In order to apply hedge accounting to a derivative instrument, at the inception management must - 1) designate the derivative as a hedge; formally document the hedging relationship, the entity’s risk management strategy for using the hedge, and the method of assessing its effectiveness; and - 2) and have the expectation that the hedge will be highly effective. The auditor should gather evidence that management has met these requirements. In addition: Fair Value Hedges • For fair value hedges, the auditor should obtain evidence to support the recorded change in the hedged item that is attributable to the hedged risk. Cash Flow Hedges • For a cash flow hedge of a forecasted transaction, the auditor should obtain evidence that supports management’s determination that the forecasted transaction will probably occur. Support may include evidence: o Regarding the frequency of similar past transactions. o Supporting the entity’s ability to execute the transaction. o Indicating the loss that might result if the transaction does not occur. o Supporting the likelihood that substantially different transactions might be used to achieve the same business purpose.

CPA AUD Flashcards (62 decks)

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