AUD 3 Internal Control 16 - 9 Investing and Financing Cycle - Derivatives and Hedge Accounting Flashcards

Question 1

Q

The Basics of Accounting for Derivatives and Hedge Accounting

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Answer

A

The Basics of Accounting for Derivatives and Hedge Accounting

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Question 2

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eli_____ hedge relationship:

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Question 3

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be sat____ed in order for hedge accounting to be applied to any eligible hedge relationship:

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Question 4

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic req_________s that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Question 5

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible he___ relationship:

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Question 6

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal doc_____________ of the hedge relationship should exist at the time of designation;

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;

Question 7

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Fo____ documentation of the hedge relationship should exist at the time of designation;

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;

Question 8

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the he___ relationship should exist at the time of designation;

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;

Question 9

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of desi______n;

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;

Question 10

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inc_____ and each period thereafter an entity must demonstrate that

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that

Question 11

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must dem________ that
the relationship is expected to be highly effective on a go-forward basis (prospectively)

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)

Question 12

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly eff______ on a go-forward basis (prospectively)

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)

Question 13

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be hi__ly effective on a go-forward basis (prospectively)

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)

Question 14

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (pro_______ly)
and has actually been effective since the date of designation (retrospectively);

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)
and has actually been effective since the date of designation (retrospectively);

Question 15

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)
and has actually been ef________ since the date of designation (retrospectively);

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)
and has actually been effective since the date of designation (retrospectively);

Question 16

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)
and has actually been effective since the date of desi_______ (retrospectively);

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)
and has actually been effective since the date of designation (retrospectively);

Question 17

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)
and has actually been effective since the date of designation (retro_______ly);

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that
the relationship is expected to be highly effective on a go-forward basis (prospectively)
and has actually been effective since the date of designation (retrospectively);

Question 18

Q

prospectively =

Answer

A

prospectively = go-forward basis

Question 19

Q

retrospectively =

Answer

A

retrospectively = looking backward

Question 20

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must re____ize any ineffectiveness in profit or loss.

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Question 21

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineff_________ in profit or loss.

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Question 22

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Each period an entity must recognize any ineffectiveness in pr__it or loss.

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Each period an entity must recognize any ineffectiveness in profit or loss.

Question 23

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or l__s.

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Question 24

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Fo____ docu________of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Question 25

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inc______ and each period thereafter an entity must de_________ that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Question 26

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be h___ly eff______ on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Question 27

Q

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must re____ize any ineff_________ in profit or loss.

Answer

A

Qualifying for Hedge Accounting

Documentation

There are 3 basic requirements that must be satisfied in order for hedge accounting to be applied to any eligible hedge relationship:

Formal documentation of the hedge relationship should exist at the time of designation;
At inception and each period thereafter an entity must demonstrate that the relationship is expected to be highly effective on a go-forward basis (prospectively) and has actually been effective since the date of designation (retrospectively);
Each period an entity must recognize any ineffectiveness in profit or loss.

Question 28

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 29

Q

Qualifying for Hedge Accounting

Documentation

Formal do__________ of the hedge relationship needs to exist at the date of designation that details:

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Question 30

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the h___e relationship needs to exist at the date of designation that details:

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Question 31

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of desi________ that details:

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Question 32

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s r___ management objective and strategy for undertaking the hedge;

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;

Question 33

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management obj_______ and strategy for undertaking the hedge;

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;

Question 34

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and str____y for undertaking the hedge;

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;

Question 35

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The na____ of the risk being hedged;

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;

Question 36

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the ri__ being hedged;

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;

Question 37

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The nature of the risk being hedged;
Clear identification of the hedged it__ and hedging derivative including the key terms;

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms;

Question 38

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The nature of the risk being hedged;
Clear identification of the hedged item and hedging deri_____ including the key terms;

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms;

Question 39

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The me____s through which the effectiveness of the relationship will be assessed o

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed

Question 40

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the ef__________ of the relationship will be assessed

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed

Question 41

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be as____ed on both a prospective and retrospective basis,

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis,

Question 42

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a pros______ and retrospective basis,

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis,

Question 43

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retro_______ basis, and how any ineffectiveness will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 44

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineff______ess will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 45

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be me____ed.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 46

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge rel_________ needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 47

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the d___ of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 48

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk ma_________ objective and strategy for undertaking the h___e;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 49

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nat___ of the r__k being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 50

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Cl___ ident________ of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 51

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged i___ and hedging der______ including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 52

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The met___s through which the eff______ess of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 53

Q

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any inef_______ess will be measured.

Answer

A

Qualifying for Hedge Accounting

Documentation

Formal documentation of the hedge relationship needs to exist at the date of designation that details:

The entity’s risk management objective and strategy for undertaking the hedge;
The nature of the risk being hedged;
Clear identification of the hedged item and hedging derivative including the key terms; and
The methods through which the effectiveness of the relationship will be assessed on both a prospective and retrospective basis, and how any ineffectiveness will be measured.

Question 54

Q

Qualifying for Hedge Accounting

Documentation

The met______ies used to assess and measure effectiveness need to be described in sufficient detail

Answer

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

Question 55

Q

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure ef______ess need to be described in sufficient detail

Answer

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

Question 56

Q

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be de_____ed in sufficient detail

that would allow a reasonably knowledgeable individual to be able to understand

Answer

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

that would allow a reasonably knowledgeable individual to be able to understand

Question 57

Q

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

that would allow a reasonably know______ble individual to be able to understand

Answer

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

that would allow a reasonably knowledgeable individual to be able to understand

Question 58

Q

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

that would allow a reasonably knowledgeable individual to be able to und________ and consistently reproduce the results of the assessment.

Answer

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

that would allow a reasonably knowledgeable individual to be able to understand and consistently reproduce the results of the assessment.

Question 59

Q

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

that would allow a reasonably knowledgeable individual to be able to understand and consistently reproduce the re____s of the assessment.

Answer

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

that would allow a reasonably knowledgeable individual to be able to understand and consistently reproduce the results of the assessment.

Question 60

Q

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

that would allow a reasonably knowledgeable individual to be able to understand and consistently reproduce the results of the as_________.

Answer

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail

that would allow a reasonably knowledgeable individual to be able to understand and consistently reproduce the results of the assessment.

Question 61

Q

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail that would allow a reasonably knowledgeable individual to be able to understand and consistently reproduce the results of the assessment.

This eff________ assessment and measurement aspect of the requirements can get particularly complicated requiring specialized resources in certain instances for the more complex types of relationships.

Answer

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail that would allow a reasonably knowledgeable individual to be able to understand and consistently reproduce the results of the assessment.

This effectiveness assessment and measurement aspect of the requirements can get particularly complicated requiring specialized resources in certain instances for the more complex types of relationships.

Question 62

Q

Qualifying for Hedge Accounting

Documentation

This effectiveness asse______t and measurement aspect of the requirements can get particularly complicated requiring specialized resources in certain instances for the more complex types of relationships.

Answer

A

Qualifying for Hedge Accounting

Documentation

This effectiveness assessment and measurement aspect of the requirements can get particularly complicated requiring specialized resources in certain instances for the more complex types of relationships.

Question 63

Q

Qualifying for Hedge Accounting

Documentation

This effectiveness assessment and measurement aspect of the requirements can get particularly com_____ed requiring specialized resources in certain instances for the more complex types of relationships.

Answer

A

Qualifying for Hedge Accounting

Documentation

This effectiveness assessment and measurement aspect of the requirements can get particularly complicated requiring specialized resources in certain instances for the more complex types of relationships.

Question 64

Q

Qualifying for Hedge Accounting

Documentation

This effectiveness assessment and measurement aspect of the requirements can get particularly complicated requiring spe_____ed resources in certain instances for the more complex types of relationships.

Answer

A

Qualifying for Hedge Accounting

Documentation

This effectiveness assessment and measurement aspect of the requirements can get particularly complicated requiring specialized resources in certain instances for the more complex types of relationships.

Answer 65

A

Qualifying for Hedge Accounting

Documentation

This effectiveness assessment and measurement aspect of the requirements can get particularly complicated requiring specialized resources in certain instances for the more complex types of relationships.

Answer 66

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail that would allow a reasonably knowledgeable individual to be able to understand and consistently reproduce the results of the assessment.

This effectiveness assessment and measurement aspect of the requirements can get particularly complicated requiring specialized resources in certain instances for the more complex types of relationships.

Answer 67

A

Qualifying for Hedge Accounting

Documentation

The methodologies used to assess and measure effectiveness need to be described in sufficient detail that would allow a reasonably knowledgeable individual to be able to understand and consistently reproduce the results of the assessment.

This effectiveness assessment and measurement aspect of the requirements can get particularly complicated requiring specialized resources in certain instances for the more complex types of relationships.

Answer 68

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

At each subsequent period (at least quarterly under current U.S. standards, and at a minimum each time an entity prepares financial statements under international standards), the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test, or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 69

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

Answer 70

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

Answer 71

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

Answer 72

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

Answer 73

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

Answer 74

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value o

Answer 75

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows

Answer 76

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows

Answer 77

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows

Answer 78

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument

Answer 79

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument

Answer 80

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument

Answer 81

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

Answer 82

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

Answer 83

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

Answer 84

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness

by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

Answer 85

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

Answer 86

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

Answer 87

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

Answer 88

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

Answer 89

A

Assessment of Effectiveness

At the inception of each hedge,

Answer 90

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that

Answer 91

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective

Answer 92

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective

Answer 93

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term

Answer 94

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term

Answer 95

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term

in achieving offsetting changes in the fair value or cash flows

Answer 96

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term

in achieving offsetting changes in the fair value or cash flows

Answer 97

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term

in achieving offsetting changes in the fair value or cash flows

Answer 98

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term

in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk

Answer 99

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term

in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

Answer 100

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term

in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

Answer 101

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term

in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

Answer 102

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

Answer 103

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

Answer 104

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

Answer 105

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

At each subsequent period (at least quarterly under current U.S. standards, and at a minimum each time an entity prepares financial statements under international standards), the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

Answer 106

A

Assessment of Effectiveness

At each subsequent period
(at least quarterly under current U.S. standards,

Answer 107

A

Assessment of Effectiveness

At each subsequent period
(at least quarterly under current U.S. standards,

Answer 108

A

Assessment of Effectiveness

At each subsequent period
(at least quarterly under current U.S. standards,
and at a minimum each time an entity prepares financial statements under international standards),

Answer 109

A

Assessment of Effectiveness

At each subsequent period
(at least quarterly under current U.S. standards,
and at a minimum each time an entity prepares financial statements under international standards),

Answer 110

A

Assessment of Effectiveness

At each subsequent period
(at least quarterly under current U.S. standards,
and at a minimum each time an entity prepares financial statements under international standards),

the prospective test should be rerun

Answer 111

A

Assessment of Effectiveness

At each subsequent period

the prospective test should be rerun

Answer 112

A

Assessment of Effectiveness

At each subsequent period

the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective

Answer 113

A

Assessment of Effectiveness

At each subsequent period

the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective

Answer 114

A

Assessment of Effectiveness

At each subsequent period

the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective

Answer 115

A

Assessment of Effectiveness

At each subsequent period

the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective

Answer 116

A

Assessment of Effectiveness

At each subsequent period

the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

Answer 117

A

Assessment of Effectiveness

At each subsequent period

the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

Answer 118

A

Assessment of Effectiveness

At each subsequent period

the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

Answer 119

A

Assessment of Effectiveness

At each subsequent period (at least quarterly under current U.S. standards, and at a minimum each time an entity prepares financial statements under international standards), the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

Answer 120

A

Assessment of Effectiveness

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

At each subsequent period (at least quarterly under current U.S. standards, and at a minimum each time an entity prepares financial statements under international standards), the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

Answer 121

A

Assessment of Effectiveness

At each subsequent period (at least quarterly under current U.S. standards, and at a minimum each time an entity prepares financial statements under international standards), the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Answer 122

A

Assessment of Effectiveness

At each period end, a retrospective test also has to be conducted

Answer 123

A

Assessment of Effectiveness

At each period end, a retrospective test also has to be conducted

Answer 124

A

Assessment of Effectiveness

At each period end, a retrospective test also has to be conducted

Answer 125

A

Assessment of Effectiveness

At each period end, a retrospective test also has to be conducted to demonstrate that

Answer 126

A

Assessment of Effectiveness

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Answer 127

A

Assessment of Effectiveness

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Answer 128

A

Assessment of Effectiveness

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Answer 129

A

Assessment of Effectiveness

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Answer 130

A

Assessment of Effectiveness

At each subsequent period (at least quarterly under current U.S. standards, and at a minimum each time an entity prepares financial statements under international standards), the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Answer 131

A

Assessment of Effectiveness

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test, or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 132

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date

Answer 133

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

Answer 134

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

Answer 135

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

Answer 136

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

Answer 137

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

or discontinued prospectively

Answer 138

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

or discontinued prospectively form the previous assessment date

Answer 139

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

or discontinued prospectively form the previous assessment date

Answer 140

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 141

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 142

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 143

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 144

A

Assessment of Effectiveness

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test,

or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 145

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

At each subsequent period (at least quarterly under current U.S. standards, and at a minimum each time an entity prepares financial statements under international standards), the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test, or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 146

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

At each subsequent period (at least quarterly under current U.S. standards, and at a minimum each time an entity prepares financial statements under international standards), the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test, or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 147

A

Assessment of Effectiveness

A critical requirement before one can apply hedge accounting is the analysis that supports the assessment of hedge effectiveness by analyzing the relationship between the changes in fair value or cash flows of the hedging derivative instrument versus those of the hedged item.

At the inception of each hedge, an organization is required to demonstrate that the hedge is expected to be highly effective throughout the designated term in achieving offsetting changes in the fair value or cash flows attributable to the hedge risk through a prospective test.

At each subsequent period (at least quarterly under current U.S. standards, and at a minimum each time an entity prepares financial statements under international standards), the prospective test should be rerun to demonstrate that the relationship is still expected to be highly effective for the remainder of the term of the hedge.

At each period end, a retrospective test also has to be conducted to demonstrate that the hedge has been highly effective since inception of the hedge.

Hedge accounting must be discontinued prospectively from the current assessment date should there be a failure of the prospective test, or discontinued prospectively form the previous assessment date should there be a failure of the retrospective test.

Answer 148

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship (that is, the extent to which the change in the fair value or cash flows of the derivative instrument does not offset the change in fair value or cash flows of the hedged item).

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 149

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

Answer 150

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

Answer 151

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

Answer 152

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 153

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 154

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 155

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 156

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 157

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 158

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 159

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 160

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 161

A

What is ineffectiveness in hedging relationship?

Ineffectiveness in hedging relationship

= When the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item

Answer 162

A

What is ineffectiveness in hedging relationship?

Ineffectiveness in hedging relationship

= When the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item

Answer 163

A

What is ineffectiveness in hedging relationship?

Ineffectiveness in hedging relationship

= When the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item

Answer 164

A

What is ineffectiveness in hedging relationship?

Ineffectiveness in hedging relationship

= When the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item

Answer 165

A

What is ineffectiveness in hedging relationship?

Ineffectiveness in hedging relationship

= When the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item

Answer 166

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument

does not offset the change in fair value or cash flows of the hedged item).

Answer 167

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument does not offset the change in fair value or cash flows of the hedged item).

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

Answer 168

A

Measurement of Ineffectiveness

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge

Answer 169

A

Measurement of Ineffectiveness

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge

Answer 170

A

Measurement of Ineffectiveness

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge

Answer 171

A

Measurement of Ineffectiveness

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge

and accordingly entities require processes and information to calculate the ineffectiveness accurately

Answer 172

A

Measurement of Ineffectiveness

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge

and accordingly entities require processes and information to calculate the ineffectiveness accurately

Answer 173

A

Measurement of Ineffectiveness

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge

and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

Answer 174

A

Measurement of Ineffectiveness

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge

and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

Answer 175

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument does not offset the change in fair value or cash flows of the hedged item).

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

Answer 176

A

Measurement of Ineffectiveness

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 177

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss

Answer 178

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss

Answer 179

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss

as it is simply the extent to which a perfect offset does not exist

Answer 180

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss

as it is simply the extent to which a perfect offset does not exist

Answer 181

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss

as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 182

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss

as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 183

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss

as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 184

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss

as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 185

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss

as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 186

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 187

A

Measurement of Ineffectiveness

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 188

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship (that is, the extent to which the change in the fair value or cash flows of the derivative instrument does not offset the change in fair value or cash flows of the hedged item).

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 189

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship (that is, the extent to which the change in the fair value or cash flows of the derivative instrument does not offset the change in fair value or cash flows of the hedged item).

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 190

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship

(that is, the extent to which the change in the fair value or cash flows of the derivative instrument does not offset the change in fair value or cash flows of the hedged item).

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 191

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship (that is, the extent to which the change in the fair value or cash flows of the derivative instrument does not offset the change in fair value or cash flows of the hedged item).

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 192

A

Measurement of Ineffectiveness

When applying hedge accounting an entity is also required to measure any ineffectiveness that may exist in the relationship (that is, the extent to which the change in the fair value or cash flows of the derivative instrument does not offset the change in fair value or cash flows of the hedged item).

For a Cash Flow Hedge ineffectiveness is currently recognized in profit or loss only when there is over hedge and accordingly entities require processes and information to calculate the ineffectiveness accurately and in the appropriate instances.

For a Fair Value Hedge, ineffectiveness is naturally recognized in profit or loss as it is simply the extent to which a perfect offset does not exist and can occur in an over hedge or under hedge situation.

Answer 193

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

It is particularly useful for organizations that experience financial statement volatility today as a result of using derivatives to hedge underlying financial and/or non-financial risks (or expect to do so in the future).

It does nevertheless require a level of expertise to ensure tit is being applied appropriately and an investment of time and resources, both at inception of a hedge relationship and on an on-going basis, to maintain it.

The consequences of not applying hedge accounting appropriately can be significant, resulting in financial statements.

However, when applied appropriately, hedge accounting can result in a better alignment of an organization’s financial reporting and economic realities.

Answer 194

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

Answer 195

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

It is particularly useful for organizations that experience financial statement volatility today

Answer 196

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

It is particularly useful for organizations that experience financial statement volatility today

as a result of using derivatives to hedge underlying financial and/or non-financial risks

Answer 197

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

It is particularly useful for organizations that experience financial statement volatility today as a result of using derivatives to hedge underlying financial and/or non-financial risks (or expect to do so in the future).

Answer 198

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

It is particularly useful for organizations that experience financial statement volatility today as a result of using derivatives to hedge underlying financial and/or non-financial risks (or expect to do so in the future).

Answer 199

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

It is particularly useful for organizations that experience financial statement volatility today as a result of using derivatives to hedge underlying financial and/or non-financial risks (or expect to do so in the future).

Answer 200

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

It is particularly useful for organizations that experience financial statement volatility today as a result of using derivatives to hedge underlying financial and/or non-financial risks (or expect to do so in the future).

It does nevertheless require a level of expertise to ensure tit is being applied appropriately

Answer 201

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

It is particularly useful for organizations that experience financial statement volatility today as a result of using derivatives to hedge underlying financial and/or non-financial risks (or expect to do so in the future).

It does nevertheless require a level of expertise to ensure tit is being applied appropriately and an investment of time and resources, both at inception of a hedge relationship and on an on-going basis, to maintain it.

Answer 202

A

Conclusion

It does nevertheless require a level of expertise to ensure tit is being applied appropriately and an investment of time and resources, both at inception of a hedge relationship and on an on-going basis, to maintain it.

Answer 203

A

Conclusion

It does nevertheless require a level of expertise to ensure tit is being applied appropriately and an investment of time and resources, both at inception of a hedge relationship and on an on-going basis, to maintain it.

Answer 204

A

Conclusion

It does nevertheless require a level of expertise to ensure tit is being applied appropriately and an investment of time and resources, both at inception of a hedge relationship and on an on-going basis, to maintain it.

Answer 205

A

Conclusion

It does nevertheless require a level of expertise to ensure tit is being applied appropriately and an investment of time and resources, both at inception of a hedge relationship and on an on-going basis, to maintain it.

The consequences of not applying hedge accounting appropriately can be significant, resulting in financial statements.

Answer 206

A

Conclusion

The consequences of not applying hedge accounting appropriately can be significant, resulting in financial statements.

However, when applied appropriately, hedge accounting can result in a better alignment of an organization’s financial reporting and economic realities.

Answer 207

A

Conclusion

The consequences of not applying hedge accounting appropriately can be significant, resulting in financial statements.

However, when applied appropriately, hedge accounting can result in a better alignment of an organization’s financial reporting and economic realities.

Answer 208

A

Conclusion

However, when applied appropriately, hedge accounting can result in a better alignment of an organization’s financial reporting and economic realities.

Answer 209

A

Conclusion

However, when applied appropriately, hedge accounting can result in a better alignment of an organization’s financial reporting and economic realities.

Answer 210

A

Conclusion

Hedge accounting is a useful financial reporting accommodation that is not as complex and mystifying as it may appear at first glance.

It is particularly useful for organizations that experience financial statement volatility today as a result of using derivatives to hedge underlying financial and/or non-financial risks (or expect to do so in the future).

It does nevertheless require a level of expertise to ensure tit is being applied appropriately and an investment of time and resources, both at inception of a hedge relationship and on an on-going basis, to maintain it.

The consequences of not applying hedge accounting appropriately can be significant, resulting in financial statements.

However, when applied appropriately, hedge accounting can result in a better alignment of an organization’s financial reporting and economic realities.

Answer 211

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

*Excerpt from Accounting Standards Codification
Master Glossary

Answer 212

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,

Answer 213

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,

Answer 214

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,

Answer 215

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,

Answer 216

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,

Answer 217

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,

Answer 218

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,

Answer 219

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 220

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 221

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 222

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 223

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 224

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 225

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 226

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 227

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 228

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 229

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 230

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 231

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Answer 232

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,
or of an unrecognized firm commitment, that are attributable to a particular risk.

Fair value hedges protect existing assets, liabilities and firm commitments against changes in fair value.

The exposure to changes in fair value can result from a variety of causes including holding a commodity, being committed to purchase or sell something on predetermined terms or issuing or holding a financial instrument that has a fixed interest rate and maturity.

Answer 233

A

What is a fair value hedge?

Fair Value Hedge =

A hedge of the exposure to changes in the fair value of a recognized asset or liability,

or of an unrecognized firm commitment, that are attributable to a particular risk.

Fair value hedges protect existing assets, liabilities and firm commitments against changes in fair value.

The exposure to changes in fair value can result from a variety of causes including holding a commodity, being committed to purchase or sell something on predetermined terms or issuing or holding a financial instrument that has a fixed interest rate and maturity.

Except for foreign currency fair value hedges,
the derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Once the derivative unlocks the fixed terms,
the entity’s income statement benefits from favorable changes in the price, rate or index.

However, because of the unlocking of the fixed terms, the entity’s earnings may also be exposed to unfavorable changes.

Answer 234

A

Fair Value Hedge

Except for foreign currency fair value hedges,

the derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Once the derivative unlocks the fixed terms,
the entity’s income statement benefits from favorable changes in the price, rate or index.

However, because of the unlocking of the fixed terms, the entity’s earnings may also be exposed to unfavorable changes.

Answer 235

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Answer 236

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Answer 237

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Answer 238

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Answer 239

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Once the derivative unlocks the fixed terms,
the entity’s income statement benefits from favorable changes in the price, rate or index.

Answer 240

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Once the derivative unlocks the fixed terms,
the entity’s income statement benefits from favorable changes in the price, rate or index.

Answer 241

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Once the derivative unlocks the fixed terms,
the entity’s income statement benefits from favorable changes in the price, rate or index.

Answer 242

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Once the derivative unlocks the fixed terms,
the entity’s income statement benefits from favorable changes in the price, rate or index.

However, because of the unlocking of the fixed terms, the entity’s earnings may also be exposed to unfavorable changes.

Answer 243

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Once the derivative unlocks the fixed terms,
the entity’s income statement benefits from favorable changes in the price, rate or index.

However, because of the unlocking of the fixed terms, the entity’s earnings may also be exposed to unfavorable changes.

Answer 244

A

Fair Value Hedge

The derivative in a fair value hedge will unlock a price, rate, or index that would otherwise be fixed or locked from the entity’s income statement perspective.

Once the derivative unlocks the fixed terms,
the entity’s income statement benefits from favorable changes in the price, rate or index.

However, because of the unlocking of the fixed terms, the entity’s earnings may also be exposed to unfavorable changes.

Answer 245

A

Fair Value Hedge

“The derivative in a fair value hedge will unlock a price, rate or index that would otherwise be fixed or locked from the entity’s income statement perspective.*”

*Fair value hedges of firm commitments denominated in a foreign currency, actually LOCK in an exchange rate rather than unlock the exchange rate.

However, the purpose of locking in the exchange rate is to protect the entity while it is “locked” into some other cost, price, rate or index,

such as a contract to purchase a fixed quantity of inventory at a fixed price denominated in a foreign currency.

Because the entity cannot avoid the fixed price, it is exposed to changes in the foreign currency exchange rate.

Thus, even in this hedging relationship, the derivative is protecting the entity from fixed prices, costs, rates or indexes.

Answer 246

A

Fair Value Hedge

“The derivative in a fair value hedge will unlock a price, rate or index that would otherwise be fixed or locked from the entity’s income statement perspective.*”

*Fair value hedges of firm commitments denominated in a foreign currency, actually LOCK in an exchange rate rather than unlock the exchange rate.

Answer 247

A

Fair Value Hedge

“The derivative in a fair value hedge will unlock a price, rate or index that would otherwise be fixed or locked from the entity’s income statement perspective.*”

*Fair value hedges of firm commitments denominated in a foreign currency, actually LOCK in an exchange rate rather than unlock the exchange rate.

Answer 248

A

Fair Value Hedge

“The derivative in a fair value hedge will unlock a price, rate or index that would otherwise be fixed or locked from the entity’s income statement perspective.*”

*Fair value hedges of firm commitments denominated in a foreign currency, actually LOCK in an exchange rate rather than unlock the exchange rate.

However, the purpose of locking in the exchange rate is to protect the entity while it is “locked” into some other cost, price, rate or index,

Answer 249

A

Fair Value Hedge

“The derivative in a fair value hedge will unlock a price, rate or index that would otherwise be fixed or locked from the entity’s income statement perspective.*”

*Fair value hedges of firm commitments denominated in a foreign currency, actually LOCK in an exchange rate rather than unlock the exchange rate.

However, the purpose of locking in the exchange rate is to protect the entity while it is “locked” into some other cost, price, rate or index,

Answer 250

A

Fair Value Hedge

“The derivative in a fair value hedge will unlock a price, rate or index that would otherwise be fixed or locked from the entity’s income statement perspective.*”

*Fair value hedges of firm commitments denominated in a foreign currency, actually LOCK in an exchange rate rather than unlock the exchange rate.

However, the purpose of locking in the exchange rate is to protect the entity while it is “locked” into some other cost, price, rate or index,

such as a contract to purchase a fixed quantity of inventory at a fixed price denominated in a foreign currency.

Answer 251

A

Fair Value Hedge

“The derivative in a fair value hedge will unlock a price, rate or index that would otherwise be fixed or locked from the entity’s income statement perspective.*”

*Fair value hedges of firm commitments denominated in a foreign currency, actually LOCK in an exchange rate rather than unlock the exchange rate.

However, the purpose of locking in the exchange rate is to protect the entity while it is “locked” into some other cost, price, rate or index,

such as a contract to purchase a fixed quantity of inventory at a fixed price denominated in a foreign currency.

Answer 252

A

Fair Value Hedge

“The derivative in a fair value hedge will unlock a price, rate or index that would otherwise be fixed or locked from the entity’s income statement perspective.*”

*Fair value hedges of firm commitments denominated in a foreign currency, actually LOCK in an exchange rate rather than unlock the exchange rate.

However, the purpose of locking in the exchange rate is to protect the entity while it is “locked” into some other cost, price, rate or index,

such as a contract to purchase a fixed quantity of inventory at a fixed price denominated in a foreign currency.

Answer 253

A

Fair Value Hedge

“The derivative in a fair value hedge will unlock a price, rate or index that would otherwise be fixed or locked from the entity’s income statement perspective.*”

*Fair value hedges of firm commitments denominated in a foreign currency, actually LOCK in an exchange rate rather than unlock the exchange rate.

However, the purpose of locking in the exchange rate is to protect the entity while it is “locked” into some other cost, price, rate or index,

such as a contract to purchase a fixed quantity of inventory at a fixed price denominated in a foreign currency.

Because the entity cannot avoid the fixed price, it is exposed to changes in the foreign currency exchange rate.

Thus, even in this hedging relationship, the derivative is protecting the entity from fixed prices, costs, rates or indexes.

Answer 254

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand, and an entity that has an investment in an available-for-sale fixed-rate debt instrument could enter into an interest rate swap to synthetically convert the fixed-rate debt instrument to a variable-rate debt instrument.

Fair value hedges protect against exposures to changes in the fair value of a recognized asset (e.g., inventory, fixed-rate notes receivable, fixed-rate bond), liability (e.g., fixed-rate debt issuance), or unrecognized firm commitment.

Answer 255

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

could enter into an interest rate swap

to synthetically convert the fixed-rate debt instrument to a variable-rate debt instrument.

Answer 256

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge

Answer 257

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory

Answer 258

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

Answer 259

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

Answer 260

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

could enter into an interest rate swap

Answer 261

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

could enter into an interest rate swap

Answer 262

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

could enter into an interest rate swap

Answer 263

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

could enter into an interest rate swap

to synthetically convert the fixed-rate debt instrument

Answer 264

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

could enter into an interest rate swap

to synthetically convert the fixed-rate debt instrument to a variable-rate debt instrument.

Answer 265

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

could enter into an interest rate swap

to synthetically convert the fixed-rate debt instrument to a variable-rate debt instrument.

Answer 266

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

could enter into an interest rate swap

to synthetically convert the fixed-rate debt instrument to a variable-rate debt instrument.

Answer 267

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument

could enter into an interest rate swap

to synthetically convert the fixed-rate debt instrument to a variable-rate debt instrument.

Answer 268

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument could enter into an interest rate swap to synthetically convert the fixed-rate debt instrument to a variable-rate debt instrument.

Answer 269

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument could enter into an interest rate swap to synthetically convert the fixed-rate debt instrument to a variable-rate debt instrument.

Answer 270

A

Fair Value Hedge

Examples of fair value hedges of assets work similarly.

An entity that owns inventory could enter into a fair value hedge to protect the value of its inventory on hand,

and an entity that has an investment in an available-for-sale fixed-rate debt instrument could enter into an interest rate swap to synthetically convert the fixed-rate debt instrument to a variable-rate debt instrument.

Fair value hedges protect against exposures to changes in the fair value of a recognized asset (e.g., inventory, fixed-rate notes receivable, fixed-rate bond), liability (e.g., fixed-rate debt issuance), or unrecognized firm commitment.

Answer 271

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value

Answer 272

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value

Answer 273

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized asset

Answer 274

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized asset, liability,
or unrecognized firm commitment.

Answer 275

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized asset, liability, or unrecognized firm commitment.

Answer 276

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized asset, liability, or unrecognized firm commitment.

Answer 277

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized asset, liability, or unrecognized firm commitment.

Answer 278

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized asset, liability, or unrecognized firm commitment.

Answer 279

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized asset, liability, or unrecognized firm commitment.

Answer 280

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized

asset (e.g., inventory, fixed-rate notes receivable, fixed-rate bond),

Answer 281

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized

asset (e.g., inventory, fixed-rate notes receivable, fixed-rate bond),

Answer 282

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized

asset (e.g., inventory, fixed-rate notes receivable, fixed-rate bond),

Answer 283

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized

asset (e.g., inventory, fixed-rate notes receivable, fixed-rate bond),

liability (e.g., fixed-rate debt issuance),

Answer 284

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized

asset (e.g., inventory, fixed-rate notes receivable, fixed-rate bond),

liability (e.g., fixed-rate debt issuance),

or unrecognized firm commitment.

Answer 285

A

Fair Value Hedge

Fair value hedges protect against exposures to changes in the fair value of a recognized

asset (e.g., inventory, fixed-rate notes receivable, fixed-rate bond),

liability (e.g., fixed-rate debt issuance),

or unrecognized firm commitment.

Answer 286

A

EY

How we see it?

The fact that an entity would be locked into a fixed price, cost, rate or index absent the hedge

is what distinguishes fair value hedges from cash flow hedges.

Identifying whether the entity is locked in to a fixed exposure is an important step in determining whether the derivative represents a fair value hedge or a cash flow hedge.

This distinction is important because the accounting for each type of hedge is different.

Answer 287

A

EY

How we see it?

The fact that an entity would be locked into a fixed price, cost, rate or index absent the hedge

Answer 288

A

EY

How we see it?

The fact that an entity would be locked into a FIXED price, cost, rate or index absent the hedge

is what distinguishes Fair Value Hedges from Cash flow Hedges.

Answer 289

A

EY

How we see it?

The fact that an entity would be locked into a FIXED price, cost, rate or index absent the hedge

is what distinguishes Fair Value Hedges from Cash flow Hedges.

Answer 290

A

EY

How we see it?

The fact that an entity would be locked into a FIXED price, cost, rate or index absent the hedge

is what distinguishes Fair Value Hedges from Cash flow Hedges.

Answer 291

A

EY

How we see it?

The fact that an entity would be locked into a FIXED price, cost, rate or index absent the hedge

is what distinguishes Fair Value Hedges from Cash flow Hedges.

Identifying whether the entity is locked in to a fixed exposure is an important step in determining whether the derivative represents a fair value hedge or a cash flow hedge.

Answer 292

A

EY

How we see it?

The fact that an entity would be locked into a FIXED price, cost, rate or index absent the hedge

is what distinguishes Fair Value Hedges from Cash flow Hedges.

Identifying whether the entity is locked in to a fixed exposure is an important step in determining whether the derivative represents a fair value hedge or a cash flow hedge.

This distinction is important because the accounting for each type of hedge is different.

Answer 293

A

EY

How we see it?

The fact that an entity would be locked into a FIXED price, cost, rate or index absent the hedge

is what distinguishes Fair Value Hedges from Cash flow Hedges.

Identifying whether the entity is locked in to a fixed exposure is an important step in determining whether the derivative represents a fair value hedge or a cash flow hedge.

This distinction is important because the accounting for each type of hedge is different.

Answer 294

A

EY

How we see it?

The fact that an entity would be locked into a FIXED price, cost, rate or index absent the hedge

is what distinguishes Fair Value Hedges from Cash flow Hedges.

Identifying whether the entity is locked in to a fixed exposure is an important step in determining whether the derivative represents a fair value hedge or a cash flow hedge.

This distinction is important because the accounting for each type of hedge is different.

Answer 295

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement specifies all significant terms, including

 - the quantity to be exchanged, 
 - the fixed price and 
 - the timing of the transaction.

The fixed price may be expressed as a specified amount of an entity’s functional currency or of a foreign currency.

It may also be expressed as a specified interest rate or specified effective yield.

• The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable.

Answer 296

A

Firm commitments

ASC 815 defines a firm commitment as

an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

Answer 297

A

Firm commitments

ASC 815 defines a firm commitment as

an agreement with an unrelated party,

Answer 298

A

Firm commitments

ASC 815 defines a firm commitment as

an agreement with an unrelated party, binding on both parties,

Answer 299

A

Firm commitments

ASC 815 defines a firm commitment as

an agreement with an unrelated party, binding on both parties, and usually legally enforceable,

Answer 300

A

Firm commitments

ASC 815 defines a firm commitment as

an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

Answer 301

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement specifies all significant terms, including

 - the quantity to be exchanged, 
 - the fixed price and 
 - the timing of the transaction.

Answer 302

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement specifies all significant terms, including

 - the quantity to be exchanged, 
 - the fixed price and 
 - the timing of the transaction.

Answer 303

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement specifies all significant terms, including

 - the quantity to be exchanged, 
 - the fixed price and 
 - the timing of the transaction.

Answer 304

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement specifies all significant terms, including

 - the quantity to be exchanged, 
 - the fixed price and 
 - the timing of the transaction.

Answer 305

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement specifies all significant terms, including

 - the quantity to be exchanged, 
 - the fixed price and 
 - the timing of the transaction.

The fixed price may be expressed as a specified amount of an entity’s functional currency or of a foreign currency.

It may also be expressed as a specified interest rate or specified effective yield.

Answer 306

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement specifies all significant terms, including

 - the quantity to be exchanged, 
 - the fixed price and 
 - the timing of the transaction.

The fixed price may be expressed as a specified amount of an entity’s functional currency or of a foreign currency.

It may also be expressed as a specified interest rate or specified effective yield.

Answer 307

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable.

Answer 308

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable.

Answer 309

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable.

Answer 310

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable.

Answer 311

A

Firm commitments

ASC 815 defines a firm commitment as an agreement with an unrelated party, binding on both parties, and usually legally enforceable, with the following characteristics:

• The agreement specifies all significant terms, including

 - the quantity to be exchanged, 
 - the fixed price and 
 - the timing of the transaction.

The fixed price may be expressed as a specified amount of an entity’s functional currency or of a foreign currency.

It may also be expressed as a specified interest rate or specified effective yield.

• The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable.

Answer 312

A

Firm commitment examples:

Examples of contractual commitments satisfying the definition of a firm commitment include:

A commodity purchase agreement that provides for a fixed quantity to be delivered at a fixed price with specified timing
A contract for the purchase of equipment on a specified delivery date at a fixed price denominated in a foreign currency (In this case, the exchange rate is not fixed, but the foreign currency amount is.)
A license or royalty agreement that provides for fixed periodic payments at specific time intervals (A license or royalty agreement that specifies a unit price but does not include a minimum or fixed quantity would not meet the definition of a firm commitment even though future sales that will result in the royalty payments are probable. It may, however, qualify as a forecasted transaction.)

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AUD 3 Internal Control 16 - 9 Investing and Financing Cycle - Derivatives and Hedge Accounting Flashcards

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