derivative Flashcards
1
Q
how are income recognized on a fair value and cash flow hedge?
A
fv: gains or losses are recognized in the current income
cash flow: gains and losses are recognized in other comprehensive income
2
Q
Which of the following is the characteristic of a perfect hedge?
No possibility of future gain or loss true or false?
A
true. The purpose of a hedge is to reduce exposure to a particular type of risk. A perfect hedge would remove all of the risk—that is, remove the possibility of any future gain or loss.
