For hedge accounting to be used, U.S. GAAP requires that these criteria must be satisfied, except: O a. The effectiveness of eliminating a specific market risk is documented. O b. A description of the hedging strategy is provided. O c. The derivative is designated as a hedging instrument. O d. A net gain results from hedging a specific risk.

For hedge accounting to be used, U.S. GAAP requires that these criteria must be satisfied, except: O a. The effectiveness of eliminating a specific market risk is documented. O b. A description of the hedging strategy is provided. O c. The derivative is designated as a hedging instrument. O d. A net gain results from hedging a specific risk.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter13: Investments And Long-term Receivables

Section: Chapter Questions

Problem 6MC: A security in a portfolio of available-for-sale securities is transferred to the trading category....

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Which statement is correct regarding fair value hedges and cash flow hedges of a foreign currency asset or liability. a. revaluation of a cash flow hedge is reported in the income statement b. under a cash flow hedge the difference between the revaluation gain and loss on the hedge and the revaluation gain or loss on the item being hedged is reported in Other Comprehensive Income c. under a cash flow hedge the difference between the revaluation gain or loss on the hedge and the revaluation gain or loss on the item being hedged is reported in the income statement d. a. revaluation of a fair value hedge is reported in Other Comprehensive Income e. under a fair value hedge the difference between the revaluation gain or loss on the hedge and the revaluation gain or loss on the item being hedged is reported in Other Comprehensive Income
How are derivatives valued on the balance sheet? How is the adjustment to fair value recorded differently for a cash flow hedge versus a fair value hedge? That is, how does the fair value adjustment of each type of hedge affect current period net income and the accounting equation? What are the three criteria that must be met for a derivative to be classified as a hedge? Once entities decide to buy or sell derivatives to hedge economic risks, they then need to decide whether they want to use hedge accounting; it is an election, not a requirement, even when the derivatives are for the economic purpose of hedging. This election is reminiscent of inventory accounting. Just like when a company selects an inventory method, a company is not required to select the accounting method (LIFO, FIFO, weighted average, specific unit) that most closely corresponds with the physical movement of inventory, although they are free to do so. If entities decide to elect hedge accounting, the following…
How is the adjustment to fair value recorded differently for a cash flow hedge versus a fair value hedge? That is, how does the fair value adjustment of each type of hedge affect current period net income and the accounting equation?
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1. A bond investment that satisfies the amortized cost measurement may be designated a. Revocably at fair value through profit or loss b. Irrevocably at fair value through profit or loss c. Irrevocably at fair value through OCI d. Irrevocably at amortized cost
Explain how to Adjust Trading Security Investments to Fair Value.
Which of the following statements relating to hedge accounting requirements is false? To qualify for hedge accounting, the hedging relationship, both at inception of the hedge and on an ongoing basis, shall be expected to be highly effective in achieving either of the following: documentation requirements to use hedge accounting are extensive and incude documentation at the inception of the hedge of risk management objective and strategy among other topics. for foreign currency related hedges, the hedges transaction is required to be denominated in currency other than functional currency of the entity engaging in the hedging transaction companies are allowed to elect hedge accounting after the fact
When comparing fi nancial statements prepared under IFRS with those prepared underUS GAAP, analysts may need to make adjustments related to:A . realized losses.B . unrealized gains and losses for trading securities.C . unrealized gains and losses for available-for-sale securities.
Which of the following is not a required condition for utilizing hedge accounting? The hedge must be: Multiple Choice highly effective. effective at the inception of the hedge term. effective at the end of the hedge term. perfectly effective.
With respect to derivative instruments that are designated as hedges, the FASB calls for which of the following general disclosures? a. The objective of using hedging instruments. b. Description of the various types of hedges. c. A description of the types of transactions that are hedged d. All of the above.
A bond investment that satisfy the amortized cost measurement may be designated a. irrevocably at either fair value through other comprehensive income or fair valiue through profit or loss. b. irrevocably at fair value through other comprehensive income c. revocably at fair valiue through profit or loss. d. irrevocably at fair value through profit or loss
Identify the major derivative securities used to hedge against risk.