In short
Hedge accounting requires formal documentation at the inception of the hedge: the risk management objective and strategy, the hedging instrument, the hedged item, the risk being hedged and how effectiveness will be assessed.
Key takeaways
- Without documentation at inception, hedge accounting can't be applied retroactively.
- Private companies have extra time to complete some of the documentation.
- Changes in the hedging strategy require new documentation.
Where it's tested
BAR: Derivatives & Hedge Accounting — study notes, a five-minute revision sheet and practice questions.
Practise: 3 questions
Question 1 of 3 · 0 answered
To qualify for hedge accounting, an entity must, at inception: