Question

What general kind of hedge if any is the hedge of a rocognized asset or liability?

Answer 1

C. Either I or II; i.e. either Fair value or  Cash flow is the hedge of a recognized asset or liability.

More about hedge:

To lessen the impact on their bottom line, corporations might use hedge accounting to match their input purchases with an offsetting position. However, hedge accounting has a reputation for being challenging.

The Financial Accounting Standards Board (FASB) released the hedge accounting standard ASC 815, which is a component of ASU 2017-12, to make derivatives and hedging easier to understand.

An exposure to changes in the fair value of a recognised asset or liability is managed with the help of a fair value hedge.

A cash flow hedge is a type of hedging strategy created to guard against currency fluctuations for a company's anticipated future revenues and costs.

Complete Question:

What general kind of hedge, if any, is the hedge of a recognized asset or liability?

I. Fair value.

II. Cash flow.

A. I only.

B. II only.

C. Either I or II.

D. Neither I nor II

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