Joined: 12 Jul 2012 Location: United States
Online Status: Offline Posts: 5
Posted: 02 Aug 2012 at 22:22 | IP Logged
I just wanted to make sure I'm thinking about the treatment of hedges in the
correct way. Could someone please confirm my thought process/make any
corrections? Thanks!
- Hedges are recorded in OCI; the effective portion of a hedge is recorded as
a gain in OCI; a loss on a hedge is recorded as a loss from continuing
operations.
- Hedges used for speculation and that are not attached to a specific
transaction have gains recorded in income from continuing operations.
Joined: 08 May 2010 Location: Australia
Online Status: Offline Posts: 23
Posted: 09 Aug 2012 at 00:38 | IP Logged
Hedges is the use of Derivatives.
Common Derivatives are
* Option (where we use Call & Put Option)
* Future (where we use Long-Buy / Short-Sell Option)
* Forward (Same like Future with Little Diff.)
* Swap (Where we Exchange Like Int.Rate, Currency etc.)
Reporting Gain & Losses
1. F.V Hedge -- Recognize Gain/Loss in Income state.
2. Cah Flow Hedge --
Effective (should be b/w 80%-120%) charged to OCI.
Ineffective (<80% or >120%) charged to Income
Statement.
3. Foreigh Currency Hedge.
a. F.C F.V Hedge -- to Income State.
b. F.C Cash Flow Hedge - Effective to I/S &
Ineffective to OCI.
c. F.C Net Investment -- to OCI.
There is no way to charge Hedges/Derivatives's gain and
losses separately. You normally net off.
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Topic: Hedging Question
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