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

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

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 17GI

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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?
When preparing an income statement, which of the following items would most likely be classified as other comprehensive income? A. A foreign currency translation adjustment B. An unrealized gain on a security held for trading purposes C. A realized gain on a derivative contract not accounted for as a hedge D. None of the above
Charges in the fair value of the effective portion of a hedging financial instrument are recognized as a part of current earnings of the period for which of the following? Cash Flow Hedge Far Value Hedge a b с d yes no yes no yes yes no no
What are the differences in accounting for a forward contract used as (a) a cash flow hedge and (b) a fair value hedge of a foreign currency denominated asset or liability?
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…
choose the correct answer: Equity security acquired for trading should be measured at reporting date a. cost, being the purchase price b. cost, being the purchase price plus transaction costs c. fair value, with change in FV taken through profit or loss. d. fair value, with change in FV taken through other comprehensive income.
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
Financial liabilities that are classified as amortized cost are subsequently measured at A. Partly at profit or loss and partly at other comprehensive income depending on the risk. B. Fair value with changes in value recognized in other comprehensive income. (FVPL) C. Fair value which changes in value recognized in profit or loss. (held for trading) D. The present value of the remaining cash flows of the instrument discounted at the original effective interest rate.
Write Notes on the Following A: Off Balance Sheet Assets and Liabilities B: Interest Rate Risk Management C: Sterilized Intervention in Foreign Exchange D: Unsterilized Intervention in Foreign Exchange E: Balance of Payment
Which of the following items is remeasured using the current exchange rate under the temporal method? Choose the correct.a. Bonds payable.b. Dividends declared.c. Additional paid-in capital.d. Amortization of intangibles.
What causes balance sheet (or translation) exposure to foreign exchange risk? How does balance sheet exposure compare with transaction exposure?
Describe the following 1. Unrealized gains or losses on derivatives held on cash flow hedges. 2.Unrealized gains or losses on investment available for sale. 3.Dividends declared in a particular period. 4.Gain or losses on foreign exchange translations. 5.Recording of previous periods errors in revenue and expenditure after preparation of final accounts in the current periods.

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	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