Fair value hedge accounting – ACCA (SBR) lectures

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1. trathanhnguyen6693 says

   February 16, 2023 at 1:42 pm

   Could you explain for me what is the difference between cash flow hedge and fair value hedge? I read the definition but I don’t understand exactly the nature of each

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   • Astral says

     February 19, 2024 at 5:11 pm

     The exact difference is the hedged item (i.e., what is being hedged/protected from risk).

     In Cash Flow Hedge, the hedged item is a future inflow/outflow of cash; the hedging instrument is recognized (in OCI) before the actual inflow/outflow (which is what is being hedged) has taken place. Once the expected cash flow takes place, the hedging instrument is transferred from OCI to P/L.

     In a Fair Value Hedge, the hedged item is already recognized in the Financial Statements. The hedging instrument just helps to prevent fluctuations in the hedged item’s value. The gain/loss of both the hedged item and the hedging instrument are taken to P/L (OCI is not involved here).

     Hope this helps; If I made an error, kindly correct me

     🙂

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2. kanan1994 says

   May 22, 2022 at 11:51 pm

   Thanks a lot! You explained it in such a simple and nice way. This particular topic of financial instruments was making me crazy while studying from Kaplan study book..

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3. tanzyr says

   August 10, 2021 at 7:31 am

   list of double entries as per dates would be greatly beneficial to understand the accounting of hedging in this video

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