Hedge accounting
Hedge accounting is an accounting approach that, where qualifying criteria are met, reflects the effects of risk management relationships between eligible hedging instruments and hedged items. Documentation, designation, effectiveness and measurement requirements depend on the applicable standards.
Worked example
An entity documents an eligible hedge of a forecast foreign-currency purchase; the auditor evaluates the relationship and the accounting applied.
Common mistake
A derivative used to manage risk does not automatically qualify for hedge accounting.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AAA (INT) | Supporting | September 2026–June 2027 |
| ACCA | SBR | Direct | September 2026–June 2027 |