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Hi Sir,
In your last video in investment section, where you are mentioning ineffective portion. I would have thought all balance sheet items hedged, movements go straight through P&L. In this case it looks like in video its split between OCI and P&L.
Can you please clarify?
Regards
Fair value hedge are where the business once protection from changes in fair value of recognised assets or liabilities
In fair value hedges gains or losses on both the derivative and the underlying go to P&L.Cash flow hedges are where the business wants protection in respect of expected future cash inflows or outflows.
In cash flow hedges the change in value on the derivative generally goes to OCI. However if the gain or loss on the derivative is greater than the gain or loss of the underlying, then any excess should strictly go to profit and loss.Be calm- any question about hedging would be very basic.
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