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Acronyms that contain the term hedge accounting
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What does hedge accounting mean?
- Hedge accounting
- Hedge accounting is an accountancy practice, the aim of which is to provide an offset to the mark-to-market movement of the derivative in the profit and loss account. There are two types of hedge recognized. For a fair value hedge, the offset is achieved either by marking-to-market an asset or a liability which offsets the P&L movement of the derivative. For a cash flow hedge, some of the derivative volatility is placed into a separate component of the entity's equity called the cash flow hedge reserve. Where a hedge relationship is effective (meets the 80%–125% rule), most of the mark-to-market derivative volatility will be offset in the profit and loss account. Hedge accounting entails much compliance - involving documenting the hedge relationship and both prospectively and retrospectively proving that the hedge relationship is effective.
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"hedge accounting." Abbreviations.com. STANDS4 LLC, 2024. Web. 30 Apr. 2024. <https://www.abbreviations.com/hedge%20accounting>.
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