Question
Why does a cash flow hedge use OCI for the effective portion?
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Answer
It defers gains and losses until the forecasted cash flows affect earnings.
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Question
Why is retrospective hedge designation not allowed?
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Answer
Hedge accounting requires designation and documentation at inception.
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Question
What three characteristics define a derivative under ASC 815?
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Answer
Underlying plus notional, little or no initial investment, and net settlement.
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Question
Why are derivatives normally reported at fair value with changes in net income?
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Answer
That is the default ASC 815 accounting unless hedge accounting applies.
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