What is Hedge Accounting?

What is Hedge Accounting?
Hedge accounting is an accounting technique that may be voluntarily adopted to achieve consistency in recognising the accounting effects arisingn from the recording of hedged instrument and the hedged item. Hedge accounting modifies the usual or a hedged item to enable gains and losses on the hedged instrument to be recognised in the profit and loss account in the same period as the offsetting losses and gains on the hedged item. Consider the following example:A company enters into a forward contract to hedge a highly probable forecast sales transaction which is expected to occur at the end of year 4. The Company has entered into the forward contract in year 1. If hedge accounting is not adopted, the Company would need to fair value the derivative from year 1 itself. Such gains and losses on the derivative instrument is recognised in profit and loss in the period in which they occur, irrespective of the occurrence of the gains and losses on the hedged.

Comments

Post a Comment

Popular posts from this blog

Texas A&M — Mays Business School

Image
Texas A&M — Mays Business School Mays Business School took its name in 1996 — 35 years after its founding — when Lowry Mays, founder and former CEO of Clear Channel Communications, gave a $15 million endowment to the school. At just $57,316 in tuition and fees for the 16-month full-time MBA program, it's a sound investment for students, who on average make nearly twice that figure after graduating. Projects like the MBA Venture Challenge, in which students evaluate startup firms' commercial viability, ready them for careers in tech. Forty percent of grads who accepted jobs in 2015 went into the technology industry.
Read more

Gujarat Secondary and Higher Secondary Education Board

Image
The Gujarat Secondary and Higher Secondary Education Board (GSHSEB) was constituted in 1972, following the enactment of the Gujarat Secondary Education Act 1972. Its Chairman and Deputy Chairman are appointed by the State Government. It has 16 ex officio members, and 44 other members drawn from academic organizations, legislative bodies and civil society. Various Committees with specific responsibilities function under the Board, such as the Executive Committee, Examination Committee, Finance Committee, Education Committee, and Magazine Advisory Committee.
Read more

Remeasurements of defined benefit plans Remeasurements

Image
Remeasurements of defined benefit plans Remeasurements of the net defined benefit liability (asset) comprise (Para 127 of Ind AS 19 ‘Employee Benefits’): (a) actuarial gains and losses; (b) the return on plan assets, excluding amounts included in net interest on the net defined benefit liability (asset); and (c) any change in the effect of the asset ceiling, excluding amounts included in net interest on the net defined benefit liability (asset).
Read more