When the temporal method is used and a net monetary liability position is hedged, there may not be an offsetting effect to the FX transaction gain or loss resulting from the remeasurement process.

Question

Quizplus · Accepted Answer

When using the temporal method, the exchange rate effects on monetary items do not necessarily offset the FX transaction gains or losses from hedging activities, because the temporal method remeasures monetary items at historical rates for some items and current rates for others, which can lead to mismatches.

When the Temporal Method Is Used and a Net Monetary