Hedge accounting is defined as accounting for the time value element in a manner consistent with accounting for the intrinsic value element of the hedging instrument.

Question

Quizplus · Accepted Answer

Hedge accounting is a method of accounting where entries for the ownership of a security and the opposing hedge are treated as one. Hedge accounting attempts to reduce the volatility created by the repeated adjustment to a financial instrument's value, by combining the instrument and the hedge as one entry, which offsets the changes from both. It does not specifically define accounting for the time value element in a manner consistent with the intrinsic value element of the hedging instrument.

Hedge Accounting Is Defined as Accounting for the Time Value