Hedge accounting is defined as accounting for mark-to-market adjustments on the hedged item in the same manner as accounting for mark-to-market adjustments on the hedging instrument.

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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, known as mark-to-market. This definition does not strictly pertain to treating mark-to-market adjustments of the hedged item and the hedging instrument in the same manner, but rather to matching the timing of the gains and losses of the hedged item and the hedge.

Hedge Accounting Is Defined as Accounting for Mark-To-Market Adjustments on the Hedged