Which of the following statements about hedge accounting is true?
A)Hedge accounting is mandatory.
B)Hedge accounting is optional.
C)Hedge accounting is applicable only if a receivable is being hedged.
D)Hedge accounting is applicable only if a liability is being hedged.

Question

Quizplus · Accepted Answer

Hedge accounting is optional under International Financial Reporting Standards (IFRS) and generally accepted accounting principles (GAAP). However, if a company chooses to use hedge accounting, it must meet certain criteria and follow specific rules in order to properly account for the gains and losses resulting from the hedging activity. Hedge accounting is not limited to receivables or liabilities, but can also apply to other financial instruments such as currency, interest rate, and commodity derivatives.

Which of the Following Statements About Hedge Accounting Is True