Under IFRS, which of the following statements is true?
A)The hedge of a forecasted transaction is accounted for using a fair-value hedge.
B)The hedge of a firm commitment is accounted for using a cash-flow hedge.
C)The gain or loss on a hedging instrument under a cash-flow hedge is first reported as other comprehensive income and then reclassified to income when the hedged item affects income.
D)The gain or loss on a hedging instrument under a fair-value hedge is first reported as other comprehensive income and then reclassified to income when the hedged item affects income.

Question

Quizplus · Accepted Answer

Under IFRS, for a cash-flow hedge, the gain or loss on the hedging instrument is initially reported in other comprehensive income and is subsequently reclassified to profit or loss when the hedged item affects income. This treatment aligns with the purpose of a cash-flow hedge, which is to hedge exposure to variability in cash flows that could affect reported earnings.

Under IFRS, Which of the Following Statements Is True