A hedge is defined by AASB 139 as an action taken,whether by entering into a foreign currency contract or otherwise,with the objective of maximising the possible positive effects of movements in exchange rates.

Question

Quizplus · Accepted Answer

A hedge is not defined as an action taken specifically to maximise the positive effects of movements in exchange rates. Rather, it is an action taken to reduce or eliminate the risks associated with fluctuations in the value of an asset or liability. This may include actions such as entering into a foreign currency contract, but the ultimate objective is risk management, not profit maximisation.

A Hedge Is Defined by AASB 139 as an Action