A fair value hedge that meets the requirements under AASB 139 for hedge accounting is accounted for in which of the following ways?

Question

Quizplus · Accepted Answer

In a fair value hedge that meets the requirements under AASB 139 for hedge accounting, any gain or loss on the hedged item attributable to the hedge risk is recognised in the profit and loss. This is known as ‘offsetting’ the gain or loss on the hedging instrument with the gain or loss on the hedged item. Therefore, option A is the correct answer. Option B describes the accounting for a cash flow hedge, and option C is incorrect as the cumulative change in fair value of the commitment should be included in the initial carrying amount of the asset. Option D is incorrect as option A correctly describes the accounting for a fair value hedge.

A Fair Value Hedge That Meets the Requirements Under AASB