Accounting for Fair Value Headging

Botea Elena Mihaela (), Stanila Oana Georgiana () and SSahlian Daniela Nicoleta ()
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Botea Elena Mihaela: The Academy of Economic Studies, Bucharest,
Stanila Oana Georgiana: The Academy of Economic Studies, Bucharest,
SSahlian Daniela Nicoleta: The Academy of Economic Studies, Bucharest,

Ovidius University Annals, Economic Sciences Series, 2010, vol. X, issue 2, 75-79

Abstract: The derivatives appearance was generated by the discovery of new ways to limit and manage current activity risks. Derivatives couldn’t hedge any type of risk. Derivative operations can be used to hedge: interest rate risks, foreign currency exchange rate risks, credit risks. Derivatives used to hedge these risks can be handled to cover fair value exposure, cash flow exposure and exposure to changes in the value of a net investment in a foreign operation. The hedging accounting roll is to protect the profit against losses generated by fluctuations of: prices, currency exchange rates and interest rates. Hedge accounting applies to recognized assets and liabilities, but also for unrecognized firm commitments. The fair value hedge is defined as a hedge of the exposure to changes in fair value of a recognized asset or liability. The accounting for change in fair value of a derivative depends on whether the derivative has been designated as part of an effective hedging relationship.

Keywords: hedge accounting; hedge effectiveness; fair value exposure; cash flow exposure; fair value hedge (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Date: 2010
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