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September 1 - Enter Into the Cash Flow Forex Hedge
We are making the assumption that you have documented the requirements for the forex hedge to
qualify for a hedging relationship under accounting guidelines by completing the following activities:
Identify the forex hedge (buy USD/CAD as a carry spot trade on a retail forex platform)
Identify the hedged item (the CAD sales contract)
Specify the risk that you are hedging (the changes in the foreign currency value)
Outline the accounting treatment that you are applying (cash flow)
State the objective of the hedge (for example, to remove the volatility of future earnings related
to changes in foreign currency exchange rates)
State how you are going to evaluate whether you have effectively hedged that risk (dollar
offset)
Evaluate and document the counterparty risk related to the retail forex platform
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