Oanda corporation Revision 5


All forex hedges are recorded on the balance sheet at



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Forex Hedge Accounting Treatment

All forex hedges are recorded on the balance sheet at 

their fair market value (FMV). 

The items recorded on the other side of the journal entry 

depend on whether a forex hedge was designated for 

special accounting treatment (provided it met applicable 

criteria). 



Forex Hedge Accounting Treatment  

OANDA’s FXConsulting 

 

for Corporations

   

 

 



- 4 - 

Who Is This Document Intended For? 

CFOs, vice-presidents of finance, treasurers, controllers, and accountants can use this document to gain 

a basic understanding of hedge accounting.  

What Are the Steps to Hedge Accounting? 

The first step in the process is deciding whether to hedge your company’s exposure to foreign currency 

balances and transactions.  

 

 



 

1.  Your company needs to assess its forex risk related to how much foreign currency exposure it 

has on the current balance sheet and on expected future transactions.   

2.  If your forex exposure exceeds your company’s appetite for risk, then you will need to build a 

process for data capture. Each company will need to capture and validate its foreign currency 

exposures to enable effective forex hedging for managing its foreign currency risk. For a 

discussion, please see Appendix B – What to Hedge?. 

3.  While determining what to hedge (or after), you will need to create and implement processes 

and procedures to manage forex hedging and its special accounting treatment, including 

obtaining fair market values at each reporting period.   

4.  You require upfront documentation to designate a hedge for special accounting treatment. 

Throughout the life of the designated hedge, the accounting standards require ongoing 

effectiveness testing and adequate accounting systems to manage tracking when the hedged 

item impacts earnings in order to release the forex hedge’s gain or loss to earnings. 

 

 

 




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