Oanda corporation Revision 5

1) Hedging  - Yes 

or No?

Assess forex risk vs. 

cost

If yes, then...

- Develop Forex Hedging 

Policy

- Educate staff

2) What to 

Hedge?

Data capture 

process

- Recorded balance sheet 

foreign currency amounts

- Forecasted future forex 

transactions

3) Forex Hedge 

Plan

- Find a forex hedge 

supplier

- Design your internal 

controls and processes

- Enter forex hedge 

(designated or not 

designated

)

4) Hedge 

Accounting

- Meet Criteria

- Documentation & 

Testing

- Fair Market Value

- Not Designated (P&L)

- Designated - Special 

Accounting

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Forex Hedge Accounting Treatment  

OANDA’s FXConsulting 

 

for Corporations

   

 

 

- 5 - 

Quick Background 

Types of Forex Hedges 

All economic hedges aim to manage foreign currency exposure, meaning they are undertaken for the 

economic aim of reducing potential loss from fluctuations in foreign exchange rates. However, not all 

hedges are designated for special accounting treatment. Accounting standards enable hedge accounting 

for three different designated forex hedges:  

  A cash flow hedge may be designated for a highly probable forecasted transaction, a firm 

commitment (not recorded on the balance sheet), foreign currency cash flows of a recognized 

asset or liability, or a forecasted intercompany transaction. 

  A fair value hedge may be designated for a firm commitment (not recorded) or foreign 

currency cash flows of a recognized asset or liability. 

  A net investment hedge may be designated for the net investment in a foreign operation.