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Cash Flow Hedges are transactions that hedge the variability of anticipated future foreign cash flows
from a forecasted transaction (for example, the forex hedge's change in value will offset the change in
value of a signed foreign sales contract when that contract is delivered in the future). Cash-flow hedges
may be used to hedge the variability of anticipated future foreign cash flows on recorded assets and
liabilities.
Fair Value Hedges are transactions that hedge the value of an asset or a liability recorded on the
balance sheet, or the value of a firm commitment. Changes in the value of the forex hedge must occur
opposite to changes in the value of the recorded asset/liability/firm commitment.
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