Oanda corporation Revision 5

Forex Hedge Accounting Treatment 

OANDA’s FXConsulting for Corporations

 

7 

 

Breakdown of Forex Hedges 

Journal Entries 

Earnings Impact  

 

 

(effective portion of hedge) 

   

 

The ineffective portion of a forex hedge, as defined by accounting criteria, is recorded to earnings immediately. 

Other forex hedge designations: 

1.  Fair value hedges may be designated for firm sales commitments. Similar impact as hedging a firm purchase commitment. 

2.  Cash flow hedges may be designated for firm purchase commitments; however, the reclassification of the OCI amounts to earnings to match the timing of 

the hedged item’s impact to earnings may be more challenging. 

3.  While not typical, both cash flow hedges and fair value hedges may be designated for certain recorded foreign currency assets and liabilities. For example, 

foreign denominated debt. 

•Gain/loss on forex hedge recorded directly to P&L

•Gain/loss on forex hedged item recorded directly to P&L

Non Designated

i.e. Recorded foreign currency 

assets/liabilities

•Gain/loss on forex hedge recorded directly to P&L

•Gain/loss on firm commitment recorded directly to P&L with firm 

commitment's change in value recorded on the balance sheet 

•When purchase transaction is completed, the firm commitment's 

value reclassified to the asset