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Designated Hedges - US GAAP and IFRS Considerations
The ultimate goal for designated forex hedges is to record the effective portion of the gains or losses
when the hedged item impacts earnings. The accounting treatment under IFRS, US GAAP, and
Canadian GAAP is similar and depends on what you are hedging, and in which of the following
categories it falls:
Cash flow hedges manage transaction risks.
Cash flow hedges are instruments that hedge the variability of anticipated future foreign cash
flows from a highly probable forecasted transaction, firm commitments, recorded assets, and
liabilities. 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 are used to hedge the variability of anticipated future foreign cash flows by
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