Oanda corporation Revision 5

Hedges that are designated: These hedges include cash flow, fair value, or net investment hedges 

that meet the documentation, effectiveness, and testing requirements of the accounting standards. A 

designated hedge must be described in such a manner that it is clearly evident that the forex hedge is 

matching the hedged item.  

The documentation must clearly describe when the forecasted transaction occurs; specifically, there can 

be no ambiguity over whether the transaction that occurred is the documented transaction. For example, 

if the forecasted transaction for a cash flow hedge is described as the ―last‖ 15,000 units sold in a 

quarter, there may be ambiguity over which transactions were hedged. The company would not know 

when the sales occurred, or if the sales were indeed the last 15,000 sold during the quarter. It is better to 

document the forecasted transaction as the ―first‖ 15,000 units sold during the quarter.  

For both fair value hedges and cash flow hedges, any similar foreign currency transactions may be 

grouped; for example, the sales in a particular quarter or in a geographic region. However, the grouped 

transactions must not include both cash inflows and cash outflows. For example, a designated cash 

flow hedge may not be for the highly probable USD transactions to take place in a quarter for a 

European company when the transactions include both sales to the USA and smaller offsetting USD 

purchases. Instead, the European company may choose to create two separate cash flow hedges or more 

likely only hedge that portion of the USD sales that exceeds the natural hedge of expected USD 

purchases.