How can accurate and reliable information about hedge accounting promote, for example, the actions of funders and investors?
One of the criticisms of the accounting rules is that users of financial statements are confused because the rules are so complex. This is all the more true in situations where companies are hedging but for whatever reason are not able to apply hedge accounting. The application of hedge accounting ultimately makes the financial statement easier for the user to read because it does a better job of reflecting the companys economic reality. Because of the rules in the accounting standards, there is no way to apply hedge accounting for certain strategies. There is no magic answer. Where hedge accounting is not possible, you have to try and explain in the notes the hedging strategy, what the issue is, what accounting treatment you have adopted, the disclosure, so the reader can clearly understand why its the right hedging strategy and then also understand why because of problems in the accounting standard, it doesnt quality for hedge accounting.
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