Important Notice: Our web hosting provider recently started charging us for additional visits, which was unexpected. In response, we're seeking donations. Depending on the situation, we may explore different monetization options for our Community and Expert Contributors. It's crucial to provide more returns for their expertise and offer more Expert Validated Answers or AI Validated Answers. Learn more about our hosting issue here.

Why are the foreign-currency hedges not eligible for hedge accounting?

April 26, 2017Accounting eligible hedge Hedges

0

Posted

Why are the foreign-currency hedges not eligible for hedge accounting?

1 Answer

0

Posted

The agreements synthetically change the interest rate and the currency exchange rate in one agreement. The criteria to qualify for effectiveness specifies that the change in fair value of the debt when divided by the change in the fair value of the derivative must be in a range of 80% to 125%, which is more difficult to obtain than matching the critical terms. Therefore, all changes in fair value are recorded in the consolidated statements of operations.