Foreign Currency Hedges F36-14b

What is the accounting treatment for hedging foreign currency denominated asset or liability?

If to hedge cash flow:

• Adjust the hedged item to fair value each balance sheet date using the spot exchange rate and recognize the change in fair value as a gain or loss in comprehensive income
• Adjust the hedging instrument to fair value each balance sheet date using the forward exchange rate and recognize the change in fair value as follows:
  • as a loss or gain in comprehensive income
  • the gain or loss on the hedged item is recognized in current income