All of the following are examples of cash flow hedges except:
A)a hedge against a price increase in a raw material expected to be purchased in 60 days.
B)a hedge against a fixed interest note payable using an interest rate swap.
C)a hedge against a variable interest note payable using an interest rate swap.
D)All of the above are examples of cash flow hedges.

Question

All of the following are examples of cash flow hedges except:
A)​a hedge against a price increase in a raw material expected to be purchased in 60 days.
B)​a hedge against a fixed interest note payable using an interest rate swap.
C)​a hedge against a variable interest note payable using an interest rate swap.
D)​All of the above are examples of cash flow hedges.

Quizplus · Accepted Answer

A cash flow hedge is used to manage exposure to variability in cash flows that is attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction. B) is incorrect because hedging against a fixed interest note payable using an interest rate swap is an example of a fair value hedge, not a cash flow hedge. Fair value hedges are used to manage exposure to changes in the fair value of an asset or liability or an unrecognized firm commitment.

All of the Following Are Examples of Cash Flow Hedges