A cash flow hedge is a hedge of exposure to variability in cash flows of a recognized asset, liability, or forecasted transaction that could affect earnings.

Question

Quizplus · Accepted Answer

A cash flow hedge is indeed designed to protect against the variability in cash flows that could arise from a recognized asset, liability, or a forecasted transaction, which in turn could affect the earnings reported by a company.

A Cash Flow Hedge Is a Hedge of Exposure to Variability