Where is the ineffective portion of a cash-flow hedge recognized on the financial statements?
A)As part of other comprehensive income.
B)As a separate component of equity.
C)It does not appear on the financial statements.
D)As part of net income.

Question

Quizplus · Accepted Answer

The ineffective portion of a cash-flow hedge is recognized in the income statement as part of net income. This is because it represents the portion of the hedge that did not effectively offset the cash flows it was intended to hedge, and thus impacts current period earnings.

Where Is the Ineffective Portion of a Cash-Flow Hedge Recognized