A highly-effective hedge of an existing asset or liability that is reported on the balance sheet would be recorded using
A)Modified Cash Basis Accounting.
B)Critical Term Hedge Analysis.
C)Fair Value Hedge Accounting.
D)Hedge of Net Investment in Foreign Subsidiary.

Question

Quizplus · Accepted Answer

Fair Value Hedge Accounting is used when a derivative is used to hedge the changes in the fair value of an asset or liability. This method is highly-effective in hedging an existing asset or liability and is reported on the balance sheet. The other options, Modified Cash Basis Accounting, Critical Term Hedge Analysis, and Hedge of Net Investment in Foreign Subsidiary are not applicable in this scenario.

A Highly-Effective Hedge of an Existing Asset or Liability That