In order for a fair value hedge to receive special accounting treatment, the
A)derivative instrument must be held until it expires or is exercised.
B)criteria necessary for special accounting treatment must only be met at the inception of the hedge.
C)entity may designate the derivative instrument as a fair value hedge when it is determined the hedge is effective.
D)hedging relationship must be considered highly effective.

Question

In order for a fair value hedge to receive special accounting treatment, the
A)​derivative instrument must be held until it expires or is exercised.
B)​criteria necessary for special accounting treatment must only be met at the inception of the hedge.
C)​entity may designate the derivative instrument as a fair value hedge when it is determined the hedge is effective.
D)​hedging relationship must be considered highly effective.

Quizplus · Accepted Answer

In order for a fair value hedge to receive special accounting treatment, the hedging relationship must be considered highly effective. This means that the changes in fair value of the derivative instrument used in the hedge must offset the changes in fair value of the hedged item. The other statements are not entirely accurate or do not address the key criteria for special accounting treatment of fair value hedges.

In Order for a Fair Value Hedge to Receive Special