Which of the Following Is Not a Condition That Must

question 16

Multiple Choice

Which of the following is not a condition that must be met,according to AASB 139,before a relationship qualifies for hedge accounting?

• A) At the inception of the hedge, there is formal designation and documentation of the hedging relationship.
• B) At the inception of the hedge, there is formal designation and documentation of the entity's risk management objective and strategy for undertaking the hedge.
• C) The hedge is expected to be highly effective.
• D) For fair-value hedges, a forecast transaction that is subject to the hedge must be highly probable.

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Definitions:

Coupon Rate

The annual interest rate paid by a bond's issuer to its bondholders, expressed as a percentage of the bond's face value.

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity, and preferred equity which constitutes how a company finances its overall operations and growth.

Indifference EBIT

Indifference EBIT (Earnings Before Interest and Taxes) is the level of EBIT where a company is indifferent between different financial options or structures, as each would result in the same earnings.

Interest

The cost of borrowing money, typically expressed as an annual percentage of the principal.