The Three Principal Types of Hedges Referred to in AASB

question 22

Multiple Choice

The three principal types of hedges referred to in AASB 139 are:

• A) fair-value hedges; market value hedges, cash-flow hedges.
• B) fair-value hedges; natural hedges, cash-flow hedges.
• C) fair-value hedges; hedges of net investments in a foreign operation, cash-flow hedges.
• D) hedges of net investments in a foreign operation; market value hedges, cash-flow hedges.

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Definitions:

Market Value

The immediate market value at which one can buy or sell an asset or service.

Dividend

A portion of a company's earnings that is distributed to shareholders, typically in the form of cash or additional stock, as a reward for investing in the company.

Fair Value Accounting

An accounting approach where assets and liabilities are recorded at their current market value rather than historical cost.

Original Cost

The initial purchase price or construction cost of an asset before adjustments for depreciation or amortization.