Which of the Following Is Not a Condition That Must

question 52

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.
• E) None of the given answers.

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Definitions:

Book Value

A rephrased definition: The net value of an asset or liability recorded on the financial statements, factoring in depreciation, amortization, and impairment, but not necessarily indicative of market value.

Activity-Based Method

An accounting method that assigns costs to products or services based on the activities and resources that go into producing them, to more accurately reflect the costs associated with each product or service.

Usage Hours

A measure of the time that an asset is actively used in production or operations.

Activity Method

A depreciation method where the asset’s expense is based on its usage or activity level, rather than the passage of time.