A Fair Value Hedge Differs from a Cash Flow Hedge

question 31

Multiple Choice

A fair value hedge differs from a cash flow hedge because a fair value hedge

• A)cannot be used for firm purchase or sales commitments.
• B)is not recorded unless it is a highly-effective hedge.
• C)records gains or losses in the value of the derivative directly to earnings of the company.
• D)defers the gains or losses in the value of the derivative using Other Comprehensive Income.

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Definitions:

Postconventional Level

According to Kohlberg, a period during which moral judgments are derived from moral principles, and people look to themselves to set moral standards.

Moral Development

The process by which individuals learn to differentiate right from wrong and develop principles of ethical behavior over time.

Moral Standards

Guidelines defining what is morally right or wrong and what constitutes good or bad conduct.

Obedience

The act of following directions or commands from authority figures, often seen as a form of social influence.