Where Is the Ineffective Portion of a Cash-Flow Hedge Recognized

question 43

Multiple Choice

Where is the ineffective portion of a cash-flow hedge recognized on the financial statements?

• A)As part of net income
• B)As part of other comprehensive income
• C)As a separate component of equity
• D)It does not appear on the financial statements.

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Definitions:

Cash Interest Payment

The actual cash paid by a borrower to a lender or bondholder as compensation for the use of borrowed money, usually at set intervals.

Bond Exchange

The process of trading bonds in the financial market, where investors buy and sell debt securities issued by entities like governments and corporations.

Market Rate of Interest

The prevailing rate of interest observed in the marketplace for loans and investments.

Trading

Buying and selling securities or commodities in financial markets, aiming for short-term profits.