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:

Internal Attributions

Internal attributions refer to the explanation of an individual's behavior as due to personal factors, such as traits, abilities, or feelings.

Stable Attributions

The tendency to explain an individual's behavior as resulting from consistent and unchanging factors.

Self-serving Bias

A cognitive bias that involves perceiving oneself in a way that is overly favorable, such as attributing successes to personal attributes but failures to external factors.

Unintentional Action

An act performed without conscious thought or intention.