Which Statement Is NOT Correct

question 28

Multiple Choice

Which statement is NOT correct?

• A)In a fair value hedge the entity uses a hedging instrument to hedge against the fluctuation in the fair value of the hedged item.The method will be used when the hedged item will be valued at fair value.
• B)In a cash flow hedge the entity uses a hedging instrument to hedge against the fluctuation in the Canadian dollar value of future cash flows.
• C)The gain or loss on the hedging instrument in a cash flow hedge is initially reported in other comprehensive income and reclassified to profit and loss when the hedged item affects profit.
• D)The gain or loss on the hedging instrument in a fair value hedge is initially recognized in other comprehensive income and transferred to profit and loss when the hedged item has be revalued for accounting purposes in accordance with IFRS.

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Definitions:

Relatively Elastic

Describes a situation where the quantity demanded of a good or service greatly changes in response to changes in its price.

Quantity Demanded

The total amount of a good or service that consumers are willing to purchase at a given price level in a given period.

Coefficient

A numerical value that multiplies a variable in an equation, serving as a measure of some property or characteristic.

Price Elasticity

Refers to how sensitive the quantity demanded of a good is to a change in its price.