Which of the Following Statements Is NOT Correct

question 39

Multiple Choice

Which of the following statements 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. This 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 been revalued for accounting purposes in accordance with IFRS.

---

Definitions:

Critical Value

A point on the scale of a test statistic beyond which we reject the null hypothesis; it depends on the chosen significance level.

Test Statistic

A value calculated from sample data during a hypothesis test.

Null Hypothesis

A hypothesis that states there is no difference or effect, serving as the default assumption to test against in statistical hypothesis testing.

Alternative Hypothesis

A statistical hypothesis that proposes a difference or effect, contrasting the null hypothesis.