When Accounting for a Cash Flow Hedge of a Recognized

question 9

Multiple Choice

When accounting for a cash flow hedge of a recognized asset or liability, which of the following is/are true?

• A)If the derivative is not highly effective in neutralizing the gain or loss on the hedged item, then the firm must reclassify the ineffective portion to net income immediately and not wait until the gain or loss on the hedged items affects net income.
• B)The firm reports the hedged asset and liability and the hedging instrument separately on the balance sheet and the cumulative amount of net changes in fair value of the hedging instrument in accumulated other comprehensive income.
• C)The firm removes the hedged asset or liability and its related derivative from the accounts at the time of settlement.
• D)The firm reclassifies gains and losses from other comprehensive income to net income when the gain or loss on the hedged item affects net income.
• E)all of the above.

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Definitions:

Individualist Cultures

Cultures that emphasize the rights and freedoms of the individual over the needs and demands of the group.

Collectivist Cultures

Refer to societies or cultures that prioritize the group over individual interests, where individuals are deeply integrated into cohesive in-groups.

Passionate Love

describes a highly emotional state of intense longing and desire, often characterized by physical attraction and deep emotional attachment.

Chastity

The state or practice of refraining from extramarital, or especially from all, sexual intercourse.