If a Derivative Is Not Designated as a Hedging Instrument

question 14

True/False

If a derivative is not designated as a hedging instrument, or doesn't qualify as one, any gain or loss from fair value changes is not recognized immediately in earnings.

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Definitions:

Reversing Entry

An accounting technique that negates the impact of the previous entry, often used to simplify bookkeeping for accruals and deferrals.

Depreciation

The process of allocating the cost of a tangible asset over its useful life to account for the loss of value over time.

Accrual

The accounting method that records revenues and expenses when they are earned or incurred, regardless of when the cash is actually received or paid.

Prepaid Rent

An asset account that represents rent payments made in advance of the rental period to which they relate.