Which of the Following Statements Is Not True About Fair

question 56

Multiple Choice

Which of the following statements is not true about fair value hedges?

• A)it requires a method of determining the fair value of the derivative
• B)it defers recognition of all profits and losses until the hedge is terminated
• C)it will cause earnings to fluctuate if hedges are not effective
• D)it requires proper documentation
• E)none of the above

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Definitions:

Purchases

The total amount spent on buying goods and services for either resale or use in production in a specific accounting period.

Cash Dividend

A payment made by a company out of its earnings to shareholders, usually in the form of cash.

Liability

Financial obligations or debts owed by a company to creditors, typically due in the near or distant future.

Declaration Date

The date on which the board of directors officially approves a dividend.