RSM320H1 Chapter Notes - Chapter 16a: Interest Rate Swap, Cash Flow, Cash Flow Hedge

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3 Dec 2017
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Hedging is the use of derivatives to hedge these risks. Hedging has value because it generally reduces uncertainty/risk and therefore volatility. Must separate the act of hedging (to reduce economic and financial risks) from the accounting for the hedge. If symmetry in accounting exists, the gains/losses created by hedging offset in the same period. In this situation, there is no need for special hedge accounting. If there is no symmetry in accounting, the gains/losses created by hedging do not offset in same period. In this situation, companies may choose to apply hedge accounting so that the gains/losses do offset. The mixed measurement model under aspe and ifrs (for example, choices include fair value, amortized cost, and cost); The treatment of the related gains and losses where fair value is used (under ifrs sometimes the resulting gains and losses are booked to income and sometimes to oci);

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