Cash flow hedge
Encyclopedia
A cash flow hedge is a hedge
of the exposure to the variability
of cash flow
that
This is mostly an accountant's definition.
Hedge (finance)
A hedge is an investment position intended to offset potential losses that may be incurred by a companion investment.A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, many types of...
of the exposure to the variability
Variability
The term variability, "the state or characteristic of being variable", describes how spread out or closely clustered a set of data is. This may be applied to many different subjects:*Climate variability...
of cash flow
Cash flow
Cash flow is the movement of money into or out of a business, project, or financial product. It is usually measured during a specified, finite period of time. Measurement of cash flow can be used for calculating other parameters that give information on a company's value and situation.Cash flow...
that
- is attributable to a particular risk associated with a recognized asset or liability. Such as all or some future interest payments on variable rate debt or a highly probable forecast transaction and
- could affect profit or loss (IAS 39IAS 39IAS 39: Financial Instruments: Recognition and Measurement is a measure of instrument of the International Accounting Standards Board ....
, §86b)
This is mostly an accountant's definition.
See also
- Hedge accountingHedge AccountingHedge accounting is an accountancy practice.-Why is hedge accounting necessary?:Many financial institutions and corporate businesses use derivative financial instruments to hedge their exposure to different risks .Accounting for derivative financial instruments under International Accounting...
- Accumulated other comprehensive incomeAccumulated other comprehensive incomeNote: Reference cited below, FAS130, remains the most current accounting literature in the United States on this topic.In 1997 the United States Financial Accounting Standards Board issued Statement on Financial Accounting Standards No. 130 entitled “Reporting Comprehensive Income”...
- Statement of changes in equity