In all, four distinct accounting treatments are possible:
- Cash flow hedge accounting
- Fair value accounting
- Accounting for hedges of net investments in foreign operations
- Speculative or undesignated accounting
Although hedge accounting (under any of the first three categories) is an elective, companies seeking to apply this treatment must satisfy some explicit prerequisite conditions. Failure to meet these prerequisites necessarily defaults to the last treatment.
Each of these treatments is discussed in greater detail at the following links: