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Overview
Coverage
Accounting
Effectiveness
Disclosure
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The following must be disclosed by all reporting entities that use derivative instruments (Paragraph 44)
- Objectives for using each derivative, whether for hedging or for speculation
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The context needed to understand objectives.
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Qualitative disclosures are encouraged.
The following must be disclosed if derivatives are used in hedging relationships (Paragraph 45)
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Risk management policies must be specified, identifying exposures to be hedged and hedging strategies for managing the associated risks.
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Identification of the type of hedging relationship (i.e., fair value, cash flow, net investment in foreign operation), if applicable.
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The hedged item must be explicitly identified.
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Ineffective hedge results must be disclosed.
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Any component of the derivatives' results that is excluded from the hedge effectiveness assessment must be disclosed.
Specific requirements for fair value hedges (Paragraph 45a)
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The place on the income statement where derivative gains or losses are reported must be disclosed.
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When a firm commitment no longer qualifies as a hedged item, the net gain or loss recognized in earnings must be disclosed.
Specific requirements for cash flow hedges (Paragraph 45b)
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A description of the conditions that will result in the reclassification of accumulated other comprehensive income into earnings, and a schedule of the estimated reclassification expected in the coming 12 months must be disclosed.
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The maximum length of time over which hedging is anticipated (except for variable interest rate exposures) must be disclosed.
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Entities must disclose the amount reclassified into earnings as a result of discontinued cash flow hedges because the forecasted transaction is no longer probable.
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Specific requirements for hedges of net investments in foreign operations (Paragraph 45c)
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Entities must disclose the amount of the derivatives' results that is included in the cumulative translation adjustment during the reporting period.
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