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Question
Which of the following statements does not accurately describe the accounting for derivatives?
A. The holding gain resulting from a fair value hedge that qualifies for hedge accounting is recognized in net income along with the offsetting loss on the hedged item.
B. The holding loss resulting from a cash flow hedge that qualifies for hedge accounting is recognized in net income during the year of the loss.
C. Management must be able to describe its hedging strategy in order to meet the GAAP criteria to qualify for hedge accounting.
D. Derivatives that fail to meet the GAAP criteria for hedge accounting are accounted for as speculative investments.
Answer
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