Which of the following is not a condition of accounting for hedge derivatives? T

Question

Which of the following is not a condition of accounting for hedge derivatives?

The derivative is used to hedge a cash flow exposure to foreign exchange risk.

The derivative is highly effective in offsetting changes in the cash flows or fair value related to the hedged item.

The derivative is used to hedge a fair value exposure to foreign exchange risk.

The derivative is properly documented as a hedge.

The derivative is minimally effective in offsetting changes in the cash flows or fair value related to the hedged item.

Explanation / Answer

Answer is option E The derivative is minimally effective in offsetting changes in the cash flows or fair value related to the hedged item.

Explanation :

The derivative is expected to be highly effective in offsetting changes in the cash flows or fair value related to the hedged item.

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