Fair Value Hedge
Accounting glossary · Understand, connect, apply
A fair value hedge addresses changes in the fair value of a recognised item or qualifying firm commitment attributable to a designated risk that could affect profit or loss.
Example
A company hedges the interest-rate exposure in the fair value of its fixed-rate debt with a qualifying swap.
Remember the difference
Qualifying hedge accounting generally recognises the designated risk adjustment to the hedged item alongside the hedging instrument’s gain or loss, subject to the relevant presentation rules.
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Prepared with AI assistance. Examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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