Cash Flow Hedge
Accounting glossary · Understand, connect, apply
A cash flow hedge addresses variability in cash flows attributable to a particular risk that could affect profit or loss. It can cover a recognised item or a highly probable forecast transaction.
Example
A borrower uses an interest rate swap to reduce uncertainty about future floating-rate interest payments.
Remember the difference
For a qualifying hedge, the effective portion is generally recognised in other comprehensive income initially. Later treatment depends on the hedged transaction.
Browse the accounting glossary · Read the IFRS Foundation reference
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.
← Return to the accounting glossary