Accounting for Fair Value Hedges | Steps | Journal Entries

In this video, we discuss what is Fair Value Hedge? along with steps in accounting and journal entries of Accounting for Fair Value Hedges.

𝐖𝐡𝐚𝐭 𝐢𝐬 𝐅𝐚𝐢𝐫 𝐕𝐚𝐥𝐮𝐞 𝐇𝐞𝐝𝐠𝐞?
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A fair value hedge is an exposure hedge to changes in the fair value of asset or liability or any such item attributable to a particular risk that can result in either profit or loss.

𝐒𝐭𝐞𝐩𝐬 𝐢𝐧 𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠 𝐟𝐨𝐫 𝐅𝐚𝐢𝐫 𝐕𝐚𝐥𝐮𝐞 𝐇𝐞𝐝𝐠𝐞𝐬
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#1 - Determine the fair value of the hedged item as well as the hedging instrument used on the reporting date of financial statements.

#2 - If there is change in the fair value of the hedged instrument, recognize the profit/loss in the books of accounts.

#3 - Recognize the hedging gain or loss on the hedged item in its carrying amount.

𝐉𝐨𝐮𝐫𝐧𝐚𝐥 𝐄𝐧𝐭𝐫𝐢𝐞𝐬 𝐨𝐟 𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠 𝐟𝐨𝐫 𝐅𝐚𝐢𝐫 𝐕𝐚𝐥𝐮𝐞 𝐇𝐞𝐝𝐠𝐞𝐬
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#1- In case of Hedged item, Debit the loss to Loss on the Hedged Item A/c and credit hedged item.

#2 - In case of Hedging instrument, debit the loss to Loss on the Hedged Instrument A/c and credit hedged instrument.

To know more about 𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐢𝐧𝐠 𝐟𝐨𝐫 𝐅𝐚𝐢𝐫 𝐕𝐚𝐥𝐮𝐞 𝐇𝐞𝐝𝐠𝐞𝐬, you can go to this 𝐥𝐢𝐧𝐤 𝐡𝐞𝐫𝐞:- https://www.wallstreetmojo.com/accounting-for-fair-value-hedges/

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Видео Accounting for Fair Value Hedges | Steps | Journal Entries канала WallStreetMojo