Cash Flow Hedge And Fair Value Hedge

Description

Answer the following the questions covering the main objectives of this module:

1. Define and differentiate between a cash flow hedge and a fair value hedge. What might cause a US-based firm to consider using one hedge vs. the other hedge?
2. Summarize the differences that exist between the US GAAP and IFRS on the accounting for derivatives designated as hedges at the current date you are answering this question.
3. Prepare an example of a US-based firm managing an exposed foreign currency net liability position including the journal entries required from the date the US firm purchases goods on account from a foreign-based supplier until the date the purchase is settled, including all journal entries required over a 3- month period. Do not copy the example from your course textbook-please create your own personal example.