alleryStart learning →A hedging instrument gains 90 while the hedged item loses 100. Is the ratio within the 80:125 rule?
AYes, as the ratio is 0.9
BNo, as the ratio is 0.75
CNo, as the ratio is 1.5
DYes, as the ratio is 1.6
Answer & Solution
Correct answer: A. Yes, as the ratio is 0.9
90 divided by 100 is 0.9, which lies between 0.8 and 1.25, so the hedge is effective.
Keep practising Hedge Accounting
Browse all Hedge Accounting questions for CA Final, or explore more Financialreporting topics.
Related questions
What does a farmer gain by selling forwards on his wheat?Forward contracts differ from futures in that forwards are what?A derivative loses 70 while the hedged item gains 100. Under the 80:125 rule, is the hedgeA dollar offset ratio of 0.8 to 1.25 equals which fractional range?The dollar offset method compares which two quantities?Stage 1 in the allowance reconciliation means which measure?Which IFRS 7 reconciliation stage covers credit-impaired financial assets?If credit risk recovers after a lifetime allowance, what happens to the allowance basis?