The study note talks about how fair value, cash flow, and other hedges with a "special relationship" get a certain accounting treatment.
For example, for qualifying fair value hedges, the change in both the derivative and the offsetting hedge both flow to earnings for the effective piece. However, the non-effective piece also flows through to earnings.
If changes to both the effective and non-effective portion flow to income, what is the advantage of being classified as a "special hedge?" If all changes on the derivative and fair value hedge just flow to income, how is that any different than just any two non-related assets carried at fair value?
For example, for qualifying fair value hedges, the change in both the derivative and the offsetting hedge both flow to earnings for the effective piece. However, the non-effective piece also flows through to earnings.
If changes to both the effective and non-effective portion flow to income, what is the advantage of being classified as a "special hedge?" If all changes on the derivative and fair value hedge just flow to income, how is that any different than just any two non-related assets carried at fair value?
Hedges Under SFAS133
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