Section 2: 35–45%B9
Derivatives and Hedge Accounting
Exam Insight
Derivatives and hedging is a high-difficulty BAR area that tests whether you can classify a hedge correctly and route the gain or loss to the right place: earnings versus other comprehensive income. The exam rewards candidates who can match the hedge type to its accounting treatment quickly.
CPA Exam Lab is an independent study resource and is not affiliated with, endorsed by, or sponsored by the AICPA® or NASBA. Practice questions are original content created for study purposes. “CPA” is a registered trademark of the AICPA.
What AICPA Wants You to Know
- 1Identify the four defining characteristics of a derivative under ASC 815.
- 2Distinguish fair value hedges, cash flow hedges, and net investment hedges and their accounting.
- 3Record gains and losses on speculative (undesignated) derivatives.
- 4Explain how the effective portion of a cash flow hedge flows through OCI and is later reclassified to earnings.
- 5Apply the remeasurement of both the derivative and the hedged item in a fair value hedge.
- 6Recognize the documentation and effectiveness requirements needed to qualify for hedge accounting.