Understanding Hedge Types

FAS 133 standardizes accounting for derivative instruments. It requires you to recognize derivative instruments as assets and liabilities in their statements of financial position and then to measure them at fair value. If certain conditions are met, your organization can designate a derivative instrument as a fair value hedge, cash flow hedge, or foreign currency hedge.

This section discusses:

• Risk Management and hedges.

• Fair value hedges.

• Cash flow hedges.

• Foreign currency hedges.