Hedge accounting

A system of incorporating a financial hedge into the accounting system.

Under International Financial Reporting Standards (IFRS) a hedge and the underlying transaction being hedged are accounted for separately.

Hedge accounting ensures that both items receive similar accounting treatment.

There are qualifications that must be satisfied in order that hedge accounting may be used, for example that the hedge can be shown to be effective.

See also

• Hedge effectiveness
• Hedging
• International Financial Reporting Standards