Can anybody help me understand cash hedging?
Dear Brenda
Cash flow hedges
Cash flow hedges are used to hedge exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment.
Examples of cash flow hedges are:
Hedges of floating rate interest-bearing instruments;
Hedges of highly probable forecast transactions.
The effective portion of the gain or loss on the hedging instrument only is recognised directly in equity as hedging reserve while ineffective portion …