Practical guide on general hedge accounting Dec 2013 | Page 5

Practical guide

2. Hedge accounting
2.1.

What is hedge accounting?

Entities are exposed to financial risks arising from many aspects of their business. Different companies are
concerned about different risks (for example, some entities might be concerned about exchange rates or interest
rates, while others might be concerned about commodity prices). Entities implement different risk management
strategies to eliminate or reduce their risk exposures.
The objective of hedge accounting is to represent, in the financial statements, the effect of risk man Y