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Chapter 3 — Fair Value Hedges

3.1 Overview

3.1 Overview

As indicated in the ASC master glossary and discussed briefly in Section 1.3.1, a fair value hedge is a “hedge of the exposure to changes in the fair value of a recognized asset or liability, or of an unrecognized firm commitment, that are attributable to a particular risk.” Variability in that risk has the potential to affect reported earnings.
Common examples of fair value hedging strategies include the following: