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Chapter 4 — Cash Flow Hedges

4.1 Overview

4.1 Overview

As indicated in ASC 815-30-20 (and discussed briefly in Section 1.3.2), a cash flow hedge is a “hedge of the exposure to variability in the cash flows of a recognized asset or liability, or of a forecasted transaction, that is attributable to a particular risk.” The variability in that risk must have the potential to affect reported earnings.

Footnotes

1
If any component of the derivative is excluded from the hedge effectiveness assessment and the difference between the changes in that component’s fair value and the amount recognized in earnings under a systematic and rational method are recorded in OCI as permitted by ASC 815-20-25-83A, only the proportion of the derivative that is still in a hedging relationship qualifies for this treatment after the date of the proportional dedesignation.
2
See footnote 1.