Financial Statement Outcomes When Alternative Derivative Hedging Designations Exist

Abstract

<p class="MsoBlockText" style="margin: 0in 0.5in 0pt;"><span style="font-style: normal;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">When alternate reporting methods exist, financial statement preparers tend to select methods that provide more favorable results.<span style="mso-spacerun: yes;">  </span>Certain hedging transactions may be designated as either a fair value hedge or a cash flow hedge.<span style="mso-spacerun: yes;">  </span>Both designations achieve the objective of matching the gain <loss> on the derivative with the loss <gain> on the hedged item in the same reporting period.<span style="mso-spacerun: yes;">  </span>However, the cash flow hedge accounting tends to create a greater appearance of equity volatility.<span style="mso-spacerun: yes;">  </span></span></span></span></p>