Account for a supplied fair-value hedge

A fair-value hedge addresses exposure to changes in the fair value of a recognized item, an unrecognized firm commitment, or a component of one of those items attributable to a designated risk. The accounting schedule must keep the derivative and hedged item visible.

For a supplied qualifying relationship, compute the derivative fair-value change. Separately compute or import the hedged item's change attributable only to the designated risk. Recognize both in current earnings under the supplied presentation conclusion and adjust the hedged item's carrying amount as required. The net earnings effect is the sum of those signed changes.

Use signed columns rather than “gain” and “loss” labels baked into formulas. A $42,000 derivative gain and a $(39,000) attributable hedged-item change produce a $3,000 net earnings effect. The difference can reflect imperfect offset; it does not automatically prove a posting error.

Reconcile the adjusted basis into the item's later interest, sale, or other accounting. Reconcile the derivative to its valuation statement and cash settlement separately. The hedge schedule is not a substitute for the debt, inventory, or commitment schedule.

Conclude with presentation and disclosure, including the designated risk, income-statement location, carrying-amount effect, derivative balance, and any excluded component. If the relationship is discontinued, preserve the date, reason, and subsequent accounting rather than deleting the old designation.