Why this is mistaken
A qualifying cash-flow hedge uses OCI and AOCI as a timing bridge. Amounts are later reclassified when the hedged forecast transaction affects earnings, or included in the initial basis of a nonfinancial asset or liability when the guidance requires it. The correction tracks opening AOCI, current-period changes, releases, and ending AOCI by relationship. It also preserves any unsupported probability or qualification question.
Where to watch
When this mistake may appear
- An effective cash-flow hedge gain stays in AOCI forever.
Check your work
Your work may contain this mistake if:
- Computes an OCI amount but does not connect it to the timing and location of the hedged forecast cash flows.