# ASC 815-35-35: Derivatives and Hedging — Net Investment Hedges — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/815/35/#35-subsequent-measurement) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:e9839e6235389b598e4669c0ad20b258896261903b696064126319e1dea8cea8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 815-35-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/815/35/#35-subsequent-measurement) SEC content: no #### Overall ##### [815-35-35-1](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:8e0b26cbc9fd9d12f0b31cb0e6a6d38596d1ba4e1baeb57f07b47631ed5fc96a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The gain or loss on a hedging [derivative instrument](https://asc.understandingaccounting.org/glossary/d/#derivative-instrument "Paragraphs 815-10-15-83815-10-15-84815-10-15-85815-10-15-86815-10-15-87815-10-15-88815-10-15-89815-10-15-90815-10-15-91815-10-15-92815-10-15-93815-10-15-94815-10-15-95815-10-15-96815-10-15-97815-10-15-98815-10-15-99815-10-15-100815-10-15-101815-10-15-102815-10-15-103815-10-15-104815-10-15-105815-10-15-106815-10-15-107815-10-15-108815-10-15-109815-10-15-110815-10-15-111815-10-15-112815-10-15-113815-10-15-114815-10-15-115815-10-15-116815-10-15-117815-10-15-118815-10-15-119815-10-15-120815-10-15-121815-10-15-122815-10-15-123815-10-15-124815-10-15-125815-10-15-126815-10-15-127815-10-15-128815-10-15-129815-10-15-130815-10-15-131815-10-15-132815-10-15-133815-10-15-134815-10-15-135815-10-15-136815-10-15-137815-10-15-138815-10-15-139 define the term derivative instrument.") (or the foreign currency transaction gain or loss on the nonderivative hedging instrument) that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation shall be reported in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment section of [other comprehensive income](https://asc.understandingaccounting.org/glossary/o/#other-comprehensive-income "Revenues, expenses, gains, and losses that under generally accepted accounting principles (GAAP) are included in comprehensive income but excluded from net income.")). ##### [815-35-35-2](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:7eb7317440b9462be82f4e2b6833ce217bb6eea6fa0c49ae2e8b54612f224a39 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The hedged net investment shall be accounted for consistent with Topic 830. The provisions of Subtopic 815-25 for recognizing the gain or loss on assets designated as being hedged in a [fair value hedge](https://asc.understandingaccounting.org/glossary/f/#fair-value-hedge "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.") do not apply to the hedge of a net investment in a foreign operation. ##### [815-35-35-3](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:9fd669930e9f9c4c35fc0c085359b12a70b2da1b54da1c5a0fab32942d1df5e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity has designated and documented that it will assess effectiveness and measure hedge results on an after-tax basis as permitted by paragraph [815-20-25-3(b)(2)(vi)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-3), the portion of the gain or loss on the hedging instrument that exceeded the loss or gain on the hedged item shall be included as an offset to the related tax effects in the period in which those tax effects are recognized. #### Assessing Hedge Effectiveness and Measuring Hedge Results ##### [815-35-35-4](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:94552baa3db82754316f9029b2243e4ecdab70aa11cabe682bdd5740d1275ac9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a derivative instrument is used as the hedging instrument, an entity may assess the effectiveness of a net investment hedge using either a method based on changes in spot exchange rates (as specified in paragraphs [815-35-35-5 through 35-15](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-5) ) or a method based on changes in forward exchange rates (as specified in paragraphs [815-35-35-17 through 35-26](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-17) ). This guidance can also be applied to purchased options used as hedging instruments in a net investment hedge. However, an entity shall consistently use the same method for all its net investment hedges in which the hedging instrument is a derivative instrument; use of the spot method for some net investment hedges and the forward method for other net investment hedges is not permitted. An entity may change the method that it chooses to assess the effectiveness of its net investment hedges in accordance with paragraphs [815-20-55-55 through 55-56A](https://asc.understandingaccounting.org/asc/815/20/#815-20-55-55). ##### [815-35-35-4A](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-4A) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:9c5f984986266bfbb37ee0c2ccd05fd14baf6f4d32c85d390840ab04bb7975f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Hedge effectiveness shall be assessed on a quantitative basis at hedge inception in accordance with paragraph [815-20-25-3(b)(2)(iv)(01)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-3) unless one of the exceptions in that paragraph applies. Subsequent assessments of hedge effectiveness may be performed either on a quantitative basis or on a qualitative basis in accordance with paragraphs [815-20-35-2 through 35-2F](https://asc.understandingaccounting.org/asc/815/20/#815-20-35-2). ##### [815-35-35-5](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:0c821308276e4f805bf933fe3b6e2124a21ea86aaba501d43ab96c2e155d48bb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The change in the [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") of the derivative instrument attributable to changes in the difference between the forward rate and [spot rate](https://asc.understandingaccounting.org/glossary/s/#spot-rate "The exchange rate for immediate delivery of currencies exchanged.") would be excluded from the assessment of hedge effectiveness if all of the following conditions are met: 1. a The [notional amount](https://asc.understandingaccounting.org/glossary/n/#notional-amount "A number of currency units, shares, bushels, pounds, or other units specified in a derivative instrument. Sometimes other names are used. For example, the notional amount is called a face amount in some contracts.") of the derivative instrument designated as a hedge of a net investment in a foreign operation matches (that is, equals) the portion of the net investment designated as being hedged. 2. b The derivative instrument's underlying exchange rate is the exchange rate between the functional currency of the hedged net investment and the investor's functional currency. 3. c When the hedging derivative instrument is a cross-currency interest rate swap, it is eligible for designation in a net investment hedge in accordance with paragraph [815-20-25-67](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-67). In that circumstance, the hedging relationship would be considered perfectly effective, and no quantitative effectiveness assessment is required at hedge inception. (See paragraph [815-20-25-3(b)(2)(iv)(01)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-3).) ##### [815-35-35-5A](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-5A) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:05fa68faaa5d6112d1ad78718859c68e0b537cf1c5c8acd7597bb637f2494dd8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall recognize in earnings the initial value of the component excluded from the assessment of effectiveness using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in earnings under that systematic and rational method shall be recognized in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment section of other comprehensive income). ##### [815-35-35-5B](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-5B) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:e6a57927a8133a391720bf2993f79d64a5a5dcbe24e9872c530b54488bd2b62a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity alternatively may elect to record changes in the fair value of the excluded component currently in earnings. This election shall be applied consistently to similar hedges in accordance with paragraph [815-20-25-81](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-81). ##### [815-35-35-6](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:22b936e3ba5df430ffb261491e8c36fdf5c85f12f759bef8b8659291373eff7b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The interest accrual (periodic cash settlement) components of qualifying receive-variable-rate, pay-variable-rate and receive-fixed rate, pay-fixed-rate cross-currency interest rate swaps shall also be reported directly in earnings. ##### [815-35-35-7](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:c8a1ce49060dd242b0ab7f4a56d2c941c570488821ced2a7500a77b3e17172a4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The change in fair value of the derivative instrument attributable to changes in the spot rate shall be reported in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment section of other comprehensive income). ##### [815-35-35-8](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:8a62b25bc831be74ffeea7d75ba9cb923feb762fe0441d2b0da9b070f2f08012 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The spot-to-spot changes in value reported in the cumulative translation adjustment section of other comprehensive income shall not be discounted. ##### [815-35-35-9](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:1db9fafa96c3f3544b79065c38e27c80b1f90b10f9175631e9a639e573dcfea1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The hedging relationship would not be considered perfectly effective, and the guidance in paragraph [815-35-35-10](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-10) shall be applied if any of the following conditions exist: 1. a The notional amount of the derivative instrument does not match the portion of the net investment designated as being hedged. 2. b The derivative instrument's underlying exchange rate is not the exchange rate between the functional currency of the hedged net investment and the investor's functional currency. 3. c When the hedging derivative instrument is a cross-currency interest rate swap eligible for designation in a net investment hedge in accordance with paragraph [815-20-25-67](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-67), both legs are not based on comparable interest rate curves (for example, pay foreign currency based on the three-month London Interbank Offered Rate \[LIBOR\], receive functional currency based on three-month commercial paper rates). ##### [815-35-35-10](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:8cb8b12019a6a2407c1235cf3057873b9c758f54fec8ae7502972ac89b8597a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If any of the conditions in paragraph [815-35-35-9](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-9) exist, the change in fair value of the hypothetical derivative instrument that does not incorporate those differences shall be compared with the change in fair value of the actual derivative instrument in assessing hedge effectiveness. ##### [815-35-35-11](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:d3b19b3036ea78cec6e1f345eff5bd55f204ddf214ecea20ed6b28d0e49db251 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The hypothetical derivative instrument used to assess hedge effectiveness also shall have a maturity and repricing and payment frequencies for any interim payments that match the maturity and repricing and payment frequencies for any interim payments of the actual derivative instrument designated as the hedging instrument in the net investment hedge. ##### [815-35-35-12](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:976513d544b87f6af7938cfa3336e71e585642108ecfffbea612d650867952aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The translation gain or loss determined under Subtopic 830-30 by reference to the spot exchange rate between the transaction currency of the debt and the functional currency of the investor (after tax effects, if appropriate) shall be reported in the same manner as the translation adjustment associated with the hedged net investment (that is, reported in the cumulative translation adjustment section of other comprehensive income) if both of the following conditions are met: 1. a The notional amount of the nonderivative instrument matches the portion of the net investment designated as being hedged. 2. b The nonderivative instrument is denominated in the functional currency of the hedged net investment. In that circumstance, the hedging relationship would be considered perfectly effective, and no prospective quantitative effectiveness assessment is required at hedge inception (see paragraph [815-20-25-3(b)(2)(iv)(01)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-3)). ##### [815-35-35-13](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:e3a7d704f63ba774243c6c67cf83814eea47ebcf7c0aeb88aa37fbc0d42a94ad Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The hedging relationship would not be perfectly effective if either of the following conditions is met: 1. a The notional amount of the nonderivative instrument does not match the portion of the net investment designated as being hedged. 2. b The nonderivative instrument is denominated in a currency other than the functional currency of the hedged net investment. ##### [815-35-35-14](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:72c930f223a3dbb2dd249039c74c793e04ccf40593b79c4dd1d65bb057305077 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Effectiveness shall be assessed by comparing the following two values: 1. a The foreign currency transaction gain or loss based on the spot rate change (after tax effects, if appropriate) of that nonderivative instrument 2. b The transaction gain or loss based on the spot rate change (after tax effects, if appropriate) that would result from the appropriate hypothetical nonderivative instrument that does not incorporate those differences. The hypothetical nonderivative instrument shall also have a maturity that matches the maturity of the actual nonderivative instrument designated as the net investment hedge. ##### [815-35-35-15](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:621cca1443e1d96a24a8670ca81e4e355e2893974904558428eeffad2de908d0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2017-12](https://asc.understandingaccounting.org/updates/asu-2017-12/). ##### [815-35-35-16](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:d2fd88b34e31889f93667550a99c6d55a057668873efdb4a5205bae4a00429ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2017-12](https://asc.understandingaccounting.org/updates/asu-2017-12/). ##### [815-35-35-17](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-17) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:d4cddfa559f6b9d2bd70404e606308a72b1b41f31468b00b30bac97358d2068e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under a method based on changes in forward exchange rates, an entity shall report all changes in fair value of the derivative instrument in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment section of other comprehensive income), including the following amounts: 1. a The time value component of purchased options 2. b The interest accrual/periodic cash settlement components of qualifying receive-variable-rate, pay-variable-rate and receive-fixed-rate, pay-fixed-rate cross-currency interest rate swaps. ##### [815-35-35-17A](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-17A) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:a4b7b7efe0810a5adfe89e9e54eaaa41c1c4329a15ff494c9058b5eea6715db9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the notional amount of the derivative instrument designated as a hedge of a net investment in a foreign operation matches (that is, equals) the portion of the net investment designated as being hedged and the derivative instrument's [underlying](https://asc.understandingaccounting.org/glossary/u/#underlying "A specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, or other variable (including the occurrence or nonoccurrence of a specified event such as a scheduled payment under a contract). An underlying may be a price or rate of an asset or liability but is not the asset or liability itself. An underlying is a variable that, along with either a notional amount or a payment provision, determines the settlement of a derivative instrument.") relates solely to the foreign exchange rate between the functional currency of the hedged net investment and the investor's functional currency, the hedging relationship would be considered perfectly effective, and no quantitative effectiveness assessment is required at hedge inception (see paragraph [815-20-25-3(b)(2)(iv)(01)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-3)). ##### [815-35-35-18](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-18) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:dae3e045a98bea6e7b747a5dc7080aa4abe8675e5b97ffffd5b13817d74b13d9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, the hedging relationship would not be considered perfectly effective if any of the following conditions exist: 1. a The notional amount of the derivative instrument does not match the portion of the net investment designated as being hedged. 2. b The derivative instrument's underlying exchange rate is not the exchange rate between the functional currency of the hedged net investment and the investor's functional currency. 3. c When the hedging derivative instrument is a cross-currency interest rate swap eligible for designation in a net investment hedge in accordance with paragraph [815-20-25-67](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-67), both legs are not based on comparable interest rate curves (for example, pay foreign currency based on three-month LIBOR, receive functional currency based on three-month commercial paper rates). ##### [815-35-35-19](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-19) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:c11f4201621ea8696af0c6ca480b034e298b9f30b6bc45d2e24ba4cdea4971d8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The assessment of hedge effectiveness due to such differences between the hedging derivative instrument and the hedged net investment considers the following: 1. a Different notional amounts. If the notional amount of the derivative instrument designated as a hedge of the net investment does not match the portion of the net investment designated as being hedged, hedge effectiveness shall be assessed by comparing the following two values: 1. 1 The change in fair value of the actual derivative instrument designated as the hedging instrument 2. 2 The change in fair value of a hypothetical derivative instrument that has a notional amount that matches the portion of the net investment being hedged and a maturity that matches the maturity of the actual derivative instrument designated as the net investment hedge. See paragraph [815-35-35-26](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-26) for situations in which the hedge of a net investment in a foreign operation is hedging foreign currency risk on an after-tax basis, as permitted by paragraph [815-20-25-3(b)(2)(vi)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-3). 2. b Different currencies. If the derivative instrument designated as the hedging instrument has an underlying foreign exchange rate that is not the exchange rate between the functional currency of the hedged net investment and the investor's functional currency (a tandem currency hedge), hedge effectiveness shall be assessed by comparing the following two values: 1. 1 The change in fair value of the actual cross-currency hedging instrument 2. 2 The change in fair value of a hypothetical derivative instrument that has as its underlying the foreign exchange rate between the functional currency of the hedged net investment and the investor's functional currency and a maturity and repricing and payment frequencies for any interim payments that match the maturity and repricing and payment frequencies for any interim payments of the actual derivative instrument designated as the net investment hedge. 3. c Multiple underlyings. In accordance with paragraph [815-20-25-67(a)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-67), the only derivative instruments with multiple underlyings permitted to be designated as a hedge of a net investment are receive-variable-rate, pay-variable-rate cross-currency interest rate swaps that meet certain criteria. Paragraph [815-20-25-67(b)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-67) also permits receive-fixed-rate, pay-fixed-rate cross-currency interest rate swaps to be designated as a hedge of a net investment. ##### [815-35-35-20](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-20) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:2e82ccf7d2b71a51195e71c7ea1e968b49b09bb7898806f1a93cbc2c40d48b13 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a receive-variable-rate, pay-variable-rate cross-currency interest rate swap is designated as the hedging instrument in a net investment hedge, hedge effectiveness shall be assessed by comparing the following two values: 1. a The change in fair value of the actual cross-currency interest rate swap designated as the hedging instrument 2. b The change in fair value of a hypothetical receive-variable-rate, pay-variable-rate cross-currency interest rate swap in which the interest rates are based on the same currencies contained in the hypothetical swap and both legs of the hypothetical swap have the same repricing intervals and dates. The hypothetical derivative instrument also shall have a maturity that matches the maturity of the actual cross-currency interest rate swap designated as the net investment hedge. ##### [815-35-35-21](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-21) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:e229504fbeb16155167c4768025b2ed12ac2964e014ba8dd1b1f9bfbac98cc4c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a receive-fixed-rate, pay-fixed-rate cross-currency interest rate swap is designated as the hedging instrument in a net investment hedge, hedge effectiveness shall be assessed by comparing the following two values: 1. a The change in fair value of the actual cross-currency interest rate swap designated as the hedging instrument 2. b The change in fair value of a hypothetical receive-fixed-rate, pay-fixed-rate cross-currency interest rate swap in which the interest rates are based on the same currencies contained in the hypothetical swap. The hypothetical derivative instrument shall also have a maturity that matches the maturity of the actual cross-currency interest rate swap designated as the net investment hedge. ##### [815-35-35-22](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-22) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:ccf1bcb57ceb570f60158a795f52591fe4f2b49710f1ff30183fa4336503dffe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2017-12](https://asc.understandingaccounting.org/updates/asu-2017-12/). ##### [815-35-35-23](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-23) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:b08b5750a1af95500a96514ea51f7f79418bea681d0aa6063acd531fdd0db9dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2017-12](https://asc.understandingaccounting.org/updates/asu-2017-12/). ##### [815-35-35-24](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-24) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:2a218fcd8d7e695b657be94d8a18b8b8b0de3f3b99ed7a797ac40dbf347b5c67 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2017-12](https://asc.understandingaccounting.org/updates/asu-2017-12/). ##### [815-35-35-25](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-25) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:baab60bf2184e0f03d691c99e9af986e80ac79e05f0043bfea7c52996d2dfb84 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2017-12](https://asc.understandingaccounting.org/updates/asu-2017-12/). ##### [815-35-35-26](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-26) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:0005b8c0af95f42cabcc854cd57727b40f3d5f5d446de6005b5f4fff041fab76 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [815-20-25-3(b)(2)(vi)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-3) permits hedging foreign currency risk on an after-tax basis, provided that the documentation of the hedge at its inception indicated that the assessment of effectiveness and measurement of hedge results will be on an after-tax basis (rather than on a pretax basis). If an entity has elected to hedge foreign currency risk on an after-tax basis, it shall adjust the notional amount of its derivative instrument appropriately to reflect the effect of tax rates. In that case, the hypothetical derivative instrument used to assess effectiveness shall have a notional amount that has been appropriately adjusted (pursuant to the documentation at inception) to reflect the effect of the after-tax approach. #### Redesignation ##### [815-35-35-27](https://asc.understandingaccounting.org/asc/815/35/#815-35-35-27) Pending content: no Source downloaded (UTC): 2026-09-10T01:38:32.426Z to 2026-09-10T01:38:32.426Z Record version: sha256:513922e890d944c3c518fb6e11da925fb090b3b23637987004b6deffac0c22a6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity documents that the effectiveness of its hedge of the net investment in a foreign operation will be assessed based on the beginning balance of its net investment and the entity's net investment changes during the year, the entity shall consider the need to redesignate the hedging relationship (to indicate what the hedging instrument is and what numerical portion of the current net investment is the hedged portion) whenever financial statements or earnings are reported, and at least every three months. An entity is not required to redesignate the hedging relationship more frequently even when a significant transaction (for example, a dividend) occurs during the interim period. Example 1 (see paragraph [815-35-55-1](https://asc.understandingaccounting.org/asc/815/35/#815-35-55-1)) illustrates the application of this guidance.