functional currency exposure

Broad Transactions1

1. 815-20Hedging—General815 Derivatives and Hedging

   ASC 815-20 sets the general "gatekeeping" rules for hedge accounting that apply to all three hedge types — fair value, cash flow, and net investment hedges. It requires formal designation and documentation at hedge inception (risk management objective, hedging instrument, hedged item, hedged risk, and the effectiveness assessment method), and it specifies which items and transactions may be designated as hedged items, which risks may be designated as the hedged risk, which instruments may be hedging instruments, and how effectiveness must be assessed. Items outside those criteria (e.g., equity method investments, most intra-entity transactions, an entity's own equity) simply cannot be hedged for accounting purposes.