ACC3100 Lecture Notes - Lecture 4: Cash Flow Hedge, Discounted Cash Flow, Cash Flow
30 Jul 2018
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Questions: explain why fair value measurements are a controversial topic in financial reporting. (lo1) Fair value measures can be unreliable, especially when there is no active market to provide evidence of fair value. Fair value measurements are not always relevant and may not faithfully represent the economic performance of the entity. In some cases, they have responded to these concerns by quarantining the unrealized gains or losses associated by requiring them to be recognized in other comprehensive income (oci) instead of profit or loss. For example, under paragraph 6. 5. 11 of aasb 9, a cash flow hedge is measured at fair value and the gain or loss from changes in the fair value of the hedging instrument is recognized in oci (para. The gains or losses that have accumulated over the life of the cash flow hedging instrument are ultimately reclassified in profit or loss when the cash flows associated with the hedged item affect profit or loss (para.
