1. Define and differentiate the differences between a cash flow hedge and a fair value hedge, including when (in or under which particular or specific circumstances) a U.S.-based firm would consider using one hedge versus the other hedge.

2. Summarize the differences that exist between the US GAAP and IFRS on the accounting for derivatives designated as hedges at the current date you are answering this question.

3. Prepare an example of a U.S.-based firm managing an exposed foreign currency net liability position, including the journal entries required from the date the U.S. firm purchases goods on account from a foreign-based supplier until the date the purchase is settled, including all journal entries required over a 3-month period.

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1 Hedging is a strategy that is used by companies to protect their assets from different risks The two types of hedges include cash flow hedge ... View the full answer