Certified Financial Services Auditor (CFSA) — Question 2

To the extent that the hedged relationship ceases to be effective, the hedging instrument’s gains/losses should be transferred from the reserve and recognized in:

Answer options

• A. Assets
• B. Receivables
• C. Income
• D. Expense

Correct answer: A

Explanation

The correct answer is A, as gains and losses from ineffective hedges are typically recognized in the assets section of the financial statements. Options B, C, and D do not correctly represent where these gains and losses should be recorded, as they pertain to different categories of financial reporting.