Cash Flow hedge


In the case of cash flow hedge, if effective then gain/loss goes to Equity, and if ineffective , gain/loss goes to income statement. so confused, what is the concept of Effective and ineffective here?


Think of it this way. if it is not hedged, then extra gain or loss could happen from the ineffective hedge…so it goes to I/S.

If it’s hedged, you record it in OCI.