SFAS 133 also allows the use of cash flow hedge accounting for foreign currency derivatives used to hedge the cash flow risk associated with a forecasted foreign currency transaction. For hedge accounting to apply, the forecasted transaction must be probable (likely to occur), the hedge must be highly effective in offsetting fluctuations in the cash flow associated with the foreign [...]
Hedges of foreign currency denominated assets and liabilities, such as accounts receivable and accounts payable, can qualify as either cash flow hedges ox fair value hedges. To qualify as a cash flow hedge, the hedging instrument must completely offset the variability in the cash flows associated with the foreign currency receivable or payable. If the hedging-instrument does not qualify as [...]
Amerco does not enter into a hedge of its export sale until it actually makes the sale. Assume now that on December 1, 2009, Amerco receives and accepts an order from a German customer to deliver goods on March 1, 2010, at a price of 1 million euros. Assume further that under the terms of the sales agreement, Amerco will [...]