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How Do You Treat Cash Flow Hedges That Are Liquidated Well Before the Period of their Associated Forecasted Cash Flows?

I would be very grateful for help with the following situation. A number of cash flow hedges are liquidated now for forecasted cash flows that are still one year or more into the future. Assuming that the hedge has been effective all the way through its liquidation, does the P&L that was realized upon liquidation get to stay in OCI until we reach the period of the associated forecasted cash flow, or does it need to be recognized immediately as income? Thanks in advance for your help.


Topic Expert
Keith Bergman
Title: Managing Director
Company: Ledgewood Advisory Group
(Managing Director, Ledgewood Advisory Group) |

Hi, the answer to your question is Yes. The realized P&L from liquidating the contracts can stay in OCI. The P&L on the rollover contracts can also go into OCI. When the P&L from the underlying exposures impact Income, OCI can be reversed to earning. The issue becomes more documentation. I can explain this further and what must be done if you prefer. I specialize in Hedge Accounting and provide guidance. I'm currently helping someone with there commodity hedging program which sounds like what you are doing. I can be reach at 914.763.8452 or 917.853.3220. My email is keith [dot] bergmanatledgewoodgroup [dot] com.



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