B is corrent. Gains and losses of a fair value hedge will be recognized in current earnings. Therefore, this answer is correct. The effective portion of a cash flow hedge is reported in other comprehensive income and the ineffective portion is reported on a cumulative basis to reflect the lesser of the cumulative gain/loss on the derivative or the cumulative gain/loss from the change in expected cash flows from the hedged instrument.
A is incorrect. Gains and losses of a fair value hedge will be recognized in current earnings. The effective portion of a cash flow hedge is reported in other comprehensive income and the ineffective portion is reported on a cumulative basis to reflect the lesser of the cumulative gain/loss on the derivative or the cumulative gain/loss from the change in expected cash flows from the hedged instrument.
C is incorrect. Gains and losses of a fair value hedge will be recognized in current earnings. The effective portion of a cash flow hedge is reported in other comprehensive income and the ineffective portion is reported on a cumulative basis to reflect the lesser of the cumulative gain/loss on the derivative or the cumulative gain/loss from the change in expected cash flows from the hedged instrument.
D is incorrect. Gains and losses of a fair value hedge will be recognized in current earnings. The effective portion of a cash flow hedge is reported in other comprehensive income and the ineffective portion is reported on a cumulative basis to reflect the lesser of the cumulative gain/loss on the derivative or the cumulative gain/loss from the change in expected cash flows from the hedged instrument.
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