4. A hedged firm purchase or sale commitment typically qualifies for fair-value hedge accounting if the hedge

Question:

4. A hedged firm purchase or sale commitment typically qualifies for fair-value hedge accounting if the hedge is documented to be effective. Compare the accounting for both the derivative and the firm purchase or sale commitment under each of these circumstances:

(a) the hedge relationship is deemed to be effective and

(b) the hedge relationship is not deemed to be effective.

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