1. Which of the following about hedging of a recognized foreign currency denominated account is true?

1. Cash flow hedges are only for foreign currency denominated liabilities.
2. Fair value hedges are only for foreign currency denominated assets.
3. Foreign currency denominated assets and foreign currency denominated liabilities can either be cash flow hedges or fair value hedges.
4. None of the above are true.

2. Which of the following about derivatives is true?

a. They are reported on the balance sheet as liabilities when they have a positive firm value.

b. They are reported on the income statement as revenues when they have a negative firm value. c. They are only allowed to be reported when they have a positive firm value.

d. They are never reported on balance sheet. They are only on the income statement as other revenues.

e. They are reported on the balance sheet as assets when they have a positive firm value.