3. Which of the following statements properly describes GAAP accounting for derivatives?

A. Marking-to-market of all derivatives must be done annually according to GAAP and any changes in value on a quarterly basis are only required to be disclosed in a footnote.

B. A firm, which wants to reduce earnings volatility, is better off classifying their investments in derivatives as hedging derivatives rather than as speculative.

C. Changes in the fair value of a derivative designated as a cash flow hedge are reported in as a component of income from continuing operations.

D. A derivatives unrealized holding gain or loss for a particular year should be reported as a component of that years income from continuing operations but should be reported as a contingent liability.