The objective of hedge accounting is to represent, in the financial statements, the effect of an entity's risk management activities that use financial instruments to manage exposures arising from particular risks that could affect profit or loss. Hedging instrument for hedge accounting purposes, is a designated derivative or (for a hedge of the risk of changes in foreign currency exchange rates only) a designated nonderivative financial asset or non-derivative financial liability whose fair value or cash flows are expected to offset changes in the fair value or cash flows of a designated hedged item. What's required? Do a research about Hedge Accounting & Derivatives. Explain in details these points: Introduction about the subject. Important definitions.