Fair Value Hedge

A fair value hedge is a financial instrument designated as hedging exposure to changes in the fair value of an asset or liability or an identified portion thereof that is attributed to a particular risk. Gains/losses on such instruments as well as the offsetting losses/gains on the hedged item are recognized in earnings in the same accounting period. A fair value hedge must also be expected to be highly effective in offsetting fair value of the hedged item. See also derivative and cash flow hedge and foreign currency hedge.