In this context, 'hedge accounting' refers to a set of special rules designed to ensure the timely
recognition of derivatives and hedged items in a firm's earnings, as well as to avoid the volatility
that is not economically justified (Glaum and Klöcker, 2001), and which is constantly monitored
by analysts and penalized by investors (Antônio et al., 2018b) (Heinle and Smith, 2017). Hedge
accounting, on the other hand, has a direct impact on a company's disclosure of financial and
currency risk exposure, and many companies do not apply the correspondent accounting rules
correctly or consistently (Chang et al., 2016), so the lessons and merits of changes in said
disclosure are still being debated, and they represent a major accounting policy issue (Tessema,
2016).
recognition of derivatives and hedged items in a firm's earnings, as well as to avoid the volatility
that is not economically justified (Glaum and Klöcker, 2001), and which is constantly monitored
by analysts and penalized by investors (Antônio et al., 2018b) (Heinle and Smith, 2017). Hedge
accounting, on the other hand, has a direct impact on a company's disclosure of financial and
currency risk exposure, and many companies do not apply the correspondent accounting rules
correctly or consistently (Chang et al., 2016), so the lessons and merits of changes in said
disclosure are still being debated, and they represent a major accounting policy issue (Tessema,
2016).
