What does effective portion mean on the CPA exam?
Effective portion. The part of a cash flow hedge's gain or loss that actually offsets the hedged risk. It goes to other comprehensive income until the hedged item hits earnings.
Defined against ASC 815-30-35-3.
Which CPA exam sections use effective portion?
Effective portion appears in the BAR section of the CPA exam.
Related terms
- recognized gain: The part of realized gain that actually goes on the return this year.
- other comprehensive income: Gains and losses that bypass net income and sit in equity until realized, such as unrealized gains on available-for-sale debt securities and foreign currency translation.
- treasury stock: A company's own shares reacquired and not retired.
- functional currency: The currency of the main economic environment in which an entity operates, which is usually where it generates and spends cash.
- statement of cash flows: The statement that explains the change in cash by sorting it into operating, investing and financing activity.
- financial statements: The formal set an entity publishes: balance sheet, income statement, statement of cash flows, statement of changes in equity, and the notes.