Hedge accounting as per as-11 and as-30

Hedging is a technique which is adopted to avoid any fluctuations in the income/exp due to changes in the foreign exchange rates........

For example if a liability is there which is to be full filled in foreign exchance.......equivalent amout of investment can be made in the indexes or options of such foreign currency and it is converted into cash on the date of payment........so any variation....being either increase.....or decrease in the net amount of liability can be balanced.......

Similar treatment can be adopted for assets.........to prevent any loss in the receipt at a future date......

P.S: The above eg is only one of the methods through which hedging is done.......there are rather more different kinds of hedging options..

Thanx for ur reply...i knw the meaning of hedgeing .

I would appreciate if u could give clarrity via this problem.

Ab ltd acquired an asset for $100000 on 1/1/09 settlement will be done on 31/5/09.

1/1/09 1$=47.2 spot rate ,1$=48.6 forward rate.

31/3/09 1$=48 closing rate ,1$=49 forward rate @  remaining 2 months

31/5/2009 1$=49.6 settlement

supposed to pass journal entries....

Probably the asset would be forward rate on the date of acquiring the asset.....

And the rate on the date of Balance sheet would no way effect it because Assets are normally recorded at the historical cost of the asset....

The additional Value on the date of settlement would be added to the original value of the asset........

But i suggest you to get confirmed........