NGW, a consumer gas provider, estimates a rather cold winter. As a result it decides to enter into a futures contract on the NYMEX for natural gas on November 2, 2011. The trading unit is 10,000...

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Answered Same DayDec 31, 2021

Answer To: NGW, a consumer gas provider, estimates a rather cold winter. As a result it decides to enter into a...

David answered on Dec 31 2021
127 Votes
Hedge Accounting
1) Considering the terms of the hedge and the facts present under the current situ
ation, it seem
that the hedge would be effective and therefore complying to the requirement of Hedge
Accounting. The reason for the same being that the value of the asset at which the consideration
for the hedge is planned to be received and the value of the underlying asset is ideally the same
and there is one to one correlation of the asset value and the hedge amount and hence the actual
consideration or the actual value is unlikely to be the different. This would therefore call for the...
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