--- title: "Ask the Auditor: Cross Country Observations on Hedge Accounting" description: Discover the complexities and considerations of hedge accounting, and why US firms are more inclined to adopt it compared to their Canadian counterparts. image: https://cb.corpay.com/hubfs/Imported%20sitepage%20images/image-Jul-29-2025-08-00-30-7314-PM.webp --- [Skip to content](https://cb.corpay.com/resources/blog/ask-the-auditor-cross-country-observations-on-hedge-accounting#main-content) ![Corpay Cross Border Payments](https://cb.corpay.com/hs-fs/hubfs/Corpay_Final-Logo_No-TM_Two-Tone_Black.png?width=130&height=35&name=Corpay_Final-Logo_No-TM_Two-Tone_Black.png) - [Blogs](https://cb.corpay.com/resources/blog) - [Whitepapers](https://cb.corpay.com/resources/whitepapers) - [Case Studies](https://cb.corpay.com/resources/case-studies) Open main navigation Close main navigation - [Blogs](https://cb.corpay.com/resources/blog) - [Whitepapers](https://cb.corpay.com/resources/whitepapers) - [Case Studies](https://cb.corpay.com/resources/case-studies) - [Contact us](https://www.corpay.com/contact-us/cross-border) [Contact us](https://www.corpay.com/contact-us/cross-border) Sep 20, 2024 # Ask the Auditor: Cross Country Observations on Hedge Accounting ![Picture of Sean Coakley](https://cb.corpay.com/hs-fs/hubfs/Imported%20sitepage%20images/Sean%20Coakley.jpg?width=50&name=Sean%20Coakley.jpg) [Sean Coakley](https://cb.corpay.com/resources/blog/author/sean-coakley) Share: [facebook-f icon](http://www.facebook.com/share.php?u=https://cb.corpay.com/resources/blog/ask-the-auditor-cross-country-observations-on-hedge-accounting) [Share this page on LinkedIn](http://www.linkedin.com/shareArticle?mini=true&url=https://cb.corpay.com/resources/blog/ask-the-auditor-cross-country-observations-on-hedge-accounting) [Share this page on Twitter](https://twitter.com/intent/tweet?url=https://cb.corpay.com/resources/blog/ask-the-auditor-cross-country-observations-on-hedge-accounting) [Share this page on Email](mailto:?body=https://cb.corpay.com/resources/blog/ask-the-auditor-cross-country-observations-on-hedge-accounting) ***A Note on Hedge Accounting*** *Hedge accounting standards under US GAAP fall under the Financial Accounting Standards Board - ASC Topic 815 and with the detailed standards can be found at *[https://asc.fasb.org/815/tableOfContent](https://asc.fasb.org/815/tableOfContent) *Outside the United States, different accounting standards apply. Generally, these standards reference International Financial Reporting Standards (IFRS), with the reporting on derivatives falling within IFRS 9.* *There are distinct differences in how the two accounting boards view hedge accounting standards. Additionally, accounting standards vary between countries as well as for the business size and the type of elections that can be made at that level (example, ASPE in Canada.)* *The information contained here is for reference only. Consult your auditors to determine how this might relate to your business.* Over the course of my career, I have worked with businesses in four different countries on two separate continents, operating under a multitude of different accounting standards. Over time, I have noticed one recurring theme: the propensity of US firms to use hedge accounting in contrast to their counterparts in Canada. --- **Hedge accounting** Hedge accounting adds an administrative burdens and requires an audit. It’s also completely optional, so *why* would a business take that on? The reality is accounting for financial derivatives is complex, and many organizations run into the challenge of aligning the economic intent of why they hedge with their financial reporting objectives. The reality is sometimes those objectives are at odds with each other. Crucially, with financial derivatives there are differences in measurement and recognition of the changes in the value of the hedge contract and the risk it is meant to hedge. What this means is that, on occasion, hedging an economic risk in a business can complicate financial reporting. Nonetheless the financial reporting focus of US firms helps explain this inclination toward hedge accounting when compared to Canadian companies.   **Measurement, Recognition, timing & mismatches** Under fair value reporting, changes in the value of hedge contracts need to be recorded as gains or losses on the income statement. This introduces a complication when hedging future cash flows that are not yet recognized on financial statements. Essentially, the changes in value of a financial derivative used to hedge economic risk are going to be reporting on the income statement of a business even when the risk being hedged has not yet been recognized/recorded.   **‘American Exceptionalism’** In my experience the driver is generally the difference in the size and scale of businesses that hedge FX in Canada versus the United States. In Canada, it is not uncommon for a business with less than US $10M in revenue to use derivatives to hedge FX risk. The Canadian economy is much smaller, and thus more exposed to foreign trade as a percentage of GDP, than the US economy. It also doesn’t have the benefit of having the world’s global trade and reserve currency. In the United States, businesses generally do not have material exposure to FX risk until they are much larger. With added scale often comes added expectations around the importance of financial reporting. This emphasis, in my opinion, makes hedge accounting more appealing to US based businesses. It’s also easier for a larger business to access the specialized knowledge and resources required to apply hedge accounting—and the audits necessary as a part of this practice. That said, in practice there are important considerations to take into account when assessing whether hedge accounting makes sense for your business. In the next few pieces, I will offer an overview of these considerations from the point of view of a FX & Treasury sales executive.   SOURCE: [https://viewpoint.pwc.com/dt/us/en/pwc/accounting\_guides/derivatives\_and\_hedg/derivatives\_and\_hedg\_US/chapter\_9\_effectiven\_US/92\_introduction\_to\_e\_US.html#pwc-topic.dita\_1810123004126094](https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/derivatives_and_hedg/derivatives_and_hedg_US/chapter_9_effectiven_US/92_introduction_to_e_US.html%23pwc-topic.dita_1810123004126094) --- [Read the previous article in the series: Building up from the Balance Sheet](https://cb.corpay.com/resources/blog/building-up-from-the-balance-sheet) [Read the next article in the series: Hedge Accounting Effectiveness- practical considerations](https://cb.corpay.com/resources/blog/hedge-accounting-effectiveness-the-practical-considerations) --- **Additional resources** [Subscribe to our Market Commentary](https://www.corpay.com/lp/market-analysis) [Explore our Currency Research site](https://corpaycurrencyresearch.com/) [Connect with Sean](https://www.linkedin.com/in/seancoakleyfx) [Currency Risk Management](https://cb.corpay.com/resources/blog/tag/currency-risk-management) ## Related posts [![](https://cb.corpay.com/hs-fs/hubfs/Imported_Blog_Media/How_to_Find_Your_Way_in_the_World_of_International_Payments.jpg?height=200&name=How_to_Find_Your_Way_in_the_World_of_International_Payments.jpg)](https://cb.corpay.com/resources/blog/find-your-way-in-the-world-of-international-payments) [Global Payments](https://cb.corpay.com/resources/blog/tag/global-payments) ## [How to Find Your Way in the World of International Payments](https://cb.corpay.com/resources/blog/find-your-way-in-the-world-of-international-payments) ![Picture of Corpay Cross-Border](https://cb.corpay.com/hs-fs/hubfs/Brand%20Logos/Corpay_Final_Avatar_caret_dark.png?width=50&name=Corpay_Final_Avatar_caret_dark.png) [Corpay Cross-Border](https://cb.corpay.com/resources/blog/author/admin) Dec 10, 2021 Credit card, direct deposit, check, cash, e-pay… making domestic payments is a breeze these days,... [Read more](https://cb.corpay.com/resources/blog/find-your-way-in-the-world-of-international-payments) [![](https://cb.corpay.com/hs-fs/hubfs/Imported_Blog_Media/Aerial_photo_of_building_in_financial_district.jpg?height=200&name=Aerial_photo_of_building_in_financial_district.jpg)](https://cb.corpay.com/resources/blog/compliance-and-regulatory-frameworks-in-fx-trading-ensuring-proper-corporate) [Compliance and Regulations](https://cb.corpay.com/resources/blog/tag/compliance-and-regulations) ## [Compliance and Regulatory Frameworks in FX Trading: Ensuring proper corporate governance in multinational operations](https://cb.corpay.com/resources/blog/compliance-and-regulatory-frameworks-in-fx-trading-ensuring-proper-corporate) ![Picture of Robbie Norton](https://cb.corpay.com/hs-fs/hubfs/Imported%20sitepage%20images/Robbie%20Norton.webp?width=50&name=Robbie%20Norton.webp) [Robbie Norton](https://cb.corpay.com/resources/blog/author/robbie-norton) Sep 19, 2024 Foreign exchange (FX) trading is a critical component of multinational operations, enabling... [Read more](https://cb.corpay.com/resources/blog/compliance-and-regulatory-frameworks-in-fx-trading-ensuring-proper-corporate) [![](https://cb.corpay.com/hs-fs/hubfs/Imported_Blog_Media/Container_ship_in_motion_with_aerial_view.jpg?height=200&name=Container_ship_in_motion_with_aerial_view.jpg)](https://cb.corpay.com/resources/blog/navigating-the-waters-of-compliance-and-the-complexities-of-todays-regulatory-landscape) [Compliance and Regulations](https://cb.corpay.com/resources/blog/tag/compliance-and-regulations) ## [Navigating the Waters of Compliance](https://cb.corpay.com/resources/blog/navigating-the-waters-of-compliance-and-the-complexities-of-todays-regulatory-landscape) ![Picture of Anthony Rodriguez](https://cb.corpay.com/hs-fs/hubfs/Imported%20sitepage%20images/image-Jul-15-2025-06-26-02-7756-PM.jpg?width=50&name=image-Jul-15-2025-06-26-02-7756-PM.jpg) [Anthony Rodriguez](https://cb.corpay.com/resources/blog/author/anthony-rodriguez) May 17, 2024 Navigating the Waters of Compliance: Overcome the complexities of today's regulatory landscape and... [Read more](https://cb.corpay.com/resources/blog/navigating-the-waters-of-compliance-and-the-complexities-of-todays-regulatory-landscape) --- [![Corpay Cross Border Payments](https://cb.corpay.com/hs-fs/hubfs/Corpay_Final-Logo_No-TM_Two-Tone_Black.png?width=130&height=35&name=Corpay_Final-Logo_No-TM_Two-Tone_Black.png "Corpay Cross Border Payments")](https://www.corpay.com/cross-border) [linkedin-in icon](https://www.linkedin.com/showcase/corpay-cross-border-solutions/) [X Twitter icon](https://twitter.com/CorpayFX) [vimeo-v icon](https://vimeo.com/corpay) [microphone icon](http://corporate-payments.corpay.com/fintech-in-focus-podcast/) [Follow us on Facebook](https://www.youtube.com/@CorpayCrossBorder) --- ## "Cambridge Global Payments” and “AFEX” are trading names that may be used for the international payment solutions and risk management solutions provided by certain affiliated entities using the brand “Corpay”. International payment solutions are provided in Australia through Cambridge Mercantile (Australia) Pty. Ltd.; in Canada through Cambridge Mercantile Corp.; in Switzerland through Associated Foreign Exchange (Schweiz) AG; in the United Kingdom through Cambridge Mercantile Corp. (UK) Ltd.; in Ireland and the European Economic Area on a cross-border basis through Associated Foreign Exchange Ireland Ltd.; in Jersey and the Channel Islands through AFEX Offshore Ltd.; in Singapore through Associated Foreign Exchange (Singapore) Pte. Ltd. and in the United States through Cambridge Mercantile Corp. (U.S.A.). Risk management solutions are provided in in Australia through Cambridge Mercantile (Australia) Pty. Ltd.; in Canada through Cambridge Mercantile Corp.; in the United Kingdom through Cambridge Mercantile Risk Management (UK) Ltd.; in Ireland and the European Economic Area on a cross-border basis through AFEX Markets Europe Ltd.; in Jersey and the Channel Islands through AFEX Offshore Ltd.; in Singapore through Associated Foreign Exchange (Singapore) Pte. Ltd. and in the United States through Cambridge Mercantile Corp. (U.S.A.). Please refer to http://cross-border.corpay.com/brochure-disclaimers for important terms and information. ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Sean Coakley", "url" : "https://cb.corpay.com/resources/blog/author/sean-coakley" }, "dateModified" : "2025-07-29T20:18:38.091Z", "datePublished" : "2024-09-20T12:15:00.000Z", "headline" : "Ask the Auditor: Cross Country Observations on Hedge Accounting", "image" : [ "https://cb.corpay.com/hubfs/Imported%20sitepage%20images/image-Jul-29-2025-08-00-30-7314-PM.webp" ], "mainEntityOfPage" : { "@id" : "https://cb.corpay.com/resources/blog/ask-the-auditor-cross-country-observations-on-hedge-accounting", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://cb.corpay.com/hubfs/Corpay_Final-Logo_No-TM_Two-Tone_Black.png" }, "name" : "Corpay" } } ```