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Member question: “Does anyone have dual-purpose hedges (for example, the hedge is originally a cash flow (CF) hedge and then intentionally de-designated to become a balance sheet hedge, with impact after de-designation going to the P&L)?”
Peer answer 1: “Yes, we’ve recently switched to a long haul approach and are now de-designating our CF hedges. Due to the timing mismatch between the two programs, I wouldn’t necessarily say we have interplay/dual purpose.”
Peer answer 2: “We do exactly what you have described; our FX cash flow hedges get de-designated when the revenue/ expense is booked, but the hedging instruments that remain on the books are hedges of [FX-denominated] AR/AP created when the revenue/expense was booked.”
Peer answer 3: “Yes, we do what you describe. We hedge the purchase of our inventory, but the hedge matures generally a month later when the product is paid for and we have a cash reimbursement of an intercompany.
- “We de-designate our cash flow hedges the month-end prior to maturity, such that the remaining P&L goes through a different P&L item.”
Peer answer 4: “We do what you describe. For important currency pairs, we true up the hedge amount once de-designated to match the actual balance sheet exposure.”
Peer answer 5: “We did that as part of our project CF hedging program at [another company]. We used Chatham Direct to handle the handoff between CF and balance sheet programs. Their tool made it quite smooth.”
Peer answer 6: “Yes, we de-designate the hedges and then they mature; or we enter into trades to close them out the next month. We hedge quarterly but de-designate monthly.”
