One of the most important requirements when applying hedge accounting in terms of the balancing of financial instruments in accordance with IAS 39 or SFAS 133 is to provide evidence of the effectiveness of hedge accounting transactions. A test of effectiveness assesses whether individual hedge accounting transactions were retroactively effective (retrospective test) and whether they are expected to be effective in future (prospective test). There is a choice of three methods for measuring prospective and retrospective efficiency: dollar offset, regression analysis and variance reduction.

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