Abstract The article presents the American Accounting Association's answers to the questions posed by the Financial Accounting Standards Board on hedging and other risk-cutting activities. It is reported here that the AAA committee believes that the best approach for hedging activities is a mark-to-market hedge accounting model. It is noted, however, that a full adoption of this approach would involve two fundamental changes to the traditional historical cost accounting model: (1) a change to reporting at fair recognized at other than fair value, and (2) a recognition of certain transactions in the financial statements not recognized under the current accounting model.
Barth et al. (1995) studied this question.