Balance Sheet Hedging 

A company doing business in local (i.e. non-functional) currency will have local currency assets and/or liabilities on its balance sheet. Depending on the firm's cash cycle, local currency items (A/R, A/P, cash) may roll over two or more balance sheet statements.  

These items are initially recorded at the FX accounting rate effective at the time of booking. Thereafter, they are "remeasured" on each balance sheet date, using current rates. The gain/loss resulting from this month to month remeasurement is recorded on the Income Statement.


This creates undesirable Income Statement volatility, which in turn adversely affects many corporate metrics. Balance sheet hedging addresses this effect, reducing the net gains/losses and resulting volatility. 

Our balance sheet hedging can be closely integrated with our Cash Flow hedging program. In addition to calculating the required hedges and swaps at each month-end, Balance Sheet hedging provides a comprehensive reporting functionality, including a variance analysis (forward points impact, balance sheet forecasting error and cash flow forecasting error).

Want To Learn More About Balance Sheet Hedging?

Reduced Net Gain/Loss from Monthly Remeasurement 

Hedging the re-measurement of net monetary assets (NMA) reduces the net effect of FX on the balance sheet.


The challenge is in forecasting NMA one month ahead, even without knowing  the current month’s trial balance. Our methodology provides a robust and accurate NMA, and manages the required swaps.

Reduce Income Statement Volatility

Under both FASB and IFRS 21, balance sheet re-measurement gains or losses must be posted to the Income Statement. These gains or losses can substantially increase the Income Statement volatility.


Thus, minimizing the gains/losses on the balance sheet stabilizes the income statement.

Our Cross-border Content is designed to answer questions you may have about the world of cross-border transactions. If you have further questions that aren't covered by our articles, feel free to contact our team.

Learn More About Our Solutions

If you are interested in finding out more about our services or speaking to one of our team, please reach out to us on:

Deaglo white logo.png
  • LinkedIn - White Circle

All statements of opinion and/or belief contained in this website and all views expressed represent Deaglo Partners LLC's “Deaglo” own assessment and interpretation of information available to it at the date of this website. The information contained in this website is based on publicly available information only, from third-party sources. Deaglo does not represent that it is accurate, timely, comprehensive or complete and it should not be relied upon as such, nor has it been independently verified. No reliance may be placed for any purposes whatsoever on the information contained in this website. Under no circumstances should the information provided in this website be considered as investment or trading advice, or as a sufficient basis on which to make any investment or trading decisions and is provided to you for information purposes only. Whilst this website has been prepared in good faith, Deaglo and its group undertakings, members and employees from time to time (“Affiliates”) do not make and are not authorized to make any representation, warranty, or undertaking, express or implied, with respect to the information or opinions contained in it and no responsibility or liability is accepted by any of them as to the accuracy, completeness or reasonableness of such information or opinions or any other written or oral information made available to you. Without prejudice to the foregoing and to the fullest extent permitted by law, Deaglo and its Affiliates do not accept any liability whatsoever for any loss however arising, directly or indirectly, from use of this website or otherwise arising in connection therewith. Nothing herein shall not exclude any liability for, or remedy in respect of, fraud or fraudulent misrepresentation. Our professionals may provide oral or written market commentary or trading strategies to our clients. Deaglo will not treat recipients as clients by virtue of their receiving this report. Data may be subject to updates and corrections without notice. No part of this material may be (i) copied or duplicated in any form by any means or (ii) redistributed without the prior written consent of Deaglo.