Record decline in hedge value by debiting hedge asset and crediting expense or contra-asset account. Details depend on hedge type and circumstances.
To record a decline in the value of a hedge for the government, a journal entry would be created to debit the hedge asset account and credit an appropriate expense or contra-asset account. The specific details of the journal entry would depend on the specific type of hedge and the circumstances of the decline in value.
Here is an example of a journal entry to record a decline in the value of a fair value hedge:
Journal Entry
Fair Value Hedge Asset-------------Dr. $100,000
To fair Value Hedge Loss $100,000
This journal entry would be made to record a $100,000 decline in the value of a fair value hedge asset. The Fair Value Hedge Loss account is a contra-asset account that is used to offset the value of a fair value hedge asset. This helps to ensure that the government's financial statements accurately reflect the fair value of its assets and liabilities.
The specific account that is credited in the journal entry will depend on the specific circumstances of the decline in value. For example, if the decline in value is due to a decrease in the market value of the hedged asset, then the Loss on Sale of Asset account would be credited. However, if the decline in value is due to a change in the expected future cash flows of the hedged asset, then the Expense account would be credited.
It is important to note that the journal entry to record a decline in the value of a hedge is not the same as the journal entry to record the realization of a loss on a hedge. The realization of a loss on a hedge occurs when the hedged asset is actually sold or otherwise disposed of. Until that time, the decline in the value of the hedge is simply recorded as a loss in the fair value hedge loss account.