1) Companies often incorrectly hedge cash flows with uncertain timing using options by assuming the critical terms match between the exposure and hedge. 2) To properly hedge cash flows with uncertain timing using options, companies should assess effectiveness based only on the intrinsic value of the exposure and hedge using spot rates, and expense the time value changes to earnings each period. 3) When hedging cash flows with uncertain timing within a specified period, companies should document the exposure as occurring within that period rather than on a specific date, assess effectiveness without assuming critical terms match, and measure effectiveness using intrinsic values at spot rates.

1. FAS 133 Effectiveness Assessment FX Exposures with Uncertain Timing