A Company Has a Receive Fixed/pay Variable Interest Rate Swap

Multiple Choice

A company has a receive fixed/pay variable interest rate swap that qualifies as an effective hedge of its fixed rate debt. If interest rates rise:

A) The gain on the debt and the loss on the swap are reported in income.
B) The change in the value of the swap is reported in other comprehensive income and adjusts future interest expense recognized on the debt.
C) The loss on the debt and the gain on the swap are reported in income.
D) The swap is written off.