An item that is designated as being hedged such as assets, liabilities, commitments, investments in a foreign operation or highly probable transactions whereby an entity is exposed to changes in fair value or cash flows. In other words, under hedge accounting, a hedged item, which must be reliably measurable, can be a recognized asset (accounts receivable/ ARs) or liability (accounts payable/ APs), an unrecognized firm commitment (e.g., sales order, SO or purchase order, PO), a net investment in a foreign operation or a forecast (but highly probable) transaction.

A hedged item is one leg of the so-called hedge relation (with the other leg being a hedging instrument). A hedged item exposes an entity (the hedger) to the risk of changes (fluctuations) in fair value or future cash flows that could impact the income statement, in the current period or in a future period. The hedged item can be a single item (e.g., an individual transaction) or a group of items (a number of transactions), or a component of an individual item or a part of a group of items.

An example of a hedged item could be a loan entailing the payment of a floating rate (6 month reference + spread) by an entity (hedger) to a market participant.