effective/ineffective hedging, where to book on financial stmt

CFA Level II FRA
#1

I am a little confused about the CFAI question for the Rading 25 (P341, Q6)

I guess the answer of B or C depends on how you classify the hedging purpose. If the hedging is for cash flow, the effective portion goes to Equity(other comprehensive invome). If the hedgin is for fair value fluctuation, the ineffective portion goes to income statement and hit the net income.

The question is clear trying to hedge the value of future raw material, and use futures to hedge, imo, it fall into the “fair value” hedge category. So that answer should be B.

On a side note, why do we care about affective portion of the hedge? The net exposure will be 0 if hedge works perfectly and why do we bother to book effective portion of hedge on SH’s equity?

#2

in the case of fail value hedge ineffective portion is a loss and will go to the income statement.And most hedges the way they are set up. especially with futures contracts will never be perfect.