Our objective is to uncover accounting distortions caused by using different exchange rates in hedge operations, and to introduce hedge accounting as a solution. Exchange rate differences arise from a lack of accounting standards to define which exchange rate to use. Through a case study, we illustrate the effect of different exchange rates on financial statements. We show that both earnings and equity can change, as a result of using hedge accounting. In addition to hedge accounting, we suggest discounting assets and liabilities in dollars by the exchange coupon, then converting them by PTAX as a way to ensure compatibility; alternatively, Brazil’s regulatory body could publish an official exchange rate to be used.