What it is:
A hedge clause is a disclaimer found in financial documents that protects a financial reports' authors from liability for errors within the report.
How it works (Example):
A hedge clause simply absolves the authors of wrongdoing in connection with the presented information. A hedge clause is a statement typically included by contributing authors as part of an annual financial report, press release or analyst report.
For example, a hedge clause might indicate that an author cannot be held accountable for misrepresentations of financial data or other inaccurate information contained in a report.
Why it Matters:
Hedge clauses are meant to protect those who communicate but do not have a role in the recording or preparation of an organization's financial information. Though they are frequently overlooked, investors are advised to review hedge clauses in order to better judge and interpret the material in a publication.