Derivative accounting – or “hedge accounting,” if you prefer – is hard. There are no two ways about it; accounting for derivative instruments and hedging activities is a highly specialized skillset possessed by only a small minority of accountants. While that may be the case, however, a lack of derivative accounting resources should not hold […]
A new exposure draft issued yesterday by the FASB clarifies that a novation of a derivative from one counterparty to another is NOT necessarily an automatic dedesignation. This is great news for Corporates that have been faced with counterparties withdrawing from the marketplace or monetizing their current positions. The FASB is asking several questions during the […]
On July 9, the FASB Board elected to submit for a 60-day public comment period two EITFs: 1) The “Effect of Derivative Contract Novation on Existing Hedge Accounting Relationships” and
One of the most common foreign exchange hedging questions we receive at Hedge Trackers deals with when derivatives should mature. While the full story is rather complex, the top-line answer is relatively simple. Essentially, derivative maturities should be tied to a cash flow event; a cash movement or a cash conversion. After all, protecting USD […]
The FASB met on June 29th in a decision-making meeting. There were three hedge accounting packages presented for board approval: Decision package one relates mainly to non-financial hedges and includes component hedging amongst many other exciting changes. Decision package two relates to financial instrument hedging issues and includes definitions of benchmark rates, callable debt and […]
Are puts and call options that can accelerate the repayment of principal in a debt instrument clearly and closely related or do they need to be bifurcated from the host debt instrument? In considering this question the EITF evaluated two alternatives.
In this interview with gtnews, Helen Kane, founder and president of Hedge Trackers LLC offers her views on the extent to which companies can mitigate the impact of various risks through contingency planning. First introduced to currency risk management while working for a Silicon Valley-based manufacturing company as international treasury manager, Helen Kane founded Hedge […]
Did you know that there is an easy way to enter large numbers in Capella? For example, if you want to enter 10,000,000, just enter “10M” (for million). It’s an easy way to enter large numbers without counting zeros.
There is great news coming out of last week’s EITF meeting: Changing counterparties would NOT necessarily stop hedge accounting. In practice, when derivatives are novated from one counterparty to another, it has been considered a change in critical terms – which requires a dedesignation. Many users do a simultaneous dedesignation/redesignation; however, those using shortcut hedge […]
There is great news coming out of last week’s EITF meeting: Changing counterparties would NOT necessarily stop hedge accounting.
Here at Hedge Trackers, we’ve helped hundreds of companies establish foreign currency hedge programs. We’re proud of all of our engagements – particularly since no public company has ever been required to restate their earnings due to our derivative accounting or reporting practices. Occasionally, however, an engagement stands out – like the one described below.
Most of the FASB’s June 10 non-decision making meeting was spent discussing benchmark interest rates. When FAS 133 was originally written, users had to include the full market interest rate, inclusive of credit. FAS 138 was subsequently approved, allowing the bifurcation of benchmark interest rate risk, which was defined as U.S. Treasuries and – for […]
The second part of FASB’s non-decision making meeting on June 10, 2015 was used to briefly discuss the overall changes to hedge accounting. Three main topics were covered:
The Financial Accounting Standards Board’s (FASB) non-decision meeting this Wednesday, May 27, featured two hours on hedge accounting — including discussions on ineffectiveness, disclosures and documentation. The main theme of ineffectiveness was where to book it, and the FASB staff presented three different options: Requiring ineffectiveness to be booked to the same line item as the […]
There are many factors to consider and actions to take when starting a foreign currency hedge program. One piece that is often overlooked — and can create significant downstream benefits and efficiencies — is consolidating your global exposures. By combining exposures from multiple entities into a single number, corporations doing business internationally can save costs, […]