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  • Reference Rate Reform: Economics & Accounting Treatment Impacts

    We always encourage hedgers to consider the economics of a transaction before looking at the accounting. If the economics don’t make sense, it doesn’t matter how favorable the accounting treatment is, it probably isn’t a good idea!

  • LIBOR Transition: Indirect Valuation Impacts

    The direct impacts of the transition away from LIBOR to the use of an alternative reference rate such as the Secured Overnight Financing Rate (SOFR) have been well publicized. ISDA and ARRC have been releasing regular updates and suggested fallback language to determine how LIBOR rates will be replaced in derivative and loan agreements, once LIBOR is no longer available.

  • LIBOR to SOFR: Are You Ready?

    While the derivatives market had been changing fairly rapidly prior to COVID-19, 2020 market dynamics have not closed the gap between expected and observed market prices. It’s critical that corporations and institutions address the coming reference rate changes related to their derivatives and debt instruments tied to LIBOR.

  • Top 5 Balance Sheet Hedges That Create Risky Positions

    Once a company establishes a balance sheet program, it likely runs on auto-pilot from then on. Exposures are gathered, forecasted, netted, hedged and adjusted inter-month, and the results of the program are reported — but rarely is there a “review” of the hedge program from top to bottom.

  • What to Watch for as LIBOR Fades Into History

    Businesses mired down by the impacts of COVID-19 are facing enough difficulties. But the march to LIBOR’s end has continued unabated.

  • SOFR: Key Characteristics & Hedge Accounting Impacts

    As many of our readers already know, SOFR (Secured Overnight Financing Rate) has been selected by the Alternative Reference Rates Committee of the Federal Reserve to replace LIBOR in 2021.

  • Top Benefits & Limitations of FX Hedge Programs

    To implement a successful hedge program, it’s important that all parties involved know exactly what the hedge program will provide. This prevents disappointment and level sets expectations with management.

  • Last-of-Layer Hedging for Financial Institutions

    Lenders such as banks, mortgage lenders, and credit unions manage large portfolios of fixed-rate loans. Typically, these assets are funded with floating-rate liabilities. This mismatch between fixed-rate assets and floating-rate liabilities can cause unwelcome earnings volatility.

  • 6 Translation Accounting Nuances You Should Know

    The translation process converts local currency financial statements of subsidiaries into USD based financials for consolidation and reporting purposes.

  • Leveraging Cross Currency Net Investment Hedges to Boost Earnings Through Interest Income

    Using a Net Investment hedge strategy to boost income has been around for decades, but the ultra-low interest rate environment in Europe combined with the new rules under ASU 2017-12 has renewed curiosity in this approach.

  • For the Urgent Hedger: Cash Flow Hedging Made Easy With Hedge Trackers

    Do you need to implement a cash flow hedge program quickly — either due to urgent management directives, Board member mandates, or competitive pressures? It happens all the time, leaving treasurers and decision-makers to scramble to come up with the right solution.

  • Special Hedge Accounting: Why Functional Currency Matters

    A common misconception is that if you have a foreign currency transaction, you can simply hedge it and apply special hedge accounting.

  • Interest Rate Risk: Hedging Future Issuance of Fixed Rate Debt

    Companies that need to refinance their debt do not have to wait until they refinance to lock in their interest rate on new issuances.

  • LIBOR Transition: Understanding FASB’s Latest Reference Rate Reform Guidance

    In March, the FASB issued ASU 2020-04 on the “Facilitation of the Effects of Reference Rate Reform on Financial Reporting.”

  • Hedge Effectiveness & Probability Assessments

    There has been some confusion around the ASC 815 rules set regarding effectiveness assessments and probability assessments.