You’ve spent hours and hours developing a hedging strategy, identifying exposures, forecasting, and verifying hedge accounting, but your efforts shouldn’t stop there. To inform management the job is done, and done well, you need to go to the next level: performance reporting.
On March 3, 2020, the Federal Open Market Committee (FOMC) made an emergency 50bp interest rate cut in response to the Coronavirus’ impact on the U.S. economy.
Treasurers are tasked with protecting the gain/loss line as well as foreign revenue, expenses and/or margins. So, it’s not unusual for Treasury departments to want to implement a foreign currency hedge program.
Many public corporations report earnings, revenues and expenses on a “constant currency” basis. The objective is to present financials year-over-year (YoY) for comparative purposes without the effects of currency movements.
The thought of applying hedge accounting can be daunting for those unfamiliar with the requirements for qualifying for special hedge accounting treatment under ASC 815. In this post, we will discuss the basic requirements for qualifying and applying special hedge accounting.
Special hedge accounting is an elective accounting treatment under U.S. and International accounting principles. An organization must first qualify for special hedge accounting and then follow ongoing compliance requirements to remain qualified.
LIBOR is being phased out through 2021, and the Secured Overnight Financing Rate (SOFR) was selected as the preferred LIBOR replacement by the Alternative Reference Rates Committee (ARRC) in June 2017.
As LIBOR is phased out, reference rate reform will identify new and alternative reference index rates for financial instruments, including the Secured Overnight Financing Rate (SOFR).
As a U.S. company, your accounting team might not realize that hedge accounting under U.S. GAAP may not satisfy local international regulations and requirements. So, just as you get a handle on ASC 815 cash flow hedge accounting in the U.S., your international subsidiaries ask you to comply with IFRS 9 for local statutory purposes.
One of the most difficult and frustrating exercises in treasury is understanding and communicating the results of a balance sheet hedge program.
The treasury department of an organization is often responsible for mitigating foreign currency, interest rate and commodity price risk. Most of the derivatives used to manage that risk are negotiated by Treasury … but this is not always the case for commodity risk management.
It’s mission-critical for companies to protect their margins, revenues, and expenses from unnecessary volatility. A lot of the time, volatility comes from currency changes — or, foreign exchange risk.
Most treasury professionals are comfortable gathering and netting down same currency exposures that go in opposite directions.
Translation and transaction accounting are often confused for one another — but the difference between them is important. How can you tell them apart?
If your company transacts internationally, you know you need to use exchange rates to not only convert foreign currency transactions from the local currency into USD but also to translate foreign currency financial statements.