Fincad, an over-the-counter (OTC) derivatives solutions company, is working with KPMG, the Canadian member firm of KPMG International, to produce a whitepaper series on the basics of hedge accounting for corporate treasuries. Entitled ‘The Basics of Hedge Accounting’, this educational series outlines the principles of hedge accounting under current and expected International and US accounting standards, including some of the practical challenges typically faced by organisations.
Topics addressed in this series include:
- Basics of accounting for derivatives and hedge accounting.
- Basics of assessing effectiveness and measuring ineffectiveness.
- Basics of credit value adjustment and implications for the assessment of hedge effectiveness.
- Upcoming changes to hedge accounting under international and US accounting standards.
- Hedging portfolios of fixed rate instruments under International Financial Reporting Standards.
- Use of overnight index swap (OIS) rate when valuing derivatives and assessing effectiveness.
- Separation of embedded derivatives within convertible debt instruments (CDIs).
Developed to help more organisations to better manage their income statement volatility, this educational series introduces treasurers to the key principles of hedge accounting. When applied appropriately, hedge accounting allows treasurers and organisations to align financial reporting with the economics of their hedge relationships and also manage income statement volatility. In addition, the series includes an article on CDIs and some of the associated challenges from a valuation and accounting perspective.
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