Accounting for Derivatives & Hedging

In this two-day revised and updated course, participants learn to recognize and distinguish between fair value and cash flow hedges, and to apply FAS 133 (ASC 815) and amendments to the accounting for qualifying hedges. Beginning with an overview of derivatives and their uses as hedging instruments, the course progresses from the fundamental applications of hedge accounting treatment to more complex applications of FAS 133 (ASC 815) and its amendments. Group discussions, short examples and case problems illustrate and apply the concepts of hedging and hedge accounting.

No sessions currently available. Contact client services to get the next available date.
CPE CREDITS
14.0
Corporate accountants, analysts, consultants, regulators, auditors, financial engineers and others who seek a fundamental, yet comprehensive understanding of FAS 133 (ASC 815) and its amendments.
No advance preparation required.
Students will be able to:
  • Describe the major causes of recent derivatives scandals
  • Identify the major types of derivatives used in hedging
  • Describe the basic rules of accounting for derivatives
  • Differentiate between speculation and hedging for accounting purposes
  • Design an effective hedge that qualifies for hedge accounting treatment
  • Explain the impact of derivatives on current period earnings and OCI
  • Describe how a company might assess hedge effectiveness
  • Describe the disclosure requirements for derivatives
  • Identify and account for fair value and cash flow hedges
  • Describe the nature and purpose of an interest rate swap
  • Account for derivatives used as hedges against interest rate risk
  • Explain the rules for accounting for foreign currency hedges
  • Account for a net investment in a foreign operation
  • Identify and account for embedded derivatives
  • Identify items that qualify for the scope exclusion
  • Discuss emerging issues and recent guidance
  • Describe methods for valuing interest rate swaps
  • Describe the valuation and accounting for a currency swap
A fundamental understanding of GAAP accounting principles. A basic understanding of time value of money concepts and commonly-used derivatives for hedging purposes (forwards, futures, swaps, and options) is also helpful.
"I am extremely pleased with what the course taught me. The instructor made it a fun experience."
"Key concepts were well-delivered."
"Thorough coverage of the material outlined."
"This is the only class I could find being offered that addresses accounting for derivatives in any depth."
"The class provided a number of illustrative examples with calculations."
DAY ONE
Introduction to Derivatives
  • Nature and Purpose of Derivatives
  • Examples of Common Derivatives
  • Infamous Derivatives Scandals
  • Put and Call Options
  • Forwards and Futures Contracts
  • Interest Rate Swaps

Accounting for Derivatives

  • Advantages of Hedge Accounting
  • Qualifying for Hedge Accounting
  • Hedging Designations: Fair Value vs. Cash Flow Hedges
  • Firm Commitments vs. Anticipated Transactions
  • Assessing & Documenting Hedge Effectiveness
  • Accounting for Hedge Ineffectiveness

Fair Value Hedges

  • Accounting for Fair Value Hedges
  • Impact on Current Period Earnings
  • Exposed Assets & Liabilities as Fair Value Hedges
  • Firm Commitments as Fair Value Hedges
  • Impact of a Discontinued Hedge
  • Documentation Requirements

Cash Flow Hedges

  • Accounting for Cash Flow Hedges
  • Impact on Current Period Earnings
  • Exposed Assets & Liabilities as Cash Flow Hedges
  • Cash Flow Hedges of Forecasted Transactions
  • Impact of a Discontinued Hedge
  • Documentation Requirements

Inerest Rate Swaps

  • Economics of Interest Rate Swaps
  • Interest Rate Swaps as Fair Value
  • Hedges and Cash Flow Hedges
  • Testing for Hedge Effectiveness
  • Valuation Methods for Interest Rate Swaps

DAY TWO
Interest Rate Risk
  • Interest Rate Futures and Options
  • Cash Flow Hedge of Anticipated Issuance of Debt
  • Cash Flow Hedge of Anticipated Purchase of Securities
  • Cash Flow Hedge of Interest Income using Floor Contract

Foreign Currency Hedges

  • Foreign Currency Hedges
  • Cash Flow Hedges of Foreign Currency Receivables & Payables
  • Cash Flow Hedge of Foreign Currency Debt
  • Hedging Foreign Currency Debt using Currency Swaps
  • Fair Value Hedge of a Firm Purchase Commitment
  • Cash Flow Hedge of a Forecasted Transaction
  • Hedge of a Net Investment in Foreign Operations

Embedded Derivatives

  • Identifying Embedded Derivatives
  • Valuing an Embedded Derivative
  • Accounting for Embedded Derivatives
  • Bifurcation Tests
  • Fair Value Option

Exceptions & Exclusions

  • Normal Purchases & Normal Sales Scope Exclusion
  • Insurance Contracts
  • Financial Guarantees
  • Other Scope Exceptions

Current Developments and Trends

  • Latest Guidance on FAS 133 (ASC 815) Implementations Issues
  • New and Proposed Accounting Standards affecting FAS 133 (ASC 815)
  • Comparisons with IFRS

Summary & Conclusion

Clients who register for this course will receive a complimentary 4-month subscription to FT.com. The Financial Times is the world's most respected financial newspaper, providing a broad assessment on finance, business and the industrial sector. The move to the electronic version follows an ongoing review of our environmental responsibilities as a global business and as part of the Pearson group. FT.com also has features that are not available in hard copy, such as: Special Reports, Alphaville, editor blogs, education sections and much more! Subscriptions will start within 6-8 weeks of the start of class and are limited to one subscription per client. (Please note: as of May 1, 2011, the electronic subscription replaces the hard-copy 3-month Financial Times subscription.)

Lunch is included for all students taking day classes.