Great class, broke down the complex FAS 133 requirements into chewable sizes.

Susan Tuey, Financial Reporting Manager, Science Applications International Corp., San Diego, CA

Accounting for Derivatives and Hedging Activities Under U.S. GAAP

Two days — 16 CPE Credits

Build the knowledge base and, with case studies, practice all the skills you need to effectively deal with derivatives and hedge accounting.

In this workshop you will interact with the instructor to:

• Learn the definition of a derivative and how to identify derivatives

• Understand embedded derivatives and related accounting issues

• Learn how to account for fair value, cash flow and foreign exchange hedging activities

• Know how to document hedging activities

• Know how to assess effectiveness of hedging activities

• Understand disclosure requirements and related issues in Forms 10-K and 10-Q

• Work a series of case studies for each area

Course Schedule

Day One: 9:00 am – 5:00 pm
Day Two: 8:30 am – 4:30 pm

Day 1

Registration/Continental Breakfast

 Introduction and Overview of the Course

• Big picture and schedule for the day

• Preview the major issues with which you will have to grapple

An Overview of SFAS 133 as Amended

• Objectives of the pronouncement

  • Why did the FASB adopt this approach?

• Key risks and pitfalls

• Effective date

• Fundamental assumptions of the pronouncement

  • Fair value treatment

  • Hedge criteria – why are they fairly limiting?

  • Rationale for these fundamental assumptions

  • Controversy and history

• Derivative accounting issues

  • Examples (forward contract and interest rate swap)

  • GAAP for derivatives as established in SFAS 133

• Hedge accounting

  • Current GAAP for hedging activities

  • GAAP for hedging as established in SFAS 133

  • Other comprehensive income treatment

  • Other comprehensive income treatment for cash flow hedges

• Transition issues

• SEC comments to date on SFAS 133

• Revisions from the DIG

SFAS 133 Definition of a Derivative Instrument

• Underlyings

  • Value derived from a price, index, etc.

  • Commodity contracts and related issues

  • Change in value of derivative versus change in price of underlying

• Notional amount

• Initial net investment

  • Minimal amount

• Net settlement – a key element of the definition

  • When is settlement net?

  • When is net settlement possible?

• Embedded derivatives

  • Determining appropriate accounting for embedded derivatives

  • When to separate

• Which instruments are not derivatives?

• “Normal purchases and sales” and other items excluded from the definition

• Examples

Accounting Principles for Derivative Instruments

• Fair Value

• Basis for Fair Value Accounting

• Impact of FASB’s SFAC 7 on present value computations

• Future impact of FASB’s fair value project

• Measurement of unrealized gains and losses

• Accounting treatment of unrealized gains and losses

  • Current income

  • Hedging activities

  • Other comprehensive income treatment in specific cases for cash flow hedge

Hedging Activities

• Definitions

• Documentation requirements

• Documentation in risk management policy

• Importance of assessing effectiveness

• Details of criteria to be met to qualify for hedge accounting

  • Hedged item, derivative, nature of hedged risk

• How to assess effectiveness

  • Examples

  • Quantitative tools required

• Impact on reported earnings and volatility

  • What if anything can be done?

• Guidance from the FASB

• The Derivative Implementation Group

• Where is SFAS 133 likely to deny hedge treatment

• Impact of the FASB's exposure draft for hedge accounting

Fair Value Hedges in Detail

• Definition

• Example hedging transaction, strategy and implementation Accounting

• Current earnings for derivative and hedged item

• Examples and case studies

Cash Flow Hedges in Detail

• Definition

• Example hedging transaction, strategy and implementation Accounting

• Comprehensive income treatment

• Examples and case studies

Cocktail Party for Participants and their Guests

Day 2

Continental Breakfast

Foreign Currency Hedges

• Definition

• Changes from SFAS 138

• Hedging foreign currency assets and liabilities

• Intercompany transactions that can be hedged

• Example of a hedging transaction, strategy and implementation Accounting

• Comprehensive income treatment

• Examples and case study

Disclosures and SFAS 161

• Gathering information for disclosure requirements

• Effective date and estimating the time to prepare

• Accounting system impact

• Relationship to risk management strategy

Questions and Answers, Concluding Issues

Learning Objective: To learn the requirements of Accounting for Derivative Instruments and Hedging Activities, and to learn how to implement this standard.
Prerequisites/Advance Preparation: None.
Experience level: Intermediate.

DOWNLOAD BROCHURE

DOWNLOAD FAX REGISTRATION FORM

CALENDAR

DOWNLOAD LIST OF UPCOMING EVENTS

Adobe Acrobat Reader® is required to download. Click the icon to get it free.