To provide CPAs and other financial professionals with an overview of the products and the transactions involved in derivatives accounting under US GAAP. You’ll gain the knowledge to avoid pitfalls and understand the effects on financial statements and risk management strategies. You’ll learn to identify the characteristics of cash flow, fair value and net investment exposures and determine the appropriate accounting and reporting treatment for these potentially complex transactions.

• Identifying the basic characteristics, risk management strategies and accounting requirements for derivatives
  – Interest rate, foreign exchange and commodities
  – Futures and forwards
  – Interest rate and other types of swaps
  – Caps, collars and floors
• Developing a conceptual accounting and reporting framework for financial instruments under ASC 815 (FAS 133)
• Expected changes to ASC 815
• Understanding embedded derivatives and bifurcation
• Examining the qualifying criteria and accounting requirements for:
  – Fair value hedges
  – Cash flow hedges
  – Net investment hedges
• Reviewing the guidelines for use of the short cut method and critical terms matching
• Simplified hedge accounting
• Effectiveness testing approaches
• Documentation and disclosure requirements
• Case studies for applying concepts

To provide CPAs and other financial professionals with an overview of the products and the transactions involved in derivatives accounting under US GAAP. You’ll gain the knowledge to avoid pitfalls and understand the effects on financial statements and risk management strategies. You’ll learn to identify the characteristics of cash flow, fair value and net investment exposures and determine the appropriate accounting and reporting treatment for these potentially complex transactions.

DETAILED LEARNING OBJECTIVES

• Identify the ASC topic providing US GAAP guidance for derivatives

• Recognize the three defining characteristics of a derivative under ASC 815

• Understand what constitutes an underlying in a derivative contract

• Recall the role of the notional amount in determining derivative cash flows

• Identify items excluded from the scope of ASC 815

• Understand the purpose of the normal purchases and normal sales exception

• Recognize risks typically associated with derivatives

• Identify instruments that do not qualify as derivatives

• Recognize entities that most frequently use derivatives for hedging

• Understand how derivatives are reported on the balance sheet under ASC 815

• Identify the defining feature of a forward contract

• Recall the characteristics of a futures contract

• Recognize the obligations and rights of option buyers and sellers

• Define a swap contract in financial markets

• Understand how clearinghouses reduce risk in futures contracts

• Identify the payment structure of an interest rate swap

• Distinguish between forwards and futures

• Recognize a practical example of an option contract

• Identify common underlyings in an option contract

• Understand the primary purpose of derivatives in corporate finance

• Recall how the fixed leg of an interest rate swap is valued

• Identify common benchmarks for the floating leg of interest rate swaps

• Recognize the role of the notional amount in swap contracts

• Understand which curve is used to discount swap cash flows

• Recall how swaps are recorded at inception under ASC 815

• Understand how changes in fair value of swaps are recognized after inception

• Define an embedded derivative

• Recognize common examples of embedded derivatives

• Identify when an embedded derivative must be separated from its host contract

• Recall when embedded derivatives do not require bifurcation

• Recognize the requirements for hedge accounting under ASC 815

• Identify which hedge type addresses fair value risk

• Identify which hedge type addresses cash flow variability

• Recall how the effective portion of cash flow hedges is reported

• Understand how changes in fair value are reported in a fair value hedge

• Recognize conditions for assuming hedge effectiveness without quantitative testing

• Recall what constitutes a critical terms match in hedge effectiveness

• Understand the impact of notional mismatches on hedge accounting

• Recall why ASC 815 restricts assuming effectiveness when mismatches exist

• Identify which portion of a hedge must always be recognized in earnings

• Recall the probability requirement for forecasted transactions in cash flow hedges

• Understand where the effective portion of a cash flow hedge is initially reported

• Recognize how ineffective portions of hedges are reported

• Identify permissible hedged items in fair value hedges

• Recall where both derivative and hedged item changes are reported in fair value hedges

• Recognize the purpose of net investment hedges

• Recall the conditions required for using the shortcut method in hedge accounting

• Identify required disclosures for derivatives under ASC 815

• Understand how deferred amounts in OCI are treated when cash flow hedges are discontinued

• Recognize how ineffective portions of derivatives are reported under hedge accounting

• Identifying the basic characteristics, risk management strategies and accounting requirements for derivatives
  – Interest rate, foreign exchange and commodities
  – Futures and forwards
  – Interest rate and other types of swaps
  – Caps, collars and floors
• Developing a conceptual accounting and reporting framework for financial instruments under ASC 815 (FAS 133)
• Expected changes to ASC 815
• Understanding embedded derivatives and bifurcation
• Examining the qualifying criteria and accounting requirements for:
  – Fair value hedges
  – Cash flow hedges
  – Net investment hedges
• Reviewing the guidelines for use of the short cut method and critical terms matching
• Simplified hedge accounting
• Effectiveness testing approaches
• Documentation and disclosure requirements
• Case studies for applying concepts