Accounting for Hedges of Recognized Foreign Denominated Assets & Liabilities Webinar (1 Hour)

Overview: 

Many companies use derivatives to hedge their foreign currency exposure. The most obvious foreign currency exposures to hedge are balance sheet items, such as foreign denominated receivables and payables, cash or other short-term assets or liabilities. These items are often hedged with forward or date-window forward contracts. ASC 830 requires foreign denominated assets and liabilities to be recorded on the balance sheet at the current spot rate, and changes in value to be recognized on the income statement in the same line where the hedging contract is recognized. In this program, we will:

  • Review the interest rate parity theorem and determination of forward rates
  • Summarize ASU 2017-12: Targeted Improvements to Accounting for Hedging Activities
  • Discuss accounting for foreign currency forward contracts
Objective: 

To update financial professionals on the accounting for hedges of recognized foreign denominated assets and liabilities.

Emphasis: 
  • Covered Interest Rate Parity
    – How forward rates are determined and calculated
    – Domestic and foreign rates
    – Balance sheet foreign exchange hedging
  • ASU 2017-12: Targeted Improvements to Accounting for Hedging Activities
    – Amendments to:
       – Align hedge accounting with a company’s risk management activities
       – Eliminate the concept of ineffectiveness
       – Clarify all changes in fair value for derivatives that qualify as hedging instruments
       – Introduce “qualitative” and “quantitative” approaches to effectiveness testing
       – Expand interest rate risk that can be hedged from benchmark to “contractually specified” rates
  • Accounting for:
    – Fair value forward contract
    – Cash flow forward contract
    – Effectiveness based on changes in spot rates
    – Effectiveness based on changes in forward rates
Bottom
Prerequisite: 

Basic knowledge of financial instruments and financial accounting and reporting.

Preparation: 

No advance preparation required.

 

Level of Knowledge: 

Overview.

CPE Credit: 
1.00
NASBA Field of Study: 
Accounting