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Download e-book for iPad: Accounting for Derivatives: Advanced Hedging under IFRS 9 by Juan Ramirez

By Juan Ramirez

The spinoff practitioner s specialist consultant to IFRS nine software

Accounting for Derivatives explains the most likely accounting implications of a proposed transaction on derivatives technique, in alignment with the IFRS nine criteria. Written through a tremendous 4 consultant, this ebook stocks the writer s insights from operating with businesses to minimise the profits volatility impression of hedging with derivatives. This moment variation contains new chapters on hedging inflation chance and inventory thoughts, with new circumstances on distinctive hedging occasions together with hedging elements of commodity threat. This re-creation additionally covers the accounting therapy of specified derivatives events, reminiscent of elevating financing via commodity-linked loans, derivatives on personal stocks and convertible bonds. situations are used largely during the booklet, simulating a selected hedging process from its inception to adulthood following a typical development. assurance contains tools resembling forwards, swaps, cross-currency swaps, and mixtures of ordinary suggestions, plus extra advanced derivatives like knock-in forwards, KIKO forwards, variety accruals, and swaps in arrears.

Under IFRS, derivatives that don't qualify for hedge accounting may perhaps considerably elevate profits volatility. Compliant software of hedge accounting calls for services throughout either the factors and markets, with a suitable stability among derivatives services and accounting wisdom. This publication is helping bridge the divide, offering entire IFRS assurance from a realistic viewpoint. * get to grips with the commonest hedging tools from an IFRS nine point of view * learn FX chance and hedging of dividends, profits, and web resources of overseas subsidies * examine new criteria surrounding the hedge of commodities, fairness, inflation, and international and household liabilities * problem the qualification for hedge accounting because the final goal IFRS nine is determined to exchange IAS 39, and plenty of practitioners might want to regulate their accounting regulations and hedging techniques to comply to the hot regular. Accounting for Derivatives is the one publication to hide IFRS nine particularly for the derivatives practitioner, with specialist suggestions and sensible suggestion.

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Additional info for Accounting for Derivatives: Advanced Hedging under IFRS 9

Sample text

If the natural hedge is not in place at the outset, IFRS 9 would not allow the first financial instrument to be recorded at FVTPL, as it would not eliminate or significantly reduce a measurement or recognition inconsistency. Additionally, to impose discipline, an entity is precluded from reclassifying financial instruments in or out of the fair value category, unless (in the case of financial assets) the business model for those assets changes. , an increase in the market variable would increase the fair value of one of the two items while decreasing that of the other item).

This may be the case when the economic risks and characteristics of the instrument are closely related to the host contract. Example: Investment in an convertible bond An entity invests in a convertible bond. Under the terms of the bond, the entity has the right to convert the bond into a fixed number of shares of the bond’s issuer. From a structuring perspective, the bond can be split between a debt instrument and an equity option. From an accounting perspective, the convertible bond would be classified at FVTPL in its entirety as the conversion right causes the instrument to fail the SPPI test.

The ineffective part represents the hedge ineffectiveness, or in other words, the portion of the change in fair value of the hedging instrument that has not been offset by a change in fair value of the hedged item. It is calculated as the difference between the cumulative change in fair value of the hedging instrument and its effective part. The ineffective part includes specific components excluded, as documented in the entity’s risk management strategy, from the assessment of hedge effectiveness.

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