Hedge Accounting

 

Understanding Hedge Accounting

Hedge accounting matches changes in the hedge’s value against those of the hedged item on the balance sheet, thus eliminating earnings volatility.

The ASC 815 accounting rules require strict documentation and reporting requirements for hedge accounting.  Improper application of these rules can lead to potential restatements.

The accounting standards can seem overwhelming, especially if you are unfamiliar with hedge accounting principles.  DerivGroup can help you take the steps necessary to comply with them and eliminate any potenital negative effects of your hedging.

Person reviewing financial market trends and mark-to-market adjustments, illustrating valuation of derivatives in hedge accounting
Analyst revising financial strategy on a whiteboard, illustrating hedge re-designation under FASB guidelines

DerivGroup Hedge Accounting Solutions

Outsourcing your hedge accounting and valuation services to DerivGroup will let you navigate the complex standards and stay ahead of ever-changing requirements.  Our comprehensive services ensure compliance and favorable accounting treatment for your derivative transactions.

Our Hedge Accounting Services Include:

  • Initial Hedge Designation Documentation Effectiveness Testing
    Documenting initial hedge relationships and performing effectiveness testing to ensure alignment with accounting standards.
  • Ongoing Valuation and Testing
    Periodic valuation and ongoing effectiveness testing.  Production of journal entries.  Billing inquiries and resolution.
  • Record keeping & Documentation Maintenance
    Maintaining accurate journal entries, managing ongoing documentation, and setting up a 5-year documentation retention program.

Expert Valuation Services

In addition to hedge accounting, DerivGroup offers expert valuation services. Our valuations act as a check on bank statements and include calculations of future hypothetical values based on various “what-if” rate scenarios and potential market movements.

By outsourcing these services to DerivGroup, you can reduce the burden of compliance, and make informed, accurate financial decisions with the support of industry-leading expertise.

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Team analyzing financial data together on a screen, demonstrating DerivGroup’s expert valuation services for hedge accounting

Free Consultation: Accounting and Valuation

DerivGroup partners with clients to deliver tailored hedge accounting solutions for any hedge program.

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Key Accounting Services We Provide:

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Mark-to-Market Valuations

Marking-to-market (fair value) involves the regular measurement of a derivative’s value, and then the recording of this value in the company’s books.  DerivGroup can provide you accurate third-party valuations.

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Hedge Accounting Entries

Proper Hedge Accounting will eliminate hedges’ changes in value from affecting the income statment.  DerivGroup’s hedge accounting services will provide you more stable financials.

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Terminations and Re-designations

Terminating or re-designating a swap or cap will affect both your balance sheet and income statement.  DerivGroup will make sure you make the proper accounting entries.