Derivatives & Hedge Accounting

New York Institute of Finance

How long?

  • 2 days
  • in person, online

What are the topics?

New York Institute of Finance

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Who should attend

  • Corporate accountants
  • analysts
  • regulators
  • auditors and financial engineers

About the course

Understand derivatives and their uses as hedging instruments, specifically how to apply FAS 113 (ASC 815) and amendments to hedge accounting situations.

Prerequisite knowledge:

  • Familiarity of GAAP accounting principles
  • Understanding of time value of money concepts
  • Knowledge of commonly used derivatives for hedging - forwards, futures, swaps and options

CURRICULUM

Day 1

MODULE 1: INTRODUCTION TO DERIVATIVES

  • Nature and Purpose of Derivatives
  • Examples of Common Derivatives
  • Infamous Derivatives Scandals
  • Put and Call Options
  • Forwards and Futures Contracts
  • Interest Rate Swaps

MODULE 2: ACCOUNTING FOR DERIVATIVES

  • Advantages of Hedge Accounting
  • Qualifying for Hedge Accounting
  • Hedging Designations: Fair Value vs. Cash Flow Hedges
  • Firm Commitments vs. Anticipated Transactions
  • Assessing & Documenting Hedge Effectiveness
  • Accounting for Hedge Ineffectiveness

MODULE 3: FAIR VALUE HEDGES

  • Accounting for Fair Value Hedges
  • Impact on Current Period Earnings
  • Exposed Assets & Liabilities as Fair Value Hedges
  • Firm Commitments as Fair Value Hedges
  • Impact of a Discontinued Hedge
  • Documentation Requirements

MODULE 4: CASH FLOW HEDGES

  • Accounting for Cash Flow Hedges
  • Impact on Current Period Earnings
  • Exposed Assets & Liabilities as Cash Flow Hedges
  • Cash Flow Hedges of Forecasted Transactions
  • Impact of a Discontinued Hedge Documentation Requirements

MODULE 5: INTEREST RATE SWAPS

  • Economics of Interest Rate Swaps
  • Interest Rate Swaps as Fair Value
  • Hedges and Cash Flow Hedges
  • Testing for Hedge Effectiveness
  • Valuation Methods for Interest Rate Swaps

Day 2

MODULE 1: INTEREST RATE RISK

  • Interest Rate Futures and Options
  • Cash Flow Hedge of Anticipated Issuance of Debt
  • Cash Flow Hedge of Anticipated Purchase of Securities
  • Cash Flow Hedge of Interest Income using Floor Contract

MODULE 2: FOREIGN CURRENCY HEDGES

  • Foreign Currency Hedges
  • Cash Flow Hedges of Foreign Currency Receivables & Payables
  • Cash Flow Hedge of Foreign Currency Debt
  • Hedging Foreign Currency Debt using Currency Swaps
  • Fair Value Hedge of a Firm Purchase Commitment
  • Cash Flow Hedge of a Forecasted Transaction
  • Hedge of a Net Investment in Foreign Operations

MODULE 3: EMBEDDED DERIVATIVES

  • Identifying Embedded Derivatives
  • Valuing an Embedded Derivative
  • Accounting for Embedded Derivatives
  • Bifurcation Tests
  • Fair Value Option

MODULE 4: EXCEPTIONS & EXCLUSIONS

  • Normal Purchases & Normal Sales Scope Exclusion
  • Insurance Contracts
  • Financial Guarantees
  • Other Scope Exceptions

MODULE 5: CURRENT DEVELOPMENTS & TRENDS

  • Latest Guidance on FAS 133 (ASC 815) Implementations Issues
  • New and Proposed Accounting Standards affecting FAS 133 (ASC 815)
  • Comparisons with IFRS

WHAT YOU'LL LEARN

  • Identify the major types of derivatives used in hedging
  • Describe the basic rules of accounting for derivatives
  • Differentiate between speculation and hedging for accounting purposes
  • Design an effective hedge that qualifies for hedge accounting treatment
  • Explain the impact of derivatives on current period earnings and OCI
  • Describe how a company might assess hedge effectiveness
  • Describe the disclosure requirements for derivatives
  • Describe the nature and purpose of an interest rate swap
  • Account for derivatives used as hedges against interest rate risk
  • Explain the rules for accounting for foreign currency hedges
  • Account for a net investment in a foreign operation
  • Identify and account for embedded derivatives
  • Identify items that qualify for the scope exclusion
  • Discuss emerging issues and recent guidance
  • Describe methods for valuing interest rate swaps
  • Describe the valuation and accounting for a currency swap
  • Identify and account for fair value and cash flow hedges
  • Describe the major causes of recent derivatives scandals

Derivatives & Hedge Accounting at New York Institute of Finance

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