Hedge ACCOUNTING

Under most accounting rules, the changes in fair value of a derivative need to be recorded in the P&L as they occur. Entities entering into derivatives or hedging contracts who opt and can qualify to apply hedge accounting can avoid the volatility in their P&L caused by the fluctuations in the value of hedging contracts or derivatives. Under the hedge accounting, the impact of the derivative instrument is recorded at the same time as the item that is being hedged eliminating the volatility of the P&L.

We can help you achieve hedge accounting in a seamless and effective way. This requires careful planning before the hedges are implemented in terms of valuation of hedges, appropriate documentation, and reporting. This also requires ensuring that all stakeholders fully understand the impact of hedges to financial statements with and without hedge accounting.