Akuntansi
Akuntansi
Derivatif dan Hedging
Direktorat Jenderal Pengelolaan Utang
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Agenda
Agenda
Latar Belakang
1.
Akuntansi
2.
Standar Akuntansi
3.
4
Ilustrasi Transaksi
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Derivative Securities
e
at e Secu t es
Latar Belakang
Market risks
Market risks
commodity price risk
interest rate risk
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Derivative Securities
Derivative Securities
H e dge s
adalah kontrak yang melindungi dari risiko
pasar – misalnya forward options and swaps
pasar – misalnya, forward, options, and swaps.
De rivat ive se c urit ie s, or sim ply de rivat ive s
,
adalah kontrak yang nilainya diturunkan dari nilai
adalah kontrak yang nilainya diturunkan dari nilai
aset lain atau item ekonomi tertentu – saham/stock,
bond, commodity price,
interest rate, or currency exchange rate
Sulit untuk mencari derivatif yang benar-benar
dapat melindungi diri dari risiko.
Ri ik
Æ
k tid k
ti
di
d t
Risiko
Æ
ketidakpastian di masa mendatang
Melindungi dari risiko = memastikan
ketidakpastian.
Kontrak lindung nilai memiliki risiko
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Derivative Financial Instruments
Derivative Financial Instruments
A derivative is a financial instrument that meets the
following three criteria:
following three criteria:
Its value changes
in response to a
Requires little or
Settled at a future
in response to a
change in an
“underlying”
Settled at a future
date
no initial
investment
Scope Exemption:
IAS 39:5 exempts contracts which meet the definition of a
IAS 39:5 exempts contracts which meet the definition of a
derivative from the standard if the contract is entered into
to meet the entity’s usual purchase, sale or usage
Tan & Lee Chapter 9 ©2009 6
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Derivative Securities
Instrumen keuangan atau kontrak lain
dengan karakteristik:
Nilainya berubah akibat dari perubahan
variabel yg mendasari (spt suku bunga harga
variabel yg mendasari (spt suku bunga, harga,
nilai tukar, dll).
Tanpa investasi awal neto atau nilainya lebih
k
il d i il i k
t k
j
i
b i
kecil dari nilai kontrak sejenis yang memberi
pengaruh yang sama thd perubahan faktor
pasar.
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Klasifikasi Derivatif
Klasifikasi Derivatif
F
t
di
d i
tif
(
ti
Freestanding derivatif
(option,
forward contract, swap, future
t
t)
contract)
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Derivative Financial Instruments
Derivative Financial Instruments
Example of derivative instruments and their underlying
Types of derivative
instruments
Underlying
Used by
Option contracts
Security price
Producers trading firms
Option contracts
(call and put)
Security price
Producers, trading firms,
financial institutions, and
speculators
F
d
t
t
F
i
V i
i
Forward contracts
e.g. foreign exchange
forward contract
e.g. commodity futures
Commodity
prices
Producers and
consumers
Swaps
Interest rate
Financial institutions
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Derivative Securities
Derivative Securities
Derivatives
e
at es
Hedge
Speculative
Speculative
Fair Value
Hedge
Cash Flow
Hedge
Foreign
Currency
Hedge
Hedge
Currency
Hedge
Fair Value
Hedge
Hedge of Net
Investment in
Foreign
O
ti
Cash Flow
Hedge
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Derivative Financial Instruments
Derivative Financial Instruments
•
Use of derivatives
1.
Manage market risk
2.
Reduce borrowing cost
3.
Profit from trading or speculation
•
Types of derivatives
1
For ard t pe deri ati es s ch as for ard contracts f t re
1.
Forward type derivatives such as forward contracts, future
contracts and swaps
2.
Option-type derivatives such as call and put options, caps and
collars and warrants
collars and warrants
3.
Free standing derivatives
4.
Embedded derivatives
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Forward Contracts
Forward Contracts
•
An agreement between two parties (counterparties) whereby one
An agreement between two parties (counterparties) whereby one
party agrees to buy and the other party agrees to sell a specified
amount
(notional amount) of an item at a fixed price
(forward rate)
for delivery at a specified future date
(forward date)
•
Can either be a forward purchase contract or a forward sales
contract, depending on the perspective of the counterparties
contract, depending on the perspective of the counterparties
Sells Forward
“A” Company Contract “B” Company
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Forward Contracts
Forward Contracts
•
Not standardized contracts as they are not traded on an
exchange
exchange
–
They entail counterparty risks
–
They are can be tailored to specific needs of counterparties
–
They involve lower transaction costs
They involve lower transaction costs
•
Fair value of forward contract:
Notional x (׀Current forward rate – contracted forward rate ׀) Notional
amount x (1+r)t
where
Contracted forward rate is forward rate r = discount rate Contracted forward rate is forward rate
fixed at inception
Current forward rate is forward rate for remaining period to maturity
r discount rate
t = period to maturity
Tan & Lee Chapter 9 ©2009 14
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Future Contracts
Future Contracts
•
A future contract is similar to a forward contract except that it is a
A future contract is similar to a forward contract except that it is a
standardized contract and is traded on an exchange
•
Futures contracts are marked-to-market and settled on a daily basis
•
Futures contracts are marked-to-market and settled on a daily basis
•
Futures contracts require payment of a margin deposit which has to
be maintained throughout the contract period
•
Wide range of exchange-traded future contracts
– Commodity futures– Interest rate futures
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Option Contracts
Option Contracts
•
Contract that gives holder
Contract that gives holder the right but not the obligation
the right
but
not the obligation
to buy or
to buy or
sell a specified item
at a specified price
•
2 type of option contracts
•
2 type of option contracts
1. Call option – right, but not obligation to buy
2. Put option – right, but not obligation to sell
•
Can be American option (exercisable anytime to expiration) or
European option (exercisable only on maturity date)
•
Can also be customized (not traded) or standard contract quoted on
exchange (listed options)
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Option Contracts
Option Contracts
•
Main features
Main features
– Purchaser (holder) pays premium to seller (writer of option)
– Holder has the right, but not obligation to perform; while write has obligation to performg p
– Asymmetrical pay-off profile
• Holder has limited loss (due to premium) and unlimited gain • Writer has limited gain and unlimited lossg
Relationship between the strike price and the underlying
Strike price> Underlying
Strike price> Underlying
Strike price> Underlying
Holder of call option
Out-of-the-money At-the-money In-the-money
Holder of put option
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Option Contracts
Option Contracts
•
Fair value of option contract
Fair value of option contract
Fair value of an option = Intrinsic value + Time value
Diminishes over time Listed options = quoted price
Not traded options = Valuation
Zero at expiration Not traded options = Valuation
model ( Black-Scholes model)
Call option = Max [0, Notional amount x (Spot price – Strike Price) Put option = Max [0, Notional amount x (Strike price – Spot Price)
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Embedded Derivatives
Embedded Derivatives
•
Derivative that is part of a hybrid financial instrument
Derivative that is part of a hybrid financial instrument
Host Instrument
Hybrid Instrument
Host Instrument
Embedded derivative:
Linked to underlying and change in Linked to underlying and change in underlying causes change in cash flow
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Split Accounting of Embedded Derivatives
Split Accounting of Embedded Derivatives
•
IAS 39 requires embedded derivatives to be separately recognized
IAS 39 requires embedded derivatives to be separately recognized
from the host instrument and accounted for in the same way as a
stand-alone derivative if the following conditions are met:
Conditions for separation of embedded derivative
Economic
characteristics and risk of host instrument are
Hybrid instrument is not measured at fair value,
with changes in fair There is a separate
instrument with same of host instrument are
not closely related to that of the derivative
with changes in fair value recognized in
profit and loss terms as the embedded
derivative
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Accounting for Derivatives
Accounting for Derivatives
Default accounting treatment for derivatives under IAS 39:
•
Derivatives are classified under the Fair Value through Profit or
Loss category and changes in their fair values are taken to income
Loss category and changes in their fair values are taken to income
statement
•
Exception - when a derivative is designated as a hedge of an
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Accounting for Forward Contract
Accounting for Forward Contract
At inception During life of contract Closing position or At inception During life of contract Closing position or
at expiration
Dr Forward Contract
(asset) Dr Cash
No journal entry as
(asset)
Cr Gain on forward contract
or
Cr Forward contract
j y
fair value is nil
Dr Loss on forward contract
Cr Forward Contract or
Dr Forward contract
Cr Cash (liability)
Adjust fair value and Close out and record Cr Cash
Tan & Lee Chapter 9 ©2009 22
j
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Accounting for Future Contract
Accounting for Future Contract
At inception During life of contract Closing position or At inception During life of contract Closing position or
at expiration
Cr Margin Contract Dr Margin deposit
Dr Loss on futures contract Cr Margin Contract
Record payment of y
settlement of future contracts
margin deposit p y
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Purchased Option Contract
Purchased Option Contract
At inception During life of contract Closing position or At inception During life of contract Closing position or
at expiration
Dr Option Contract
Cr Gain on future Dr Cash*Dr Gain on option Cr Gain on future
contract
or
Dr Gain on option contract
Cr Option Contract Dr Option contract
(asset)
Dr Loss on futures contract
Cr Option Contract or
Adjust for fair value Close out and record Cr Option Contract
Record payment of
(* assume expires in-the-money)
Tan & Lee Chapter 9 ©2009 24
j
and record gain/loss net settlement of contract
p y
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Written Option Contract
Written Option Contract
At inception During life of contract Closing position or At inception During life of contract Closing position or
at expiration
Dr Option Contract
Cr Gain on future Dr Option contractCr Gain on Option Cr Gain on future
Cr Option contract
(Expires out-of-the-money)
Dr Loss on futures contract
Cr Option Contract or
Dr Option contract Dr Loss on option Cr Cash
Cr Option contract (liability)
money)
p
Adjust for fair value Close out and record Record payment of
(Expires in-the-money)
j
and record gain/loss net settlement of contract
p y
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Hedging
Hedging
•
Propose is to neutralize an exposed risk
Propose is to neutralize an exposed risk
– Loss on hedge item offset by gain on hedging instrument
– Reduce volatility than preserve gains
•
Other ways of hedging through non-derivative derivatives
– Money market instruments (money market hedge)Natural hedge (offsetting foreign currency assets and liability in the
– Natural hedge (offsetting foreign currency assets and liability in the same currency)
•
Special accounting rules called “hedge accounting” applies when
•
Special accounting rules called hedge accounting applies when
derivatives are used for hedging purposes
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Rationale of Hedge Accounting
Rationale of Hedge Accounting
•
Arises because of the mismatch of income-offsetting effect between
Arises because of the mismatch of income offsetting effect between
hedged item and hedging instrument
•
Situations requiring hedge accounting
•
Situations requiring hedge accounting
– Hedge item and hedging instrument are measured using different bases (One is at cost while the other is at fair value)
– Hedged item yet to be recognized in financial statementHedged item yet to be recognized in financial statement
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Risks That Qualify for Hedge Accounting
Risks That Qualify for Hedge Accounting
Specific risks
Interest rate risk Spec c s s Price risk
that qualify for hedge accounting
Foreign exchange risk Credit risk
Risks must be specific risk, not general business risks
Possible for a derivative to hedge more than one risk
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Qualifying Hedging Instruments
(IAS 39: 72 – 73)
•
Instruments that qualify include:
D
i
t d d i
ti
(
t
itt
ti
)
–
Designated derivatives (except written options)
–
Embedded Derivatives
–
Designated non-derivatives financial asset/ liability that hedge
f
i
h
i k
l
foreign exchange risks only
•
Value used to determine hedge effectiveness
–
If used in its entirety, fair value is used
–
If broken into time value and intrinsic value, permissible to use
intrinsic value. However, it must be explicitly documented at
inception
•
If derivative is used as a hedge of more than 1 risk
–
Individual designated component must meet hedge accounting
criteria
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Qualifying Hedged Items
y g
g
(IAS 39: 78 -79)
Qualify Do not qualify
• Financial assets and liabilities with exposure to changes in fair value
• Held-to-maturity instruments (regardless of fixed rate or variable rate)
value
• Non-financial assets exposed to foreign exchange or price risks
variable rate)
• Investment in an associated company
• Firm commitment
• Highly probable forecast g y p
transaction with exposures to future cash flows
• Net investment in foreign entity
Tan & Lee Chapter 9 ©2009 30
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Criteria for Hedge Accounting
(IAS 39 88)
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(IAS 39: 88)
C
diti
t b
t f
h d
ti
t
l
Enterprise must have exposure to risk that affects income
Conditions to be met for hedge accounting to apply
statement
Derivative contract specifically entered to hedge underlying exposure
exposure
Hedge must be highly effective
Effectiveness of hedge can be reliably measured Effectiveness of hedge can be reliably measured
Hedging relationship must be formally documented at the inception of the hedge
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Assessing Hedge Effectiveness
Assessing Hedge Effectiveness
•
IAS 39:9 - The degree to which changes in the fair value or cash
IAS 39:9 The degree to which changes in the fair value or cash
flows of the hedged item that is attributable to a hedged risk are
offset by changes in the fair value or cash flow of the hedging
instrument
•
Hedge effectiveness is evaluated
– Prospectively on inception of hedge; and
– Retrospectively on an ongoing basisp y g g
•
On inception, hedge effectiveness is assessed on
– Comparison of the principal or critical terms– Historical analysisHistorical analysis
– Correlation analysis
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Efektivitas Hedging
Efektivitas Hedging
Efektifitas dihitung secara prospektif dan
Efektifitas dihitung secara prospektif dan
retrospektif
H
il kt
l b
d d l
ki
80
Hasil aktual berada dalam kisaran 80
-125%
Seluruh lindung nilai yang tidak efektif
diakui dalam laporan L/R (termasuk
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Efektivitas Hedging
Efektivitas Hedging
Risks must be identifiable
Risk must be foreseeable
Risk must be realistically measured
y
Precise attribution of hedging instrument to
hedged item
g
Reason:
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Kriteria & Dokumentasi
Kriteria & Dokumentasi
Kriteria
Tdpt kebijakan tertulis, tujuan manajemen risiko &
strategi lindung nilai.
H b
li d
il i dih
k
f ktif tk
li
Hubungan lindung nilai diharapkan efektif utk saling
menghapuskan perubahan nilai wajar.
Dokumentasi
Dokumentasi
Identifikasi hedged items vs hedging instruments.
Sifat risiko yang dilindungi
Sifat risiko yang dilindungi
Strategi manajemen risiko dan lindung nilai
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Assessing Hedge Effectiveness
Assessing Hedge Effectiveness
•
During the duration of hedge, hedge effectiveness is assessed on
During the duration of hedge, hedge effectiveness is assessed on
dollar-offset method:
•
Hedge effectiveness ratio (HER):
Hedge effectiveness (or delta ratio) =
Changes in fair value or future cash flow of hedging instrument Changes in fair value or future cash flow of hedged item
0 8 1 2
0.8 1.25
•
Exceptions for effective hedge even if HER falls out of range
– IAS 39 allows hedge effectiveness to be assessed on cumulative basis Effective hedge (IAS 39: AG 105b)
S 39 a o s edge e ect e ess to be assessed o cu u at e bas s if hedge is designated and conditions are properly documented
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Assessing Hedge Effectiveness
Assessing Hedge Effectiveness
•
Exclusion of time value of certain derivatives to be excluded from
Exclusion of time value of certain derivatives to be excluded from
hedge relationship
– Derivative separated into 2 component
1. Time value (options) or interest (forwards) 1. Time value (options) or interest (forwards) 2. Intrinsic (options) or spot element (forwards)
– Excluded time value taken to income statement as per default treatment
– Should result in highly effective hedge, as intrinsic/ spot componentShould result in highly effective hedge, as intrinsic/ spot component moves in tandem with underlying, while time/interest component does not
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Classification of Hedging Relationships
Classification of Hedging Relationships
Causes Explanation
Hedge of “the exposure to changes in fair value of a Hedge of the exposure to changes in fair value of a recognized asset or liability or an unrecognized firm
commitment, or an identified portion of such asset, liability or firm commitment, which is attributable to a particular
i k d ld ff t fit l ” (IAS 39 86 )
Fair value hedge
risk and could affect profit or loss” (IAS 39:86a)
Hedge of “the exposure to variability in cash flows that (i) is attributable to a particular risk associated with a
i d t li bilit ( h ll f t
Cash flow
recognized asset or liability (such as all or some future interest payment on variable debt instrument )or a highly probable future transaction, and
(ii) could affect profit or loss” (IAS 39:86b)
hedge
( ) p ( )
Hedge of a net investment in a
f i tit
Hedge of the foreign currency risk associated with a
foreign operation whose financial statements are required to be translated into the presentation currency of the
Tan & Lee Chapter 9 ©2009 38
foreign entity to be translated into the presentation currency of the
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Classification of Hedging Relationships
Classification of Hedging Relationships
•
The designation of a derivative as a fair value hedge or a cash flow
The designation of a derivative as a fair value hedge or a cash flow
hedge is determined by the hedged risk, that is, whether the entity
has a fair value exposure or a cash flow exposure
•
An exception where a derivative can be designated as either a fair
value hedge or a cash flow hedge is where the hedged risk is the
foreign exchange risk of a firm commitment
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Accounting for a Fair Value Hedge
Accounting for a Fair Value Hedge
Hedged Item (recognized asset
or liability or firm commitment) Hedging Instruments
Income statement
Gain (loss) on hedging instrument
Change in fair value Change in fair value
Gain (loss) on hedging instrument offset loss (gain) on hedged item
Balance sheet
Change in fair value adjusted against carrying amount
Change in fair value adjusted against carrying amount
Tan & Lee Chapter 9 ©2009 40
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Illustration 1:
Hedge of inventory (fair value
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Hedge of inventory (fair value
hedge)
Scenario
Scenario
31/10/20x3
Inventory of 10,000 ounces of gold
Carried at cost of $3 000 000 ($300 per ounce) Carried at cost of $3,000,000 ($300 per ounce) Price of gold was $352 per ounce
1/11/20x3
Sold forward contract on 10 000 ounce for forward price of $350 ounce Sold forward contract on 10,000 ounce for forward price of $350 ounce Forward contract matures on 31/3/20x4
31/12/20x3
F d i f 31/3/20 4 t t $340 d t i Forward price for 31/3/20x4 contract was $340 per ounce and spot price
of gold was $342 per ounce
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Illustration 1:
Hedge of inventory (fair value
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Hedge of inventory (fair value
hedge)
1/11/20x3
1/11/20x3
No entry or just a memorandum entry as the fair value of the forward
contract is nil
31/12/20 3
31/12/20x3
Dr Forward contract ………. 100,000
Cr Gain on forward contract ……... 100,000
C Ga o o a d co t act 00,000
Gain on forward contract: 10,000 x ($340 -$350)
Dr Loss on inventory 100 000
Taken to income statement
Dr Loss on inventory ……… 100,000
Cr Inventory ……….. 100,000 Gain on forward contract: 10,000 x ($342 - $352)
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Illustration 1:
Hedge of inventory (fair value
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Hedge of inventory (fair value
hedge)
31/3/20x4
Inventory is sold to third-party at $330 per ounce (also maturity date of
y
p
y
$
p
(
y
forward contract
Dr Forward contract ………. 100,000
Cr Gain on forward contract 100 000 Cr Gain on forward contract ……... 100,000 Gain on forward contract: 10,000 x ($330 -$340)
Dr Loss on inventory 120 000 Dr Loss on inventory ……… 120,000
Cr Inventory ……….. 120,000 Gain on forward contract: 10,000 x ($330 - $342)
Dr Cash ……….. 3,300,000
Cr Sales ………. 3,300,000 Sale of inventory: 10 000 x $330
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Accounting for a Cash Flow Hedge
Accounting for a Cash Flow Hedge
Effective Cash Flow Hedge (IAS
39:95)
39:95)
Effective portion
of gain/ loss
Ineffective portion
of gain/ loss
Recognized
directly in equity
through statement
Recognized in profit
or loss
of changes in
equity
or loss
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Accounting for a Cash Flow Hedge
Accounting for a Cash Flow Hedge
Cash flo
hedges are applicable to the follo ing
Cash flow hedges are applicable to the following:
Forecasted
Forecasted
transactions
involving financial
d
fi
i l
Other
transactions
I t
t
t
and non-financial
assets/liabilities
which will result
which affect
future
cash flows
Interest rate
swaps
in cash inflow/
outflow
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Effective and ineffective portions
Effective and ineffective portions
Scenario
1/1/20 1
1/1/20x1
Entered into futures contract to hedged forecast transaction at
30/4/20x1
Classified as cash flow hedge
Period
ending
∆
in fair value
of future contracts
∆
in present value of
expected future cash
ending
of future contracts
expected future cash
flow
31/1/20x1
$100
$(105)
28/2/20x1
90
(80)
31/3/20x1
103
(105)
30/4/20x1
(38)
45
Tan & Lee Chapter 9 ©2009 46
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Illustration 2:
Effective and ineffective portions of a
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Effective and ineffective portions of a
cash flow hedge
Determination of effective and ineffective portions of a cash flow hedge
Cumulative Cumulative in current ending (a) (b) (c) ( period
31/1/20x1 $100 $(105) $100 $100 $0
28/2/20x1 190 (185)( ) 185 85 5
31/3/20x1 293 (290) 290 105 (2)
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Hedge of a Net Investment
i
F
i
E tit
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in a Foreign Entity
•
Hedge risk is foreign exchange risk
Hedge risk is foreign exchange risk
– Applies to foreign operations whose functional currencies are the currencies of the country where the foreign operations are located
– Closing rate method may result in significant translation loss from g y g depreciating currencies
•
Accounting treatment similar to cash flow hedge
g
g
Hedge effectiveness= Cumulative change in fair value of hedging instrument (A) Cumulative translation difference on net investment (B)
– Hedge is effective if the delta ratio is between 0.8 and 1.25.
– Unlike a fair value hedge or a cash flow hedge, a non-derivative is allowed to be the hedging instrument for example a foreign currency allowed to be the hedging instrument, for example, a foreign currency loan.
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Hedge of a Net Investment in a Foreign Entity
g
g
y
Scenario
Scenario
Functional currency is the dollar ($)
Acquired 100% interest in foreign company (functional currency is FC)
31/12/20x3
Exchange rate is $1.85 to FC1
Loan of FC1 200 000 at 5% interest taken to hedge foreign investment Loan of FC1,200,000 at 5% interest taken to hedge foreign investment Foreign currency translation reserves showed $15,000 (credit balance)
31/12/200
31/12/200x4
Exchange rate is $1.70 to FC1 Average rate is $1.78 to FC1
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Hedge of a Net Investment in a Foreign Entity
g
g
y
Translation difference in foreign investment’s FS for 31/12/20x4
On net assets on 1/1/20x4 (FC 1,200,000 x $(1.70-1.85) ……. $(180,000) On net profit for 20x4 (FC380,000 x $(1.70-1.85) ……….. (30,400) Translation loss for 20x4 $(210,400) Foreign currency translation reserves (credit balance) (195,400)
Journal entries for parent
31/12/20x3
Dr Cash 2 200 000
Dr Cash ……….. 2,200,000
Cr Loan payable ………... 2,200,000 The loan payable is designated as a hedge of the net investment: FC1 200 000 t t f $1 85
Tan & Lee Chapter 9 ©2009 50
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Hedge of a Net Investment in a Foreign Entity
Hedge of a Net Investment in a Foreign Entity
31/12/20x4
Dr Interest expense ……….p 106,800,
Cr Accrued interest ……….. 106,800 Interest expense during the year at 5% x FC1,200,000 x $1.78
Dr Accrued interest ……….. 106,800
Cr Cash ……….. 102,000
Cr Exchange gain 4 800 Taken to equity t ff t Cr Exchange gain ………. 4,800
Settlement of accrued interest at year-end
Dr Loan payable ………... 180,000
to offset
translation loss
Dr Loan payable ………... 180,000 Cr Foreign currency translation
reserves ………
180,000
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Discontinuation or Termination
of Hedge Accounting
Consideration for discontinuation or termination of hedge accounting
Hedging instrument has reached maturity date or is closed off or
Hedge designation is revoked
Criteria for hedge accounting date or is closed off or
terminated
is revoked is no longer met
Accounting treatment depends on type of hedge
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Evaluation of Hedge Accounting
Evaluation of Hedge Accounting
•
Objective of hedge accounting
Objective of hedge accounting
– Reflect effectiveness of hedging activities of a firm
– Reduce volatility of reported earnings