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The majority of reporting companies manage many of their risks with the use of hedges and derivatives. Given the impacts of these activities on financial statements, this course demystifies the motivations for, and the requirements of hedge accounting.
The course will make use of various real-world examples to explain the types of derivatives used by companies to hedge various risks in their operations. The course will also identify and describe in detail the current rules and accounting methodologies for hedge accounting and the disclosure requirements that must be met by reporting companies.
Training Objectives
By the end of the programme, participants will be able to:
- Understand the reasons why companies hedge
- Construct a successful hedge and use hedge engineering to achieve better results
- Measure hedge effectiveness and ineffectiveness
- Identify and account for the different hedges
- Identify and analyse embedded derivatives
- Determine the appropriate treatment of embedded derivatives under IAS 39 and IFRS 9
- Discuss the latest developments on the macro-hedging standard and interest rate benchmark reforms
Training Outline
IFRS 9 Financial Instruments
- Classification and measurement
- Effective interest method
Derivatives
- Analysis and examples of common derivatives (including options, interest rate swaps, currency swaps, forwards and futures)
- Cash flows
- Variations of ‘standard’ derivative contracts
- Techniques for measuring fair values
- Accounting for derivatives
Embedded Derivatives
- Analysis and examples of embedded derivatives in debt host contracts, equity host contracts, and purchase/sale contracts
- Accounting for embedded derivatives
- Determining how embedded derivatives affect the ‘cash flow characteristics’ test under IFRS 9
- Determining the separation conditions
- Allocating the initial carrying amount to embedded derivatives that are separated
Hedging
- Analysis and examples of common hedging relationships
- Hedged items
- Hedging instruments
- Definition and mechanics of fair value, cash flow and net investment hedges
- Examples (commodity contracts, interest rate and forex risk exposures)
Hedge accounting (IAS 39)
- Measuring and testing hedge effectiveness
- Measuring and accounting for hedge ineffectiveness
- Discontinuation of hedge accounting
IFRS 9 Hedge Accounting
- Overview of the hedge accounting framework
- Alignment with risk management policies
- Hedge documentation
- Hedged items
- Hedging instruments
- Effectiveness assessment and rebalancing
- Recording hedge effectiveness
- Group and net positions
- Transitional issues and disclosures
Presentation and Disclosures (IFRS 7)
Course Closure
Who Should Attend?
The programme is ideal for:
- Accountants in an investment bank or treasury operation/internal audit in a bank
- Individuals working in non-banking entities where they are considering hedge accounting for the first time
- Industry controllers, external auditors, analysts, and other finance professionals who are interested in learning about derivatives and hedge accounting
Industry Expert | Marios Mortis
Marios Mortis holds a bachelor’s degree in Business Administration in Accounting, a Master’s in Banking and Finance, and he is a qualified member of Association of Certified Chartered Accountants (ACCA). Marios has developed and conducted professional training courses on corporate reporting, Accounting and Finance, and Financial Workshops. He had, also, participated to researches on the area of finance and accounting in both academic and professional level. He has a working experience in the accounting, audit, advisory, assurance and banking sectors in various positions and companies in Cyprus. During last 4 years Marios continued his path in the education field which is a challenging and interesting field for him.
He currently works as a Visitor Academic for a local University in Cyprus, where he is teaching courses such as Corporate Governance and Business Ethics, Corporate Finance, Corporate Risk Management and Audit and Assurance. He also holds the position of Trainer & Accountancy Programmes Leader for a local institute where among others he is teaching many courses of various accountancy qualifications, such as the Cash and Treasury Management, Credit Management, Governance, Ethics, and Risks, Management Accounting, and Indirect Tax.
Training Style
- Illustration of key terms and concepts
- Preparation and discussion of practical examples, including mini cases
- The course will have both a theoretical and practical framework with real examples drawn from actual companies, local and international
CPD Recognition
This programme may be approved for up to 7 CPD units in Accounting & Auditing. Eligibility criteria and CPD Units are verified directly by your association, regulator or other bodies which you hold membership.
