Accounting for Derivatives

Contents Preface 1 The Theoretical Framework EU's IAS 39 versus IASB's IAS 39 US Gaap FAS 133 * Accounting Categories for Financial Assets and Liabilities Financial Assets Categories 2 An Introduction to the Derivative Instruments 3 Hedging Foreign Exchange Risk Case 3.1 Hedging a Highly Expected Foreign Sale with a Forward Case 3.2 Hedging a Highly Expected Foreign Sale with a Tunnel Case 3.3 Hedging a Highly Expected Foreign Sale with a Participating Forward Case 3.4 Hedging a Highly Expected Foreign Sale with a Knock-In Forward Case 3.5 Hedging a Highly Expected Foreign Sale with a KIKO Forward Case 3.6 Hedging a Highly Expected Foreign Sale with a Range Accrual Forward Case 3.7 The Treasury Centre Challenge Case 3.8 Hedging Forecast Intragroup Transactions 4 Hedging Foreign Subsidiaries Case 4.1 Hedging Intragroup Foreign Dividends Case 4.2 Hedging Foreign Subsidiary Earnings Case 4.3 Accounting for Net Investments in Foreign Operations Case 4.4 Net Investment Hedge using a Forward Case 4.5 Net Investment Hedge using a Cross-Currency Swap Case 4.6 Net Investment Hedge using Foreign Currency Debt Case 4.7 Hedging of an Investment in a Foreign Operation 5 Hedging Interest Rate Risk Case 5.1 Hedging a Floating-Rate Liability using an Interest Rate Swap Case 5.2 Hedging a Floating-Rate Liability using a Zero-Cost Collar Case 5.3 Calculations and Implications of Interest Accruals Case 5.4 Hedging a Fixed-Rate Liability with an Interest Rate Swap Case 5.5 Hedging a Future Fixed-Rate Bond Issuance with a Swap Case 5.6 Hedging a Future Floating-Rate Bond Issuance with a Swap Case 5.7 Hedging a Fixed-Rate Liability with a Swap In-Arrears Case 5.8 Hedging a Floating-Rate Liability with a European KIKO Collar 6 Hedging Foreign Currency Liabilities Case 6.1 Hedging a Floating-Rate Foreign Currency Liability using a Receive- Floating Pay-Floating Cross-Currency Swap Case 6.2 Hedging a Fixed-Rate Foreign Currency Liability using a Receive-Fixed Pay-Fixed Cross-Currency Swap Case 6.3 Hedging a Fixed-Rate Currency Liability using a Receive-Fixed Pay-Floating Cross-Currency Swap Case 6.4 Hedging a Floating-Rate Foreign Currency Liability using a Receive-Floating Pay-Fixed Cross-Currency Swap 7 Hedging Equity Risk Case 7.1 Accounting for a Stock Lending Transaction Case 7.2 Measurement of a Mandatory Convertible Bond Case 7.3 Measurement of a Convertible Bond Case 7.4 Hedging Step-Up Perpetual Callable Preference Shares Case 7.5 Base Instruments Linked to Debt Instruments Case 7.6 Hedging an Available-for-Sale Investment with a Put Option Case 7.7 Parking Shares through a Total Return Swap Case 7.8 Hedging an Equity-Settled Options Plan with an Equity Swap 8 Hedging Commodity Risk Case 8.1 Hedging a Commodity Firm Commitment with a Forward Case 8.2 Hedging a Commodity Inventory with Futures Case 8.3 Hedging a Highly Expected Purchase with Futures 9 Hedge Accounting: A Double Edged Sword References Index