Hedge Accounting
Where to start with Hedge Accounting? Let HedgeStar help!
Hedge accounting can be nuanced and complex, but at HedgeStar, we will help you through the process by offering a full-service solution. You’ll work with experienced professionals who understand your risk management objectives and hedging strategy. With that foundation, we will apply the most advantageous accounting treatments. We handle everything from documentation to effectiveness assessments, periodic valuations, journal entries, and disclosures. We work with you throughout the entire process, answering questions, and generating timely and accurate reports. Whether dealing with interest rates, currencies, or commodities, your satisfaction is our primary objective.
Hedge Accounting Process
Documentation required for accounting purposes
understand risk
management objectives
Hedge
Memo
Effectiveness
Test
Record changes in value of hedge instrument (realized and unrealized)
Record
Results
Prove hedge relationship is “highly effective” to qualify for hedge accounting
Full Service Hedge Accounting
Hedge Designation Memorandum
This documentation is required under prevailing hedge accounting guidance. It provides a blueprint for the hedging program and includes critical information such as a description of the hedge relationships, hedged risk and risk management objective, methods for assessing effectiveness, counterparty credit risk considerations and financial statement impacts.
Effectiveness Test
With the help of powerful valuation and analytics platforms, HedgeStar's team of quantitative analysts provides timely statistical reports to prove that hedges are highly effective at mitigating financial risk. Statistical analyses include but are not limited to regression tests, scenario analysis, synthetic instrument, cash flow or value offset, and value at-risk calculations.
Auditor / Regulator Interface
Interface between HedgeStar and client’s auditor and/or regulator. This includes calls, emails, and documentation. This is also used by clients to streamline burden of interfacing with auditors and regulators about derivative accounting and valuation topics.
Audit Committee / Board / Analyst Presentations
Presentation materials provided by HedgeStar and customized from HedgeStar’s resource library. Then, used by clients to explain their hedge accounting internally and externally.
Recording Results
Accounting experts use system-generated outputs to deliver General Ledger balance ("GL") reports to our client's accounting and financial reporting teams. GL reports show the preferential accounting treatment of hedge accounting along with any amortization of hedged item basis or other comprehensive income adjustments. GL reports also show current and prior period balances so clients can assess the period-over-period change. Accounting experts are on-hand to review and make timely adjustments as necessary.
Additional Hedge Accounting Service
Independent hedge accounting review
Review by HedgeStar of client’s existing hedge accounting. Includes analysis of hedge memos, valuations, effectiveness tests, and ledger balances. Used by clients to evaluate internal or third-party hedge accounting for accuracy and validity.
Hedge Accounting Scenario Analysis
Assessment by HedgeStar of hypothetical hedging and hedge accounting scenarios including valuation of surrogate hedging instruments and hedged item, effectiveness testing and anticipated general ledger impacts. Used by clients to evaluate prospective hedging programs, or to stress test existing hedge programs.
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