Hedge Accounting

Implement Hedging strategies with confidence, improve P&L volatility & protect your balance sheet

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Derivatives used to hedge underlying exposures to market risk (such as interest rate, foreign exchange, commodity price) are valued at FVTPL. The volatility of derivatives can cause adverse movements in fair values and cash-flows which can severely impact reported earnings. In extreme circumstances, they can cause entities to breach loan covenants and financial ratios can have disastrous consequences for the entity.

The solution is Hedge Accounting

Hedge Accounting helps to reduce profit and loss volatility and protects balance sheet valuations. It enables key stakeholders to better understand the true performance of an entity, by minimising the accounting impact of derivatives on the financial statements.

In an environment when CFOs are asked to do more with less, outsourcing Hedge Accounting to a trusted specialist can provide peace of mind that optimal accounting results will be obtained, particularly at audit time where hedge accounting is often scrutinised and financial instrument disclosures requirements are exhaustive.

At Rochford, we provide invaluable Hedging solutions and align your commercial hedging strategy with the appropriate accounting standards to ensure your company’s financial performance is not adversely affected.

Our in-depth experience of financial risk enables us to provide:

  • Optimal Hedge accounting to reduce profit and loss volatility & protect balance sheet valuation
  • IFRS 9 interpretation & guidance
  • Hedge effectiveness testing/insights, and support with audit queries
  • Credit risk adjustments (CVA & DVA) to mark-to-market (MTM) valuations
  • Fin. stat disclosures & commentary for audit/risk committee reports
  • Accurate analysis & reporting for monthly/year-end deliverables
  • Unbiased recommendations on Hedge system upgrades

As a specialist skill set, hedge accounting is often additional workload taken on by CFOs, who may not have the relevant or appropriate experience in this area. Therefore, outsourcing hedge accounting can reduce fixed costs and minimise key-man risk. We can also work to improve your operational efficiencies, compliance & governance, and educate your team to improve internal capabilities going forward.

Hedge Accounting Insights

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