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Accounting for Derivatives and Hedging Activities by Frank J. Beil

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CHAPTER 1

Financial Reporting Implications

About This Chapter

Derivative instruments are very useful risk management tools that can be used by companies to effectively manage the financial and operating risks that all firms face in uncertain business environments. The deployment of these financial instruments, when used properly, will allow managers to more accurately predict their financial and operating performance and better manage the investment communities “expectations” regarding overall firm performance. Derivative instruments are very effective at hedging price or market risk, interest rate risk, and foreign exchange risk.

Our focus in this chapter is to gain an understanding of the accounting implications on the company’s financial statements ...

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