Wiley GAAP 2013: Interpretation and Application of Generally Accepted Accounting Principles

CHAPTER 10

DERIVATIVES AND HEDGING

Perspective and Issues

Definitions of Terms

Concepts, Rules, and Examples

Financial Instruments

Types of financial assets

Exclusions

Derivative Financial Instruments

Accounting for Derivatives and Hedging Transactions per ASC 815: An Overview

Underlying principles

Contracts not subject to ASC 815

Embedded derivative instruments

Hybrid financial instruments

Hedging Activities—General Requirements

Overview

Effectiveness—general observations

Fair Value Hedges

Qualifications

Reporting gains and losses from fair value hedges

Measuring the effectiveness of fair value hedges

Discontinuance of a fair value hedge

Ineffectiveness of a fair value hedge

Impairment considerations for hedging and hedged items

Cash Flow Hedges

Qualifications

Gains and losses from cash flow hedges

Reclassifications to earnings

Effectiveness of cash flow hedges

Discontinuance of a cash flow hedge

Ineffectiveness of a cash flow hedge

Impairment

Expanded application of interest rate hedging

Foreign Currency Hedges

Foreign currency net investment hedge

Foreign currency unrecognized firm commitment hedge

Foreign currency available-for-sale security hedge

Foreign currency–denominated forecasted transaction

Using certain intercompany derivatives as hedging instruments in cash flow hedges of foreign currency risk in the consolidated financial statements

Other guidance on accounting for financial instruments

Organizations That Do Not Report Earnings

Summary of Accounting for Hedges