Market Pricing of SFAS 133 Cash Flow Hedge Accounting and U.S. Multinationals' Derivatives Use

2008 ◽  
Author(s):  
Stephen D. Makar ◽  
Li Wang ◽  
Pervaiz Alam
Keyword(s):  
Cash Flow ◽  
Market Pricing ◽  
Hedge Accounting ◽  
Sfas 133

scholarly journals A administração do lucro contábil e os critérios para determinação da eficácia do hedge accounting: utilização da correlação simples dentro do arcabouço do sfas nº 133

2003 ◽  
Vol 14 (31) ◽  
pp. 16-25
Author(s):  
Alexsandro Broedel Lopes ◽  
Nelson Seixas dos Santos
Keyword(s):  
Ad Hoc ◽  
Hedge Accounting ◽  
Sfas 133

O hedge accounting constitui inovação relevante introduzida pelo SFAS 133. Dentro desse critério, operações designadas como hedge deverão ter seus resultados diferidos para o momento no qual os itens sendo protegidos forem reconhecidos. Problema central nessa contabilização é a determinação do quê constitui uma operação de hedge. Os órgãos reguladores analisados neste trabalho apresentam critérios ad hoc para a determinação da eficácia das operações de hedge. Esses critérios não possuem propriedades estatísticas de previsão do comportamento dos ativos no futuro, condição necessária para o sucesso do hedge. Esse tipo de qualificação de hedge introduz enorme subjetividade no processo de reconhecimento contábil, fornecendo ampla margem para manipulação dos resultados. Este trabalho analisa e critica a opção adotada pelo FASB e outros órgãos reguladores e oferece sugestões.

Accounting for Derivatives and Hedging Activities: Comparison of Cash Flow versus Fair Value Hedge Accounting

2008 ◽  
Vol 23 (1) ◽  
pp. 103-117
Author(s):  
Pamela A. Smith ◽  
Mark J. Kohlbeck
Keyword(s):  
Board Of Directors ◽  
Cash Flow ◽  
Fair Value ◽  
Hedge Accounting ◽  
Limited Experience

Warfield Company is considering hedging the risk associated with (1) an available-for-sale (AFS) security portfolio and (2) an anticipated purchase of oil. Warfield's Board of Directors has limited experience in this area and has requested that you summarize the accounting and reporting implications if these items are hedged. The hedged risk in these two transactions can be either the risk associated with the cash flow or the risk associated with changes in the fair value. The two risks are discussed in separate parts of the case.

scholarly journals Financial Statement Outcomes When Alternative Derivative Hedging Designations Exist

2011 ◽  
Vol 19 (3) ◽  
Author(s):  
Arlette C. Wilson ◽  
Ronald L. Clark ◽  
William Pugh
Keyword(s):  
Cash Flow ◽  
Fair Value ◽  
Financial Statement ◽  
Font Size ◽  
Hedge Accounting

<p class="MsoBlockText" style="margin: 0in 0.5in 0pt;"><span style="font-style: normal;"><span style="font-size: x-small;"><span style="font-family: Times New Roman;">When alternate reporting methods exist, financial statement preparers tend to select methods that provide more favorable results.<span style="mso-spacerun: yes;">&nbsp; </span>Certain hedging transactions may be designated as either a fair value hedge or a cash flow hedge.<span style="mso-spacerun: yes;">&nbsp; </span>Both designations achieve the objective of matching the gain &lt;loss&gt; on the derivative with the loss &lt;gain&gt; on the hedged item in the same reporting period.<span style="mso-spacerun: yes;">&nbsp; </span>However, the cash flow hedge accounting tends to create a greater appearance of equity volatility.<span style="mso-spacerun: yes;">&nbsp; </span></span></span></span></p>

Hedge accounting and investors’ view of FX risk

2019 ◽  
Vol 27 (3) ◽  
pp. 407-424
Author(s):  
Li Wang ◽  
Stephen Makar
Keyword(s):  
Risk Management ◽  
Cash Flow ◽  
Risk Premium ◽  
Relevant Information ◽  
Content Type ◽  
Risk Premiums ◽  
Risk Effects ◽  
Positive Effects ◽  
Hedge Accounting ◽  
The Relationship

Purpose This paper aims to examine the foreign exchange (FX) risk effects of cash flow hedge accounting (HA). To the extent the HA qualification criteria and detailed documentation give investors confidence that FX derivatives effectively hedge risk, market-assigned FX risk premiums will be lower for firms using cash flow HA. Design/methodology/approach Probit analyses rely on the HA designation to examine the decision to use cash flow HA. Primary analyses test the hypothesized relationship between the magnitude of FX risk premiums and such HA use. Additional analyses allow for the interaction between cash flow HA use and the extent of FX derivatives use. Findings Hypothesis tests indicate that the magnitude of the FX risk premium is, on average, lower for firms designated as effective cash flow hedgers. In additional tests, the evidence suggests that the market assigns a lower FX risk premium to firms using a higher level of FX derivatives as effective cash flow hedges. Practical implications The findings suggest that cash flow HA provides risk-relevant information to investors. Such positive effects of HA on investors’ understanding of risk management may guide US accounting regulators in their efforts to improve HA. Corporate treasurers also may benefit from these insights into evaluating the use of HA. Originality/value Responding to the call for research on the risk relevance of cash flow HA, this paper merges the HA literature with the FX risk management literature to directly examine the relationship between HA use and FX risk premiums for manufacturing firms. The authors take an innovative approach using FX rates to which each firm is most exposed and provide evidence consistent with the argument that this approach is helpful in understanding both the decision to use cash flow HA and the effect of such HA use on market-assigned FX risk premiums.

Interest rate derivatives use in banking: Market pricing implications of cash flow hedges

2018 ◽  
Vol 86 ◽  
pp. 113-126 ◽  
Author(s):  
Aigbe Akhigbe ◽  
Stephen Makar ◽  
Li Wang ◽  
Ann Marie Whyte
Keyword(s):  
Interest Rate ◽  
Cash Flow ◽  
Market Pricing ◽  
Interest Rate Derivatives ◽  
Banking Market
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