hedge + instrument

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1 The finance departments of many companies are able to create the financial options appropriate as hedging instruments to protect against adverse price movements in their trading commitments.
2 ," Bank for International Settlements Working Papers (Basel, 2012); T. Beck, A. Demirguc-Kunt, and R. Levine, "Financial Institutions and Markets: Across Countries and Over Time," World Bank Economic Review (2010); W. Easterly, R. Islam, and J. Stiglitz, "Shaken and Stirred: Explaining Growth Volatility," Annual World Bank Conference on Development Economics, (Washington, D.C., 2000). 5 See section 2.1 for GDP growth projections for major economies. 22 Long-term Finance and Economic Growth of hedging instruments and other means of risk mitigation.
3 At the inception of the transaction, TNT Express documents the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions.
4 The amount that is reclassified into earnings is presented in the Consolidated Statements of Income in the same line item in which the hedged instrument or transaction is recognized, primarily in interest expense.
5 The following table summarizes the total gross fair value, excluding interest accruals, of derivative assets and liabilities as of December 31: Other Assets Fair Value (Millions) 2010 Derivatives designated as hedging instruments : Interest rate contracts Fair value hedges Cash flow hedges Foreign exchange contracts Net investment hedges $ 909 2 $ $ 2009 $ 632 1 977 $ 3 109 – $ 66 Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments: Interest rate contracts Foreign exchange contracts, including certain embedded derivatives(a) Equity-linked embedded derivative(b) Total derivatives not designated as hedging instruments $ Total derivatives 1,089 2010 38 13 765 $ 323 $ 180 11 57 – $ 3 91 2 $ 5 95 3 833 $ 272 68
6 The following table summarizes the total gross fair value, excluding interest accruals, of derivative assets and liabilities as of December 31: Other Assets Fair Value (Millions) 2010 Derivatives designated as hedging instruments: Interest rate contracts Fair value hedges Cash flow hedges Foreign exchange contracts Net investment hedges $ 909 2 $ $ 2009 $ 632 1 977 $ 3 109 – $ 66 Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments : Interest rate contracts Foreign exchange contracts, including certain embedded derivatives(a) Equity-linked embedded derivative(b) Total derivatives not designated as hedging instruments $ Total derivatives 1,089 2010 38 13 765 $ 323 $ 180 11 57 – $ 3 91 2 $ 5 95 3 833 $ 272 68 $ 2009 $ 132 112 (c) Other Liabilities Fair Value 130 96 $ 419 6 44 103 $ 283 (a) Includes foreign currency derivatives embedded in certain operating agreements. (b) Represents an equity-linked derivative embedded in one
7 fair value, excluding interest accruals, of derivative assets and liabilities as of December 31: Other Assets Fair Value (Millions) 2010 Derivatives designated as hedging instruments: Interest rate contracts Fair value hedges Cash flow hedges Foreign exchange contracts Net investment hedges $ 909 2 $ $ 2009 $ 632 1 977 $ 3 109 – $ 66 Total derivatives designated as hedging instruments Derivatives not designated as hedging instruments: Interest rate contracts Foreign exchange contracts, including certain embedded derivatives(a) Equity-linked embedded derivative(b) Total derivatives not designated as hedging instruments $ Total derivatives 1,089 2010 38 13 765 $ 323 $ 180 11 57 – $ 3 91 2 $ 5 95 3 833 $ 272 68 $ 2009 $ 132 112 (c) Other Liabilities Fair Value 130 96 $ 419 6 44 103 $ 283 (a) Includes foreign currency derivatives embedded in certain operating agreements. (b) Represents an equity-linked derivative embedded in one of the Company's investment securities. (c) GAAP permits the netting of derivative assets and derivative liabilities when a legally enforceable master netting agreement exists between
8 Due to the volatile nature of such instruments, all derivative and hedging instruments would be unallowable, including derivative and hedging instruments embedded in other contracts, whether used for risk management purposes, forecasting, calculations used for the preparation of proposals for federal funding (e.g., forecasting contingencies) or otherwise, and regardless of whether related to assets, liabilities, or expenses.
9 In evaluating further the concerns expressed, however, Commission staff supplemented the analysis regarding the additional risks that investors who use ETPs as hedging instruments may have to bear discussed in the 2012 Extension Release and above.
10 Provide information regarding the impact of foreign currency fluctuations on the company, if material, and the extent to which foreign currency net investments are hedged by currency borrowings and other hedging instruments .
11 Therefore, the question is which standard, IAS 21 or IAS 39, should take precedence in recording gains and losses on the hedging instrument to which hedge accounting is applied; or can the requirements be reconciled in some way? (b) IAS 39 requires recycling of gains and loses on the hedging instruments that have been recognised directly in equity under the net investment hedge accounting provisions into profit or loss when the hedged net assets in the foreign operation are disposed of.
12 Therefore, the question is which standard, IAS 21 or IAS 39, should take precedence in recording gains and losses on the hedging instrument to which hedge accounting is applied; or can the requirements be reconciled in some way? (b) IAS 39 requires recycling of gains and loses on the hedging instruments that have been recognised directly in equity under the net investment hedge accounting provisions into profit or loss when the hedged net assets in the foreign operation are disposed of.
13 To avoid any divergence 3 of views, IFRIC should make clear in the Interpretation that this is allowed as long as hedge accounting requirements in IAS 39 and in this Interpretation are satisfied. (c) The draft IFRIC Interpretation allows the hedging instruments to be held by any entity within the group "except the foreign operation that itself is being hedged".
14 We think it would be helpful if IFRIC could clarify how it envisages the requirements of existing standards will be met when the hedging instrument is a loan and is held by an entity that has a different functional currency risk to that of the entity that has the foreign operation investment. (b) In line with the conclusion in paragraph 12, we understand that it should be equally acceptable if more than one entity within a group hold hedging instruments .
15 This conclusion will be especially helpful for groups managing their risks on a centralised basis through treasury centres that enter into hedging instruments on behalf of other entities within the group.
16 the following issues arising in accounting for hedges of net investment in consolidated accounts of entities: (a) whether hedge accounting may be applied to the foreign exchange differences arising between the functional currency of the foreign operation and the presentation currency of the parent entity; (b) whether hedge accounting may be applied to the foreign currency exposure arising between the functional currency of the foreign operation and the functional currency of any parent entity (the immediate, intermediate or ultimate parent entity of that foreign operation), and (c) whether hedging instrument (s) may be held by any entity within the group.
17 In the assessment, candidates may be required to: (a) identify and describe the key financial risks facing a business in a given scenario 9, 10 (b) explain how financial instruments (eg derivatives, hedging instruments ) can be utilised to manage financial risks and describe the characteristics of those instruments 9, 10 Study Guide 17 Covered in chapter (c) explain different methods of managing interest rate exposure appropriate to a given situation and perform non-complex calculations to determine the cost of the hedge (d) explain different methods of managing currency risks appropriate to a given situation and perform non-complex calculations to determine the cost of the hedge (e) 3 explain methods of managing other key financial risks and perform non-complex calculations to determine the cost of particular
18 These include checking and deposit services, overdrafts, term loans, mortgages, international asset financing, leasing, instalment credit, debt financing, foreign exchange facilities, interest and exchange rate hedging instruments , executor and trustee services.
19 The problems multiply for the newer financial and hedging instruments , many of which do not easily fit into existing statute and case law.
20 Funds accustomed to trading both an underlying security and a hedging instrument with a single broker used to be able to take advantage of netting margin for both transactions but the new structure does not allow for that as the derivative trade must be cleared through a CCP.
21 Hedging instruments such as swaps, options and financial futures can of course be used by financial institutions to limit risk, but these also contain (often unknown and unlimited) risks of their own - witness the losses of Midland Bank in its interest rate risk hedging in 1990.
22 Besides , many brokers could also have been taking proprietary positions on NSEL with their own or clients' money as a hedging instrument in the wake of dwindling returns in the capital markets, sources said.
23 There is also a generally accepted principle that, where derivatives are being used as a hedge against underlying assets or liabilities, accounting adjustments are required to ensure that the gain/loss on the hedged instrument is recognized in the income statement on a similar basis as the underlying assets and liabilities.
24 Legacy airlines, compared with new entrants, have been hit harder by rising fuel prices partly due to the running of older, less fuel efficient aircraft. [ 24 ] While hedging instruments can be expensive, they can easily pay for themselves many times over in periods of increasing fuel costs, such as in the 2000–2005 period.
25 the portion of the gain or loss on the hedging instrument in a cash flow hedge (or a hedge of a net investment in a foreign operation, as this is accounted similarly ) that is determined to be an effective hedge