The basics of accounTing for derivaTives and …（会计的基础知识对衍生品和u2026）.pdf

The basics of accounTing for derivaTives and hedge accounTing This is the first paper in an ongoing series that outlines the principles of hedge accounting under current and expected International and U.S. accounting standards, including the practical challenges typically faced by organizations. Prepared by The Basics of Accounting for Derivatives and Hedge Accounting In the regular course of business operations, organizations are exposed to market risks such as interest rate risk, foreign exchange risk, commodity price risk, etc., that give rise to income volatility. As a result, organizations often will take some action to mitigate or economically hedge against such exposures using derivative financial instruments. In addition some organizations may enter into derivative contracts for speculative or trading purposes. accounTing for derivaTive insTrumenTs Under current U.S. and International accounting standards, an entity is required to measure derivative instruments at fair value, or mark-to-market (MTM), with changes in fair value or MTM to be recognized through the income statement. Fair value is defined under U.S. accounting standards as “the price that would be received to sell an asset, or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” International accounting standards define fair value slightly differently as “the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing par