Marie Leone, CFO.com | US
September 5, 2008

@Jiro Okochi

I totally agree with you.
Hedge accounting is a must have in this "post-crisis" economy.
Most companies realize the importance of it but still fears the complexity and technical details.
I believe REVAL should be able to support this need and solve the CFO's concern by the web-as-service way of product.
When Hedging is fully implemented into the whole economy, we should be able to build a more stable and secure economy. so this should be the trend of the future.

Posted by Shaoyou Wang | Mar 6, 2011 9:59 AM ET

timeoutfas133.com

While there have been hundreds of FAS 133 restatements, most of those appeared to have slowed down of late. The troubling part of FAS 133R is the fact that the FASB hasn't simplified 133. Many of the respondents to the ED have asked for a delay now that the SEC has announced a date for IFRS convergence in 2014. Go to timeoutfas133.com if you agree to delay as why implement FAS 133 again when IAS 39 comes into play.

Also, the fair value option (FAS 159) is not good for most corporate treasuries, who unlike a bank will not have financial assets that can be also mark to market to offset the move in the derivative and also will not want to mark their liabilities and encounter a different kind of volatility. ie as your credit weakens your liabilities drop.

Natural hedges are nice if you can find them and many companies relied on locking in prices from suppliers in the contract, but many suppliers no longer wanted to take on that risk or in the case of commodity producers, cap off gains themselves.

Bottomline, derivatives are a must have but in order to be allowed to use them you have to good documentation, controls and understanding of they work.

Regards

Jiro Okochi
CEO Reval.com, Inc.

Posted by Jiro Okochi | Sep 14, 2008 8:07 PM ET

To Hedge or Not to Hedge

It's important to note that it may be easier to exclude the impact of "non-effective hedging" via the presentation of proforma, non-GAAP results rather than to try to qualify and document for hedge accounting purposes to reduce the volatility.

Posted by Dave Parsons | Sep 8, 2008 6:08 PM ET

Financial Results not consistent with Risk Management

Not pointed out here is that derivatives can be good risk management tools too. However because of the challenges discussed here (documentation, difficulty in complying with the ?rules? both at inception and subsequently, and ultimately fear of restatements) the economically effective use of a derivative to manage an identified risk may not show up in the financial statements. I believe that CFO?s are feed up with discussing and defending risk management strategies that are effective, but present different results in the financial statements. While the Fair Value Option and Fair Value, may provide some relief in certain cases, they do create more volatility, more uncertainty than they attempt to solve and can present what can are interpreted by many as false non-economic results.

Posted by KURT SCHWARZ | Sep 8, 2008 12:52 PM ET