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Basics of Hedge Accounting


What you need to know about hedge effectiveness testing, credit value adjustments and the latest regulations, prepared by KPMG LLP (Canada).

Organizations are exposed to interest rate and foreign exchange risks that give rise to income volatility. As a result, companies take action to mitigate such exposures using derivative financial instruments. How can corporate treasurers and controllers leverage hedge accounting to reduce income statement volatility? What are the documentation and regulation requirements?

This whitepaper gives you a complete review of the basics of hedge accounting, hedge effectiveness testing and the importance of credit value adjustments - directly from the experts at KPMG LLP (Canada).

In this paper you will find valuable information to help you understand:

  • Key benefits to hedge accounting, including reducing your income statement volatility
  • How to overcome the challenges surrounding credit value adjustment and hedge accounting
  • How to differentiate a highly effective hedge from an ineffective one
  • Which methodologies to apply when assessing a hedge’s effectiveness
  • How credit value adjustment impacts your hedge effectiveness tests

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