CICA 3865
Canadian Institute of Chartered Accountants
Accounting Standards Board
“Section 3865: Hedges”
Reval provides a comprehensive solution to clients seeking compliance with this regulatory standard dealing with hedging. Our basic approach allows Canadian clients to:
- Define the hedging instrument for regulatory purposes.
- Link the hedging instrument with the corresponding hedged item.
- Designate the hedge relationship.
- Designate the type of risk(s) that is being hedged.
- Prepare the documentation required by auditors to record the hedging relationship, objective, and the strategy for undertaking the hedge.
- Generate reports to perform at inception and on-going assessment of hedge effectiveness using various methods including advanced regression analysis, stress testing, and dollar offset testing.
- Generate reports and ledger entries for the measurement of effectiveness and ineffectiveness of the hedge relationship over its life.
- Account for the gain or loss of a hedging relationship based on a fair value hedge, cash flow hedge, or hedge of a net investment in a foreign operation.
- Prepare proper accounting outputs, including equity or basis adjustment amounts and their adjustments related to foreign currency translation, foreign currency forward point amortization, option premium amortization, or the estimated releases of equity/basis adjustments expected to be reclassified within the next 12 months on an effective yield or straight line basis.
Reval handles the convergence of accounting standards around accounting for financial instruments from FAS 133 to IAS 39 and from CICA 3865 to IAS 39.
Additionally, Reval is strongly positioned to support the Canadian market by providing credit adjusted valuations for financial derivative instruments in light of recent guidance by CICA through EIC-173 (Credit Risk and the Fair Value of Financial Assets and Financial Liabilities).
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