Posts Tagged ‘ASC 815-20’

Hypothetical Derivatives and Currency Basis

Since FAS 133 was introduced nearly a decade ago and IAS 39 was introduced over five years ago, we continue to see differing interpretations of these standards being applied in the marketplace. A good example of this is the application of currency basis on Cross Currency Interest Rate Swaps (“CCIRS”) for effectiveness testing.

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Bad Credit = No Hedging?

The last few years have proven to be extremely challenging for companies issuing debt. Even if a company was lucky enough to find a bank willing to underwrite an issue, the pricing was prohibitive and issuers needed a pragmatic approach. One of the practical ways to get pricing to achieve reasonable levels was to embed credit-contingent features in the deals that would trigger higher coupon payments with the expectation that credit ratings (read credit spreads) widen in the future.

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Will FAS 133 (ASC 815-20) Revised be the New Frontier for Derivative Accounting?

The FASB is expected to issue an exposure draft to FAS 133 (ASC 815-20) as part of the Financial Instruments Project in the next few days. Assuming for once, that the FASB keeps to its timetable (don’t hold your breath, I’m not), the Exposure Draft is basically expected to be a re-issue of the Exposure Draft that was issued in July 2008, and one that generated close to 2,000 comment letters.

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