Posts Tagged ‘FAS 133’

When Opposites Distract – FASB and IASB

When the FASB and the IASB started talking about the convergence of accounting standards back in 2006, the road map was pretty optimistic. Now the path to convergence is clearly widened further. No doubt its exposure draft issuance will coincide with the holiday period with comments due by September, so don’t forgot your laptop when your pack your suitcase.

Read More

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.

Read More

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.

Read More

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.

Read More

CP Issuers – Beware of Re-Designation Pitfalls!

Given the extreme volatility in credit markets and the shutdown of commercial paper (CP) issuance over the last year, many CP issuers missed their forecasts, which were hedged with payer swaps. Because the shut down affected then current forecasts and called into account the ability to accurately predict when markets would thaw, many CP issuers…

Read More

On the Convergence Road Again: Will IAS 39 Wait for FAS 133?

The IASB was proceeding at an aggressive pace to overhaul IAS 39 and had announced its first two phases of the simplification project addressing classification and measurement and impairment methodology, but it fell behind with Phase III, which was going to tackle the simplification of hedge accounting.   With the overhaul originally planned for Q3, then…

Read More

Late Term Hedging of IR Risk Under FAS 133

Given the steepness of the yield curve , many companies are considering (and many banks are pitching) the strategy of swapping existing fixed rate debt into variable so companies can enjoy positive carry-over over the next few resets. While this strategy may make sense for certain companies from an economic perspective, the accounting ramifications under…

Read More

Late Term Hedging of IR Risk Under FAS 133

Given the steepness of the yield curve , many companies are considering (and many banks are pitching) the strategy of swapping existing fixed rate debt into variable so companies can enjoy positive carry-over over the next few resets. While this strategy may make sense for certain companies from an economic perspective, the accounting ramifications under…

Read More