Hedge Accounting Rules - PWC

1、Hedge Accounting Rules - PWC2013Guide to Accounting for Derivative Instruments and Hedging Activities.pwc4This publication has been prepared for general information on matters of interest only, and does not constitute professional advice on facts and circumstances specific to any person or entity. Y

2、ou should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this mate

3、rial was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees and agents shall not be responsible for any loss sustained by any person or entity w

4、ho relies on this publication.The content of this publication is based on information available as of March 31, 2013. Accordingly, certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are th

5、erefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretive guidance that is issued.This publication has been updated to reflect new and updated authoritative and interpretive guidance since the 2012 edition. See Appendix B for a summary of changes from the

6、2012 edition.Portions of FASB Accounting Standards Codification?#0046994, copyright ? by Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, are reproduced by permission.Dear Clients and Friends: PricewaterhouseCoopers is pleased to offer this updated comprehensive guide, which is mea

7、nt to help you meet the challenges of accounting for derivative instruments and hedging activities. Domestically and internationally, the volume, variety, and inherent complexity of derivative transactions have steadily increased and the nature of hedging activities continues to evolve. In practice,

8、 hedge accounting is difficult to apply and leads to divergent interpretations. For this reason, the use of derivative instruments and related hedging activities still attracts heightened scrutiny from regulators and other interested parties.In this guide we attempt to clarify a complex area of acco

9、unting by providing relevant guidance and examples. We also add our own perspective throughout, based on both our analysis of the guidance and our experience in applying it.The FASB continues to amend and provide further clarification of the accounting and disclosure requirements for derivative and

10、hedging activities to keep pace with the ever evolving nature of derivative transactions. Additional FASB guidance is sure to come, since practice issues will continue to arise in this area. We will keep you up-to-date on new guidance through further communications whenever it is necessary and usefu

11、l.Although this publication is intended to clarify the fundamental requirements of accounting for derivative instruments and to highlight key points that should be considered before transactions are undertaken, it is not a substitute for a thorough analysis of the facts and circumstances surrounding

12、 proposed transactions, nor should it be read in place of the relevant accounting literature. Nonetheless, we trust that you will find in these pages information and insights that will allow you to work with greater confidence and certainty when accounting for derivative instruments and hedging acti

13、vities.PricewaterhouseCoopers LLPTable of Contents / ITable of ContentsChapter 1: Executive Summary1.1 Historical Perspective .1 - 21.2 Fundamental Principles of Accounting for Derivatives and Hedging Activities .1 - 21.3 Challenges Associated With Accounting for Derivatives and Hedging Activities .

14、1 - 31.3.1 Securing Resources With the Appropriate Background and Work Experience .1 - 31.3.2 Preparing Hedge Documentation .1 - 41.3.3 Coordinating Between Departments .1 - 41.3.4 Applying Hedge Accounting and the Shortcut Method .1 - 41.3.5 Identifying Embedded Derivatives .1 - 51.4 How Entities H

15、ave Responded .1 - 51.5 Looking Forward: Considerations for Accounting for Derivatives and Hedging Activities .1 - 51.6 A Note About This Guide .1 - 7Chapter 2: Scope Executive Takeaway .2 - 22.1 Definition and Scope .2 - 32.1.1 Underlying, Notional Amount and Payment Provision .2 - 42.1.2 Initial N

16、et Investment .2 - 52.1.3 Net Settlement .2 - 62.1.3.1 Net Settlement Under Contract Terms .2 - 62.1.3.2 Net Settlement Through a Market Mechanism .2 - 82.1.3.3 Net Settlement by Delivery of Derivative Instrument or Asset Readily Convertible to Cash .2 - 102.2 Contracts Excluded From ASC 815s Scope

17、.2 - 112.2.1 Regular-way Security Trades .2 - 122.2.2 Normal Purchases and Normal Sales .2 - 122.2.2.1 Qualifying Criteria for the Normal Purchases and Normal Sales Exception .2 - 132.2.2.2 Freestanding Option Contracts .2 - 162.2.2.3 Forward (Non-Option-Based) Contracts .2 - 172.2.2.4 Forward Contr

18、acts That Contain Optionality Features .2 - 172.2.2.5 Power Purchase or Sale Agreements .2 - 182.2.3 Certain Insurance Contracts.2 - 202.2.4 Certain Financial Guarantee Contracts .2 - 212.2.5 Certain Contracts That Are Not Traded on an Exchange .2 - 222.2.6 Derivative Instruments That Impede Sale Ac

19、counting .2 - 23II / Table of Contents2.2.7 Investments in Life Insurance .2 - 242.2.8 Certain Investment Contracts .2 - 242.2.9 Certain Loan Commitments .2 - 242.2.10 Leases .2 - 252.2.11 Residual Value Guarantees .2 - 252.2.12 Registration Payment Arrangements .2 - 252.3 Certain Contracts Involvin

20、g an Entitys Own Equity .2 - 262.3.1 Contracts Indexed to, and Potentially Settled in, an Entitys Own Stock .2 - 262.3.1.1 Determining Whether a Contract Is Indexed to an Entitys Own Stock .2 - 272.3.1.2 Determining Whether a Contract Is Classified in Stockholders Equity .2 - 292.3.2 Share-based Pay

21、ments .2 - 302.3.3 Forward Contracts to Enter Into a Business Combination .2 - 312.3.4 Financial Instruments Within the Scope of ASC 480 .2 - 312.4 Examples of Contracts That Meet the Definition of a Derivative .2 - 31 Exhibit 2-1 Table of Derivatives: Contract Types .2 - 322.5 Questions and Interpr

22、etive Responses.2 - 36 Question No. 2-1 Derivative-Like Instruments .2 - 36 Question No. 2-2 Forward Commitment in a Securitization Transaction .2 - 37 Question No. 2-3 Short Sales .2 - 37 Question No. 2-4 Commodity Requirements Contracts .2 - 38 Question No. 2-5 Payment Provisions .2 - 38 Question

23、No. 2-6 Payment Provisions .2 - 39 Question No. 2-7 “Regular-Way” Securities Trades .2 - 39 Question No. 2-8 “Regular-Way” Securities Trades .2 - 39 Question No. 2-9 To-Be-Announced or When-Issued Securities Trades .2 - 40 Question No. 2-10 Take-or-Pay Contracts.2 - 40 Question No. 2-11 Fair Value O

24、ption .2 - 41 Question No. 2-12 Option to Purchase Leased Property .2 - 41 Question No. 2-13 Accounting for Weather Derivatives .2 - 42 Question No. 2-14 Royalty Agreements .2 - 42 Question No. 2-15 Stock Purchase Warrants .2 - 43 Question No. 2-16 Entities That Record Financial Instruments at Fair

25、Value .2 - 46 Question No. 2-17 Continual Reassessment of Nonderivative Contracts .2 - 47 Question No. 2-18 Continual Reassessment of Nonderivative Contracts .2 - 47 Question No. 2-19 Continual Reassessment of Nonderivative Contracts .2 - 48 Question No. 2-20 Impracticability of a Fair Value Estimat

26、e.2 - 48 Question No. 2-21 Repurchase Agreements .2 - 49 Question No. 2-22 Application of ASC 815 to Not-for-Profit Organizations .2 - 50Chapter 3: Embedded Derivative Instruments Executive Takeaway .3 - 23.1 Hybrid Instruments, Host Contracts, and Embedded Derivatives .3 - 4 Exhibit 3-1 Types of Em

27、bedded Features Added to Host Contracts .3 - 53.1.1 Identifying an Embedded Derivative .3 - 53.1.1.1 Determining Embedded vs. Freestanding .3 - 63.1.2 Defining the Host Contract .3 - 7Table of Contents / III3.1.3 SEC Views on Indentifying Host Contracts and Embedded Features .3 - 73.2 Bifurcation of

28、 the Hybrid Instrument .3 - 83.2.1 Reserved3.2.2 Reserved3.2.3 Application Exception for Interest-Only and Principal-Only Strips .3 - 103.2.4 Application Exception for Foreign Exchange Contracts .3 - 11 Exhibit 3-2 Decision Tree for Determining Whether or Not to Bifurcate a Hybrid Instrument and Sep

29、arately Account for the Embedded Derivative .3 - 123.3 Other Considerations .3 - 133.3.1 Issuer and Investor Asymmetry .3 - 13 Exhibit 3-3 Examples of Hybrid Instruments With Asymmetrical Accounting .3 - 133.3.2 Timing and Frequency of Assessment .3 - 143.3.3 Multiple Derivative Features .3 - 153.4

30、Debt Hosts .3 - 163.4.1 Common Embedded Features in Debt Hosts .3 - 163.4.1.1 Interest-Bearing Host Contracts With Interest Rate Underlyings .3 - 173.4.2 Callable and Puttable Debt .3 - 193.4.3 Issuers Accounting for Convertible Debt.3 - 213.4.3.1 Indexed to the Companys Own Stock .3 - 213.4.3.2 Cla

31、ssified as Shareholders Equity if Freestanding .3 - 233.4.4 SEC Views on Freestanding and Embedded Conversion Features on Share Settled Features .3 - 253.4.5 Beneficial Interests in Securitizations .3 - 273.4.5.1 Accounting for Derivatives Embedded in Beneficial Interests .3 - 283.4.5.2 Embedded Cre

32、dit Derivatives .3 - 313.4.5.3 Application Exception for Beneficial Interests in Prepayable Securitized Assets .3 - 33 Exhibit 3-4 Decision Tree for Application of ASC 815 to Beneficial Interests in Securitizations .3 - 363.5 Equity Hosts .3 - 373.5.1 SECs Views on Determining Debt vs. Equity Hosts

33、.3 - 373.5.2 Calls and Puts on Equity Hosts .3 - 383.6 Other Host Contracts .3 - 393.6.1 Executory Contract Hosts .3 - 393.6.2 Insurance Hosts .3 - 393.6.3 Lease Hosts .3 - 403.7 Accounting Considerations for Hybrid Instruments .3 - 413.7.1 Allocating Basis .3 - 41 Exhibit 3-5 Separating Option-Based and Non-Option-Based Embedded Derivatives .3 - 423.7.2 Conversion Options No Longer Requiring Bifurcation .3 - 423.7.3 Fair Value Option (FVO) for Hybrid Instruments .3 - 43IV / Table of Contents3.