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U.S. GAAP Codification of Accounting Standards |
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U.S. GAAP Accounting Standards |
| Codification Topic 815 Derivatives and Hedging Overview Derivatives and Hedging SFAS 133, June 1988 "Accounting for Derivative Instruments and Hedging Activities" Derivatives 1. Derivative instruments are recognized in financial statements 2. Derivative instruments are measured at fair value Characteristics of Derivative Instruments 1. Underlying and notional amounts 2. No initial net investment or smaller than usual initial net investment 3. Require or permit net settlement SFAS 133 does not apply to the following: 1. Regular way security trades 2. Normal purchases and normal sales 3. Certain insurance contracts 4. Certain financial guarantee contracts 5. Certain contracts not traded on an exchange 6. Derivatives as impediments to sales accounting --> e.g., guarantee of residual value to avoid sales-type lease 7. Investments in life insurance 8. Certain investments by defined benefit pension plans 9. Loan commitments 10. Registration payment arrangements, FSP EITF 00-19-2 Embedded derivative instruments --> are separated from the host contract --> and apply SFAS 133 as a derivative instrument Measurement of derivatives --> derivative instruments are measured at fair value Gains and losses on derivative instruments 1. No hedging designation --> gains and losses are recognized in earnings 2. Fair value hedge --> gains and losses are recognized in earnings 3. Cash flow hedge --> effective portion of the gains and losses are recognized in other comprehensive income --> ineffective portion of the gains and losses are recognized in earnings 4. Foreign currency hedge (a) hedge of a foreign currency denominated firm commitment --> gains and losses are recognized in earnings (b) hedge of an available-for-sale security --> gains and losses are recognized in earnings (c) hedge of a forecasted foreign currency denominated transaction --> gains and losses are recognized in other comprehensive income (d) hedge of a net investment in a foreign operation --> gains and losses are recognized in other comprehensive income If the hedged item is denominated in foreign currency --> designate as one of the following: 1. Fair value hedge of --> an unrecognized firm commitment --> recognized asset or liability 2. Cash flow hedge of --> an unrecognized firm commitment --> a forecasted transaction 3. Hedge of a net investment in a foreign operation |
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Codification Topic 815 Derivatives and Hedging |
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Subtopics of Codification Topic 815 815-10 Overall 815-15 Embedded derivatives 815-20 Hedging-general 815-25 Fair value hedges 815-30 Cash flow hedges 815-35 Net investment hedges 815-40 Contracts in entity's own equity 815-45 Weather derivatives |
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Accounting Terms of Codification Topic 815-10 All-in-one hedge Asymmetrical default provision Bid-ask spread Capacity contract Cash flow hedge Cashless exercise Control area Credit derivative Credit risk Derivative instrument Effective notional amount Embedded derivative Face amount Fair value Fair value hedge Financial instrument Firm commitment Forecasted transaction Foreign exchange risk Forward commitment dollar roll Freestanding contract Government national mortgage association rolls Hybrid instrument Interest rate risk Internal derivative Loan commitment London interbank offered rate swap rate Mandatorily redeemable financial instrument Net share settlement Notional amount Payment provision Prepaid interest rate swap Readily convertible to cash Regular way security trades Synthetic instrument accounting Take-or-pay contract Trading Trading purposes Transaction Underlying |
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Accounting Terms of Codification Topic 815-15 Annuitization Equity kicker Equity-indexed annuity Expected residual profit Market value annuity Periodic ratchet design Point-to-point design Prepayable |
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Accounting Terms of Codification Topic 815-20 Auction rate notes Benchmark interest rate Expected cash flow Intra-entity derivative LIBOR swap rate Make-whole provision Noncontrolling interest Stock appreciation right Stub period Stub rate Time value of an option |
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Accounting Terms of Codification Topic 815-25 Zero-coupon method |
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Accounting Terms of Codification Topic 815-30 Comprehensive income |
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Accounting Terms of Codification Topic 815-35 |
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Accounting Terms of Codification Topic 815-40 Equity restructuring Exercise contingency Lock-up options Net cash settlement Physical settlement Standard antidilution provisions Top-off provision |
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Accounting Terms of Codification Topic 815-45 Weather derivative |
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