DERIVACTIV PROVIDES FAS 133/GASB 53 HEDGE ACCOUNTING VALUATION

Statements of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities, commonly known as FAS 133, is an accounting standard issued in January 2001 by the Financial Accounting Standards Board (FASB) that provides companies with the ability to measure all assets and liabilities on their balance sheet at fair value. All derivatives within the scope of FAS 133 must be recorded at fair value as an asset or liability. Hedge accounting may be applied if there is hedge documentation and gains and losses in the value of the derivative with gains and losses in the value of the underlying transaction.

To be designated and qualify for FAS 133 hedge accounting, a commodity (hedged item) and its derivative must have a correlation ratio between 80% and 125%, and the reporting enterprise must have hedge documentation in place at the inception of the hedge. If these criteria are not met, hedge accounting cannot be applied. The non-applicability of hedge accounting can lead to significant volatility in corporate earnings.

Statement No. 53 of the Governmental Accounting Standards Board provides newly adopted guidelines for Accounting and Financial Reporting for Derivative Instruments. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2009.

GASB 53 describes methods of evaluating hedge effectiveness for derivatives. The common methods for evaluating hedge effectiveness are the consistent critical terms method, the synthetic instrument method, the dollar offset method and regression analysis. DerivActiv performs all of these evaluations for GASB reporting entities.

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DerivActiv is a leading provider of mid-market valuations on derivatives and other financial instruments and a leading provider for FAS 133 hedge accounting compliance. For more information call us at 866-200-9012. For more information, call us at 866-200-9012 or click here to request a free demonstration