ASC 815-10-50 (previously FAS 161) requires additional financial reporting for derivatives and hedging activities. This standard amends the financial reporting requirements of ASC 815 (previously FASB 133), and became effective for fiscal years and interim periods beginning after November 15, 2008. With the same scope as ASC 815, ASC 815-10-50 financial reporting applies to all entities, including nonprofit organizations. DerivActiv, a leading provider of derivative valuation services, is experienced at helping all forms of entities comply with financial reporting requirements of derivatives.
Since the issuance of ASSC 85 (FAS 133) in 1998, the use of derivatives and other hedging activities, as well as their complexity, increased dramatically. The expanded ASC 815-10-50 financial reporting requirements addresses the following:
- How and why does an entity use derivative instruments?
- What are the risks related to using derivatives?
- What effect does the derivatives have on the financial statements?
To learn more about ASC 815-10-50, and how we can help you with your entity’s financial reporting, contact DerivActiv at 1-866-200-9012.
ASC 815-10-50 Enhanced Financial Reporting
The additional ASC 815-10-50 financial reporting requirements are summarized below:
- Entities must provide disclosure outlining the reasons for using derivative instruments
- Disclosures should be in the context of overall risk exposure
- For derivatives used as hedges, the reporting should include a description of hedges used for 1) fair value hedges, 2) cash flow hedges, and 3) foreign currency hedges
- For derivatives held solely as investments, the reporting needs to provide the purpose for holding such an investment
- A statement about the organization’s objectives and strategies for using derivative instruments should be made in the context of the entity’s overall risk exposure. The statements should be made as they relate to interest rate risk, foreign exchange rate risk, commodity price risk, credit risk and equity price risk
- For each reporting period the following should be reported in tabular form by type of derivative:
- The counterparty and fair value of derivatives reported in the financial statements
- The amount of gains and losses reported in the statement of operations
- The effective portion of gains and losses on cash flow hedges and net investment hedges recognized in other comprehensive income or reclassified out of other comprehensive income and into earnings
- The portion of gains and losses for cash flow hedges and net investment hedges representing 1) the amount of the hedges ineffectiveness and 2) the amount excluded from the assessment of hedge effectiveness
- Derivative contracts not designated as hedges
For each reporting period for which a statement of financial position is presented the following should be reported:
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The existence and nature of credit risk related contingent features and circumstances that could be triggered in derivates that are in a net liability position
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The aggregate fair value of such derivatives
- The aggregate fair value of assets that are reported as collateral
- The aggregate fair value of additional assets that would be reported as collateral
- The aggregate fair value of assets needed to settle the derivative contract is credit related features were triggered
DerivActiv can assist you with your derivative accounting needs. Please call us at 1-866-200-9012.
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