Hedge Accounting: Hedge Accounting Qualification

Derivative instruments can be powerful tools for a company to use to reduce its exposure to financial risks, but there is a drawback. Accounting for derivative instruments can create volatility in earnings because these instruments are recorded at fair value with changes in fair value recorded through the income statement in accordance with ASC 815, while the hedged item is accounting for in accordance with other standards. Is there anything a company can do to mitigate this volatility? Yes! If they qualify for, and elect to use, hedge accounting they can mitigate this income statement volatility. However, in order to apply hedge accounting strict criteria must be met. In this CPE-eligible, eLearning course (1.0)  you learn about the criteria to qualify for hedge accounting under U.S. GAAP, as well the effectiveness requirements within ASC 815 needed to maintain hedge qualification.

This the second course in our two-part hedge accounting training series.

 By the end of this course, you should be able to: 

• Identify the documentation requirements to qualify for hedge accounting 
• Recognize the hedge accounting qualification requirements for hedged items and the risk being hedged 
• Recognize the hedge accounting qualification requirements for the hedging instrument 
• Recall the effectiveness requirements to qualify for hedge accounting