Presented by: Helen Kane FX Hedging at Risk  in New Exposure Draft? August 13, 2010
<ul><li>Purpose of this webinar  </li></ul><ul><li>July 2010 HT-FASB Conversation </li></ul><ul><li>FASB Process </li></ul...
Purpose <ul><li>Explain the FASB process that may put cash flow currency hedging  of intercompany transactions at risk </l...
FASB Process <ul><li>The Board  identifies a financial reporting issues  based on requests/recommendations from stakeholde...
FASB Process – Where We Are Today <ul><li>The Board issues an Exposure Draft  to solicit broad stakeholder input </li></ul...
FASB Process – Yet to Come <ul><li>Board holds  public roundtable meeting(s)  on the Exposure Draft (must register if inte...
May 2010 Derivatives Conference <ul><li>FASB Project Manager </li></ul><ul><li>Derivative Accounting Changes </li></ul><ul...
July 2010 Conversation – Other Information <ul><li>HT & FASB Project Manager & Staff </li></ul><ul><li>Redline version lik...
What did the 2008 ED say  <ul><li>Paragraph 29 </li></ul><ul><li>29. A forecasted transaction is eligible for designation ...
What did the 2008 ED say  <ul><li>Addition to paragraph 40 </li></ul><ul><li>Paragraph 40 pre-addition: </li></ul><ul><li>...
What did the 2008 ED say  <ul><li>Addition to paragraph 40 </li></ul><ul><li>. “(However, the requirement in paragraph 29(...
Audit Firm Interpretations from 2008 <ul><li>Mild:  Amendment is merely clarifying guidance, no change in types of items q...
GAAP Drift <ul><li>Green Book Support </li></ul><ul><li>¶40 </li></ul><ul><li>¶469-471, 474, 475-478, 481-487 </li></ul><u...
Revisit Comment Letters From 2008 <ul><li>Comment letters supporting changes to intercompany hedging in 2008:  0 (zero) </...
Update on May-to-Date Lobbying <ul><li>August 10 Conversation between FASB & National Office Partner </li></ul><ul><li>FAS...
What to do Today <ul><li>Contact your Local Audit Partner  </li></ul><ul><ul><li>Unless you already have a relationship wi...
Where to Go From Here <ul><li>Making sure your audit partner communicates your use and dependence on intercompany cash flo...
Reference Paragraphs <ul><li>Derivative & Hedging Guidance buried throughout the standard: </li></ul><ul><li>Questions fro...
FAS 133/ASC 815 Derivative Accounting 408-350-8580 [email_address]
Upcoming SlideShare
Loading in …5
×

FX Hedging at Risk in New FASB Exposure Draft

2,232 views

Published on

Recently, the FASB staff disclosed that the 2008 Exposure Draft language prohibiting hedging of intercompany transactions that eliminate in consolidation are scheduled for inclusion in the redline version of the exposure draft. The redline version has been delayed and is now due out at the end of August though the comment letter period has not been extended and the deadline remains at September 30th. For more info visit www.hedgetrackers.com.

Published in: Economy & Finance
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
2,232
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
0
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide
  • The Board holds a public roundtable meeting on the Exposure Draft, if necessary. Two on October 12, 2010, and Two on October 21, 2010 The staff analyzes comment letters , public roundtable discussion, and any other information obtained through due process activities and redeliberates the proposed provisions, carefully considering stakeholder input The Board issues an Accounting Standards Update describing amendments to the Accounting Standards Codification. Will detail implementation date and early adoption options
  • Likely delay in Effective Date (2013 or 2014) Could derivative accounting changes come early?
  • Likely delay in Effective Date (2013 or 2014) Could derivative accounting changes come early?
  • Likely delay in Effective Date (2013 or 2014) Could derivative accounting changes come early?
  • Likely delay in Effective Date (2013 or 2014) Could derivative accounting changes come early?
  • Likely delay in Effective Date (2013 or 2014) Could derivative accounting changes come early?
  • FX Hedging at Risk in New FASB Exposure Draft

    1. 1. Presented by: Helen Kane FX Hedging at Risk in New Exposure Draft? August 13, 2010
    2. 2. <ul><li>Purpose of this webinar </li></ul><ul><li>July 2010 HT-FASB Conversation </li></ul><ul><li>FASB Process </li></ul><ul><li>2008 Exposure Draft Language </li></ul><ul><li>2008 Exposure Draft Interpretations </li></ul><ul><li>Communicating Your Concerns </li></ul><ul><li>Update August 2010 </li></ul>Agenda
    3. 3. Purpose <ul><li>Explain the FASB process that may put cash flow currency hedging of intercompany transactions at risk </li></ul><ul><li>Educate companies on what and how intercompany hedging strategies are at risk of losing cash flow hedging treatment </li></ul><ul><li>Detail what to do today , and what to do after the redline version issued. </li></ul>
    4. 4. FASB Process <ul><li>The Board identifies a financial reporting issues based on requests/recommendations from stakeholders. </li></ul><ul><li>The FASB Chairman decides whether to add a project to the technical agenda </li></ul><ul><li>The Board deliberates at one or more public meetings the various reporting issues identified and analyzed by the staff. </li></ul><ul><ul><li>Interco element missed this deliberation </li></ul></ul>
    5. 5. FASB Process – Where We Are Today <ul><li>The Board issues an Exposure Draft to solicit broad stakeholder input </li></ul><ul><ul><li>Exposure Draft indicating what changes are proposed </li></ul></ul><ul><ul><ul><li>May 26, 2010 </li></ul></ul></ul><ul><ul><li>Redline version of ASC 815 (actual text) </li></ul></ul><ul><ul><ul><li>Pending (recent estimate “end of August”) </li></ul></ul></ul><ul><ul><li>Comment Letters due September 30, 2010 </li></ul></ul>
    6. 6. FASB Process – Yet to Come <ul><li>Board holds public roundtable meeting(s) on the Exposure Draft (must register if interested) </li></ul><ul><ul><li>Two on October 12, 2010, and </li></ul></ul><ul><ul><li>Two on October 21, 2010 </li></ul></ul><ul><li>Solicited Field Visits </li></ul><ul><li>Staff analyzes </li></ul><ul><ul><li>comment letters , </li></ul></ul><ul><ul><li>public roundtable discussion, and </li></ul></ul><ul><ul><li>any other information obtained </li></ul></ul><ul><li>FASB redeliberates the proposed provisions, </li></ul><ul><li>I ssues an Accounting Standards Update (ASU) </li></ul><ul><ul><li>Detail implementation date and adoption “rules” </li></ul></ul>
    7. 7. May 2010 Derivatives Conference <ul><li>FASB Project Manager </li></ul><ul><li>Derivative Accounting Changes </li></ul><ul><ul><li>Redline version likely to have all changes proposed in 2008 ED except prohibition against interest rate “benchmark” hedging </li></ul></ul>
    8. 8. July 2010 Conversation – Other Information <ul><li>HT & FASB Project Manager & Staff </li></ul><ul><li>Redline version likely to have all changes proposed in 2008 ED except prohibition against interest rate benchmark hedging </li></ul><ul><li>Re-inserting prohibition on interco hedging is consistent with current ED which indicates there would be no changes in hedged risks or transactions </li></ul><ul><li>Examples of interco hedging in current GAAP would be excised </li></ul>
    9. 9. What did the 2008 ED say <ul><li>Paragraph 29 </li></ul><ul><li>29. A forecasted transaction is eligible for designation as a hedged transaction in a cash flow hedge if all of the following additional criteria are met: </li></ul><ul><li> c. The forecasted transaction is a transaction with a party external to the reporting entity ( except as permitted by paragraph 40 ) and presents an exposure to variations in cash flows for the hedged risk that could affect reported earnings. </li></ul>
    10. 10. What did the 2008 ED say <ul><li>Addition to paragraph 40 </li></ul><ul><li>Paragraph 40 pre-addition: </li></ul><ul><li>A nonderivative financial instrument shall not be designated as a hedging instrument in a foreign currency cash flow hedge. </li></ul><ul><li>A derivative instrument designated as hedging the foreign currency exposure to variability in the functional-currency-equivalent cash flows associated with </li></ul><ul><ul><li>a forecasted transaction (for example, a forecasted export sale to an unaffiliated entity with the price to be denominated in a foreign currency), a recognized asset or liability,an unrecognized firm commitment, or </li></ul></ul><ul><ul><li>a forecasted intercompany transaction (for example, a forecasted sale to a foreign subsidiary or a forecasted royalty from a foreign subsidiary) </li></ul></ul><ul><li>qualifies for hedge accounting if all the following criteria are met </li></ul>
    11. 11. What did the 2008 ED say <ul><li>Addition to paragraph 40 </li></ul><ul><li>. “(However, the requirement in paragraph 29(c) that the forecasted transaction presents an exposure to variations in cash flows that could affect reported earnings must still be met at the level being reported on. (For example, in the financial statements of a consolidated entity, there would need to be a potential earnings effect that survives consolidation .) </li></ul>
    12. 12. Audit Firm Interpretations from 2008 <ul><li>Mild: Amendment is merely clarifying guidance, no change in types of items qualifying for cash flow hedge accounting treatment </li></ul><ul><li>Middle: eliminates hedge accounting for royalties and other (non-widget) transactions </li></ul><ul><li>Severe: Fundamentally alters and limits the types of transactions available for cash flow currency hedging (effectively eliminates hedging of all intercompany transactions within consolidated reporting). </li></ul>
    13. 13. GAAP Drift <ul><li>Green Book Support </li></ul><ul><li>¶40 </li></ul><ul><li>¶469-471, 474, 475-478, 481-487 </li></ul><ul><li>DIG H13 </li></ul><ul><li>ASC Support </li></ul><ul><li>ASC 815-20-25-38d </li></ul><ul><li>No equivalent </li></ul><ul><li>ASC 815-30-55-86 to 90 </li></ul>
    14. 14. Revisit Comment Letters From 2008 <ul><li>Comment letters supporting changes to intercompany hedging in 2008: 0 (zero) </li></ul><ul><li>Comment letters opposing changes to intercompany hedging in 2008 ( http://www.fasb.org/jsp/FASB/CommentLetter_C/CommentLetterPage&cid=1218220137090&project_id=1590-100 ) </li></ul><ul><ul><li>Letters 17, 21, 26, 29, 33, 39, 40, 42, 46, 55, 59, 62, 65, 76, 82, 85, 88, 91, 94, 99, 102, 104, 105, 108, 112, 113, 118, 119, 120, 122 </li></ul></ul>
    15. 15. Update on May-to-Date Lobbying <ul><li>August 10 Conversation between FASB & National Office Partner </li></ul><ul><li>FASB staff is considering that 2008 intercompany language be dropped in redline </li></ul><ul><li>Alternative would be to legitimize (?) current intercompany hedging practices </li></ul><ul><ul><li>Would require deliberations </li></ul></ul>
    16. 16. What to do Today <ul><li>Contact your Local Audit Partner </li></ul><ul><ul><li>Unless you already have a relationship with National Office Derivative Accounting Specialists </li></ul></ul><ul><li>Ask him/her to communicate your concern to National Office that FASB may reinsert 2008 ED language around intercompany hedging without due process </li></ul><ul><ul><li>Communicate how loss of hedge accounting for anticipated intercompany FX transactions would negatively impact your company </li></ul></ul><ul><li>Ask them to lobby FASB staff to drop 2008 language prior to redline </li></ul>
    17. 17. Where to Go From Here <ul><li>Making sure your audit partner communicates your use and dependence on intercompany cash flow hedging to National Office. Request National Office to lobby FASB staff to keep 2008 language OUT. </li></ul><ul><li>Carefully read redline version when issued to ensure language is not reinserted </li></ul><ul><li>If issued with prohibition read 2008 comment letters, prepare your own and submit by September 30 </li></ul>
    18. 18. Reference Paragraphs <ul><li>Derivative & Hedging Guidance buried throughout the standard: </li></ul><ul><li>Questions from FASB on hedging </li></ul><ul><ul><li>Questions 56-58 and 61-64 </li></ul></ul><ul><li>Proposed guidance: 110-128 </li></ul><ul><li>Implementation guide: IG172-180 </li></ul><ul><li>Background/conclusions: BC216-235 </li></ul>
    19. 19. FAS 133/ASC 815 Derivative Accounting 408-350-8580 [email_address]

    ×