Accounting for Derivatives in Practice under IFRS9

Course Outline

An intensive 3-day programme providing hands-on experience on accounting for derivatives in the equity, FX and interest rates markets. The complex topic of hedge accounting is mastered through the use of practical cases.

The programme provides a conceptual framework based on an intensive use of real world cases. Each case is covered step by step, encouraging interactive participation. The cases will cover the decision-making, documentation requirements, hedge effectiveness assessment and the accounting of a hedging strategy during its life.

All participants receive a copy of the "Accounting for Derivatives" book by Juan Ramirez.

Who The Course is For

  • Derivatives structurers and salespeople
  • Derivatives accountants
  • Financial managers
  • Treasurers
  • Derivatives middle-office
  • Stock analysts

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Prior Knowledge

  • Basic understanding of financial statements
  • Derivatives instruments: forwards, calls, puts and interest rate swaps (basic level)


This program is eligible for 24 Continuing Education credit hours from the CFA Institute. If you are a CFA Institute member, CE credit for your participation in this program will be automatically recorded in your CE Diary.


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Day One

Conceptual Framework and Accounting for Equity Derivatives

  • Introduction to IFRS 9
  • Interaction with other IFRS standards

Case 1: Porsche: Acquisition of a stake in Volkswagen

  • Financial assets classification
  • Accounting for equity instruments with changes in fair value in OCI
  • Accounting for a sale of a put
  • Hedge accounting – the theoretical framework
  • Hedge rebalancing
  • Hedge accounting challenges for a purchased put
  • What Porsche did in reality

Workshop: Fictional Acquisition of KPN by Telefonica

  • Accounting for equity instruments with changes in fair value in PoL
  • Accounting for a purchase of a call
  • Accounting for a collar
  • Embedded derivatives and convertible bonds
 

Day Two

Accounting for Foreign Exchange Derivatives

  • Types of FX exposures
  • Functional currency
  • The ST Microelectronics functional currency
  • Chronology of a FX transaction

Case 2: Philips - Hedging a highly expected foreign sale

  • Identification of the FX exposure
  • Applying hedge accounting - hedging with an FX forward
  • Applying hedge accounting - hedging with an option
  • Applying hedge accounting - hedging with a tunnel
  • Applying hedge accounting - hedging with a knock-in forward

Workshop: Mediaset - Hedging a highly expected foreign purchase

  • Identification of the FX exposure
  • Applying hedge accounting - hedging with an FX forward
  • Applying hedge accounting - hedging with an option
  • Applying hedge accounting - hedging with a tunnel
 

Day Three

Accounting for Interest Rate Derivatives

Case 3: Deutsche Telekom - Hedging a floating rate liability

  • Financial liabilities classification and the fair value option
  • Accounting for fixed rate bonds – the effective interest rate
  • Applying cash flow hedge for a fixed to floating interest rate swap
  • Hedge accounting documentation and hedge effectiveness assessments
  • Accounting entries

Case 4: Adidas - Hedging a fixed rate liability

  • Accounting for floating rate bonds
  • Applying fair value hedge for a floating to fixed interest rate swap
  • Hedge accounting documentation and hedge effectiveness assessments
  • Accounting entries

 

Other topics on interest rate risk

  • Hedging credit risk with CDSs
  • Hedging inflation risk
  • Interest rate risk macro hedging
  • Embedded derivatives
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