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

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.

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