Derivatif Dan Hedging DJPU PDF

Akuntansi
Derivatif dan Hedging

Direktorat Jenderal Pengelolaan Utang
Presented : Dwi Martani

DJPU
J U Agenda
1. Latar Belakang
2. Akuntansi
3. Standar Akuntansi
4
4. Ilustrasi Transaksi
DJPU
J U Derivative
e at e Secu
Securities
t es
Latar Belakang
Market risks
commodity price risk interest rate risk

foreign currency risk
DJPU
J U Instrumen Keuangan
DJPU
J U Derivative Securities
Hedges adalah kontrak yang melindungi dari risiko
pasar – misalnya,
misalnya forward,
forward options
options, and swaps.
swaps
Derivative securities, or simply derivatives,

adalah kontrak yang nilainya diturunkan dari nilai
aset lain atau item ekonomi tertentu – saham/stock,
bond, commodity price,
interest rate, or currency exchange rate
Sulit untuk mencari derivatif yang benar-benar

dapat melindungi diri dari risiko.
Risiko
Ri ik Æ ketidakpastian
k tid k ti di masa mendatang
d t
Melindungi dari risiko = memastikan
ketidakpastian.
Kontrak lindung nilai memiliki risiko
DJPU
J U Derivative Financial Instruments
A derivative is a financial instrument that meets the
following three criteria:
Its value changes
Requires little or
in response to a Settled at a future
no initial
change in an date
investment
“underlying”
Scope Exemption:
IAS 39:5 exempts contracts which meet the definition of a

derivative from the standard if the contract is entered into
to meet the entity’s usual purchase, sale or usage
requirements
Tan & Lee Chapter 9 ©2009 6
DJPU
Instrumen keuangan atau kontrak lain

dengan karakteristik:
Nilainya berubah akibat dari perubahan
variabel yg mendasari (spt suku bunga,
bunga harga,
harga
nilai tukar, dll).
Tanpa investasi awal neto atau nilainya lebih
k il dari
kecil d i nilai
il i kontrak
k t k sejenis
j i yang memberi
b i
pengaruh yang sama thd perubahan faktor
pasar.
Diselesaikan pd tgl tertentu di masa
mendatang.
DJPU
J U Tujuan Akuntansi Hedging
DJPU
J U Klasifikasi Derivatif
F
Freestanding
t di derivatif
d i tif ( ti
(option,
forward contract, swap, future
contract)
t t)
Embedded derivatif
DJPU
Example of derivative instruments and their underlying
Types of derivative Underlying Used by

instruments
Option contracts Security price Producers, trading firms
Producers firms,
(call and put) financial institutions, and
speculators
Forward
F d contracts
t t Foreign
F i V i
Various companies
i
e.g. foreign exchange exchange rate
forward contract
Future
F t contracts
t t Commodity
C dit Producers
P d and
d
e.g. commodity futures prices consumers
Swaps Interest rate Financial institutions

DJPU
Derivatives
e at es
Hedge Speculative
Fair Value Cash Flow Foreign

Hedge Hedge Currency
Hedge
Fair Value Cash Flow Hedge of Net

Hedge Hedge Investment in
Foreign
O
Operation
ti
DJPU
• Use of derivatives
1. Manage market risk
2. Reduce borrowing cost
3. Profit from trading or speculation
• Types of derivatives
1 For
1. Forward
ard type
t pe derivatives
deri ati es such
s ch as forward
for ard contracts,
contracts ffuture
t re
contracts and swaps
2. Option-type derivatives such as call and put options, caps and
collars and warrants
3. Free standing derivatives
4. Embedded derivatives

DJPU
J U Forward Contracts
• An agreement between two parties (counterparties) whereby one

party agrees to buy and the other party agrees to sell a specified
amount (notional amount) of an item at a fixed price (forward rate)
for delivery at a specified future date (forward date)
• Can either be a forward purchase contract or a forward sales

contract, depending on the perspective of the counterparties
Sells Forward
“A” Company Contract “B” Company
“Forward sales contract” “Forward purchase contract”

DJPU
J U Forward Contracts
• Not standardized contracts as they are not traded on an
exchange
– They entail counterparty risks
– They are can be tailored to specific needs of counterparties
– They involve lower transaction costs
• Fair value of forward contract:

Notional x (‫׀‬Current forward rate – contracted forward rate ‫)׀‬
t
amount (1+r)
where
Contracted forward rate is forward rate r = discount rate
fixed at inception
Current forward rate is forward rate for t = period to maturity
remaining period to maturity
At inception date, the fair value of a forward contract is nil.
DJPU
J U Future Contracts
• A future contract is similar to a forward contract except that it is a

standardized contract and is traded on an exchange
• Futures contracts are marked-to-market and settled on a daily basis
• Futures contracts require payment of a margin deposit which has to

be maintained throughout the contract period
• Wide range of exchange-traded future contracts

– Commodity futures
– Interest rate futures
– Currencyy futures

DJPU
J U Option Contracts
• Contract that gives holder the right but not the obligation to buy or
sell a specified item at a specified price
• 2 type of option contracts

1. Call option – right, but not obligation to buy
2. Put option – right, but not obligation to sell
• Can be American option (exercisable anytime to expiration) or

European option (exercisable only on maturity date)
• Can also be customized (not traded) or standard contract quoted on

exchange (listed options)

DJPU
• Main features
– Purchaser (holder) pays premium to seller (writer of option)
– Holder has the right, but not obligation to perform; while write has
obligation
g to p
perform
– Asymmetrical pay-off profile
• Holder has limited loss (due to premium) and unlimited gain
• Writer has limited ggain and unlimited loss
Relationship between the strike price and the underlying
Strike price> Strike price> Strike price>
Underlying
y g Underlying
y g Underlying
y g
(spot price) (spot price) (spot price)
Holder of call Out-of-the-money At-the-money In-the-money
option
Holder of put In-the-money At-the-money Out-of-the-money
option
DJPU
• Fair value of option contract
Fair value of an option = Intrinsic value + Time value
Listed options = quoted price

Diminishes over time
Not traded options = Valuation
Zero at expiration
model ( Black-Scholes model)
Call option = Max [0, Notional amount x (Spot price – Strike Price)
Put option = Max [0, Notional amount x (Strike price – Spot Price)

DJPU
J U Embedded Derivatives
• Derivative that is part of a hybrid financial instrument
Hybrid Instrument
Host Instrument
Embedded derivative:
Linked to underlying and change in
underlying causes change in cash flow
• Example is bond whose ultimate proceed are linked to price of

commodity, such as oil, or to a consumer price index

DJPU
J U Split Accounting of Embedded Derivatives
• IAS 39 requires embedded derivatives to be separately recognized

from the host instrument and accounted for in the same way as a
stand-alone derivative if the following conditions are met:
Conditions for separation of embedded derivative
Economic Hybrid instrument is not

There is a separate
characteristics and risk measured at fair value,
instrument with same
of host instrument are with changes in fair
terms as the embedded
not closely related to value recognized in
derivative
that of the derivative profit and loss

DJPU
J U Accounting for Derivatives
Default accounting treatment for derivatives under IAS 39:

• Derivatives are classified under the Fair Value through Profit or
Loss category and changes in their fair values are taken to income
statement
• Exception - when a derivative is designated as a hedge of an
identified risk and the hedge is effective
effective. In this case
case, accounting for
the derivative follows hedge accounting rules

DJPU
J U Accounting for Forward Contract
At inception During life of contract Closing position or

at expiration
Dr Forward Contract Dr Cash
(asset)
Cr Gain on forward Cr Forward contract
contract
No jjournal entry y as or
fair value is nil
Dr Loss on forward Dr Forward contract
contract
Cr Forward Contract Cr Cash
(liability)
j
Adjust fair value and Close out and record
record gain/loss net settlement of
contract
DJPU
J U Accounting for Future Contract

at expiration
Dr Cash Dr Cash
Cr Gain on future Dr Gain on future
f t re
contract contract
Dr Margin deposit Cr Margin Contract
or
Cr Cash Dr Loss on futures Dr Cash
contract Cr Loss on future
Cr Cash contract
Cr Margin Contract
Record p payment
y of Record dailyy Close out and recover
initial margin deposit settlement of future margin deposit
contracts
DJPU
J U Purchased Option Contract

at expiration
Dr Option Contract Dr Cash*
Cr Gain on future Dr Gain on option
contract contract
Dr Option contract Cr Option Contract
(asset) or
Cr Cash Dr Loss on futures Dr Cash*
contract Cr Loss on option
Cr Option
p Contract contract
Cr Option Contract
(* assume expires in-the-money)
Record p payment
y of Adjust
j for fair value Close out and record
initial margin deposit and record gain/loss net settlement of
contract
DJPU
J U Written Option Contract

at expiration
Dr Option Contract Dr Option contract
Cr Gain on future Cr Gain on Option
contract Contract
Dr Cash (Expires out-of-the-
Cr Option contract or money)
(liability) Dr Loss on futures Dr Option contract
contract Dr Loss on option
Cr Option
p Contract Cr Cash
(Expires in-the-money)
Record p payment
y of Adjust
j for fair value Close out and record
initial margin deposit and record gain/loss net settlement of
contract
DJPU
J U Hedging
• Propose is to neutralize an exposed risk

– Loss on hedge item offset by gain on hedging instrument
– Reduce volatility than preserve gains
• Other ways of hedging through non-derivative derivatives

– Money market instruments (money market hedge)
– Natural hedge (offsetting foreign currency assets and liability in the
same currency)
• Special accounting rules called “hedge

hedge accounting
accounting” applies when
derivatives are used for hedging purposes

DJPU
J U Rationale of Hedge Accounting
• Arises because of the mismatch of income-offsetting

income offsetting effect between
hedged item and hedging instrument
• Situations requiring hedge accounting

– Hedge item and hedging instrument are measured using different bases
(One is at cost while the other is at fair value)
– Hedged item yet to be recognized in financial statement
– Different treatment for changes in fair value (changes taken to equity
while the other is taken to income statement)

DJPU
J U Risks That Qualify for Hedge Accounting
Interest rate risk Spec c risks

Specific s s Price risk
that qualify for
hedge accounting
Foreign exchange risk Credit risk
Risks must be specific risk, Possible for a derivative to

not general business risks hedge more than one risk

DJPU
J U
Qualifying Hedging Instruments
(IAS 39: 72 – 73)
• Instruments that qualify include:

– D
Designated
i t dd
derivatives
i ti ((exceptt written
itt options)
ti )
– Embedded Derivatives
– Designated non-derivatives financial asset/ liability that hedge
f i exchange
foreign h risks
i k onlyl
• Value used to determine hedge effectiveness
– If used in its entirety, fair value is used
– If broken into time value and intrinsic value, permissible to use
intrinsic value. However, it must be explicitly documented at
inception
• If derivative is used as a hedge of more than 1 risk
– Individual designated component must meet hedge accounting
criteria
– Permissible for portion of notional amount to be designated
DJPU
J U Qualifying
y g Hedged
g Items
(IAS 39: 78 -79)
Qualify Do not qualify
• Financial assets and liabilities • Held-to-maturity instruments

with exposure to changes in fair (regardless of fixed rate or
value variable rate)
• Non-financial assets exposed to • Investment in an associated

foreign exchange or price risks company
• Firm commitment
• Highly
g ypprobable forecast
transaction with exposures to
future cash flows
• Net investment in foreign entity

DJPU
J U
Criteria for Hedge Accounting
(IAS 39
39: 88)
C diti
Conditions tto b
be mett ffor h
hedge
d accounting
ti tto apply
l
Enterprise must have exposure to risk that affects income

statement
Derivative contract specifically entered to hedge underlying

exposure
Hedge must be highly effective
Effectiveness of hedge can be reliably measured
Hedging relationship must be formally documented at the

inception of the hedge

DJPU
J U Assessing Hedge Effectiveness
• IAS 39:9 - The degree to which changes in the fair value or cash
flows of the hedged item that is attributable to a hedged risk are
offset by changes in the fair value or cash flow of the hedging
instrument
• Hedge effectiveness is evaluated
– Prospectively on inception of hedge; and
– Retrospectively
p y on an ongoing
g g basis
• On inception, hedge effectiveness is assessed on
– Comparison of the principal or critical terms
– Historical analysis
– Correlation analysis

DJPU
J U Efektivitas Hedging
Efektifitas dihitung secara prospektif dan

retrospektif
H il aktual
Hasil kt l berada
b d dalam
d l ki
kisaran 80 -
125%
Seluruh lindung nilai yang tidak efektif
diakui dalam laporan L/R (termasuk
ketidakefektifan dalam kisaran 80 -125%)
DJPU
J U Efektivitas Hedging
Risks must be identifiable

Risk must be foreseeable
Risk must be realisticallyy measured
Precise attribution of hedging instrument to
hedged
g item
Reason:
p
Impact of hedging
g g in financial report
p should be
as neutral as possible
DJPU
J U Kriteria & Dokumentasi
Kriteria
Tdpt kebijakan tertulis, tujuan manajemen risiko &
strategi lindung nilai.
Hubungan
H b li d
lindung nilai
il i diharapkan
dih k efektif
f ktif utk
tk saling
li
menghapuskan perubahan nilai wajar.
Dokumentasi
Identifikasi hedged items vs hedging instruments.
Sifat risiko yang dilindungi
Strategi manajemen risiko dan lindung nilai
Penilaian efektifitas instrumen lindung nilai
DJPU
• During the duration of hedge, hedge effectiveness is assessed on

dollar-offset method:
• Hedge effectiveness ratio (HER):

Hedge effectiveness Changes in fair value or future cash flow of hedging instrument
=
(or delta ratio) Changes in fair value or future cash flow of hedged item
08
0.8 12
1.25
Effective hedge (IAS 39: AG 105b)

• Exceptions for effective hedge even if HER falls out of range
– IASS 39 a
allows
o s hedge
edge e
effectiveness
ect e ess to be assessed o on cu
cumulative
u at e bas
basis
s
if hedge is designated and conditions are properly documented

DJPU
• Exclusion of time value of certain derivatives to be excluded from

hedge relationship
– Derivative separated into 2 component
1. Time value (options) or interest (forwards)
2. Intrinsic (options) or spot element (forwards)
– Excluded time value taken to income statement as per default treatment
– Should result in highly effective hedge, as intrinsic/ spot component
moves in tandem with underlying, while time/interest component does
not
– If critical terms of hedging instruments and hedged item are exactly the
same, HER should be equal or around 1

DJPU
J U Classification of Hedging Relationships
Causes Explanation
Hedge of “the
the exposure to changes in fair value of a
Fair value recognized asset or liability or an unrecognized firm
hedge commitment, or an identified portion of such asset, liability
or firm commitment, which is attributable to a particular
risk
i k andd could
ld affect
ff t profit
fit or loss”
l ” (IAS 39
39:86a)
86 )
Hedge of “the exposure to variability in cash flows that
Cash flow (i) is attributable to a particular risk associated with a
hedge recognized i d assett or liliability
bilit ((such
h as allll or some ffuture
t
interest payment on variable debt instrument )or a highly
probable future transaction, and
((ii)) could affect p
profit or loss” ((IAS 39:86b))
Hedge of a net Hedge of the foreign currency risk associated with a

investment in a foreign operation whose financial statements are required
f i entity
foreign tit to be translated into the presentation currency of the
parent company
DJPU
J U Classification of Hedging Relationships
• The designation of a derivative as a fair value hedge or a cash flow

hedge is determined by the hedged risk, that is, whether the entity
has a fair value exposure or a cash flow exposure
• An exception where a derivative can be designated as either a fair

value hedge or a cash flow hedge is where the hedged risk is the
foreign exchange risk of a firm commitment

DJPU
J U Accounting for a Fair Value Hedge
Hedged Item (recognized asset

Hedging Instruments
or liability or firm commitment)
Change in fair value Change in fair value
Income statement
Gain (loss) on hedging instrument
offset loss (gain) on hedged item
Balance sheet
Change in fair value adjusted Change in fair value adjusted

against carrying amount against carrying amount

Illustration 1:
DJPU
J U Hedge of inventory (fair value
hedge)
Scenario
31/10/20x3
Inventory of 10,000 ounces of gold
Carried at cost of $3
$3,000,000
000 000 ($300 per ounce)
Price of gold was $352 per ounce
1/11/20x3
Sold forward contract on 10,000
10 000 ounce for forward price of $350 ounce
Forward contract matures on 31/3/20x4
31/12/20x3
F
Forwardd price
i ffor 31/3/20
31/3/20x4 4 contract
t t was $340 per ounce and
d spott price
i
of gold was $342 per ounce
Hedge effective ratio of 1 on 31/12/20x3

Illustration 1:
DJPU
hedge)
1/11/20x3
No entry or just a memorandum entry as the fair value of the forward
contract is nil
31/12/20 3
31/12/20x3
Dr Forward contract ………………. 100,000
Cr
C Gain on
Ga o forward
o a d contract
co t act ……... 100,000
00,000
Gain on forward contract: 10,000 x ($340 -$350) Taken to income
statement
Dr Loss on inventory ……………… 100 000
100,000
Cr Inventory ……………………….. 100,000
Gain on forward contract: 10,000 x ($342 - $352)

Illustration 1:
DJPU
31/3/20x4 hedge)
Inventory
y is sold to third-party
p y at $
$330 p
per ounce ((also maturity
y date of
forward contract
Dr Forward contract ………………. 100,000
Cr Gain on forward contract ……... 100 000
100,000
Gain on forward contract: 10,000 x ($330 -$340)
Dr Loss on inventory ……………… 120 000

120,000
Cr Inventory ……………………….. 120,000
Gain on forward contract: 10,000 x ($330 - $342)
Dr Cash …………………………….. 3,300,000

Cr Sales ……………………………. 3,300,000
Sale of inventory: 10,000
10 000 x $330

DJPU
J U Accounting for a Cash Flow Hedge
Effective Cash Flow Hedge (IAS

39:95)
Effective portion Ineffective portion

of gain/ loss of gain/ loss
Recognized
directly in equity
Recognized in profit
through statement
or loss
of changes in
equity

DJPU
J U Accounting for a Cash Flow Hedge
Cash flo
flow hedges are applicable to the following:
follo ing
Forecasted
transactions
Other
involving financial
transactions
andd non-financial
fi i l IInterest
t t rate
t
which affect
assets/liabilities swaps
future
which will result
cash flows
in cash inflow/
outflow

DJPU
J U Effective and ineffective portions
Scenario
1/1/20 1
1/1/20x1
Entered into futures contract to hedged forecast transaction at
30/4/20x1
Classified as cash flow hedge
Period ∆ in fair value ∆ in present value of

ending of future contracts expected future cash
flow
31/1/20x1 $100 $(105)
28/2/20x1 90 (80)
31/3/20x1 103 (105)
30/4/20x1 (38) 45

Illustration 2:
DJPU
J U Effective and ineffective portions of a
cash flow hedge
Determination of effective and ineffective portions of a cash flow hedge
Effective Ineffective
Lesser of portion portion
two credited/ credited/
Cumulative Cumulative cumulative (debited) (debited)
∆ in FV of ∆ in PV of amount in to equity in to income
future expected absolute current statement
Period contracts cash flow terms period in current
ending (a) (b) (c) ( period
31/1/20x1 $100 $(105) $100 $100 $0
28/2/20x1 190 ((185)) 185 85 5
31/3/20x1 293 (290) 290 105 (2)
30/4/20x1 255 (245) 245 (45) 7

Hedge of a Net Investment
DJPU
J U
i a Foreign
in F i Entity
E tit
• Hedge risk is foreign exchange risk

– Applies to foreign operations whose functional currencies are the
currencies of the country where the foreign operations are located
– Closing
g rate method may y result in significant
g translation loss from
depreciating currencies
• Accounting
g treatment similar to cash flow hedge
g
Cumulative change in fair value of hedging instrument (A)
Hedge effectiveness =
Cumulative translation difference on net investment (B)
– Hedge is effective if the delta ratio is between 0.8 and 1.25.

– Unlike a fair value hedge or a cash flow hedge, a non-derivative is
allowed to be the hedging instrument
instrument, for example
example, a foreign currency
loan.
DJPU
J U Hedge
g of a Net Investment in a Foreign
g Entity
y
Scenario
Functional currency is the dollar ($)
Acquired 100% interest in foreign company (functional currency is FC)
31/12/20x3
Exchange rate is $1.85 to FC1
Loan of FC1
FC1,200,000
200 000 at 5% interest taken to hedge foreign investment
Foreign currency translation reserves showed $15,000 (credit balance)
31/12/200x4
31/12/200
Exchange rate is $1.70 to FC1
Average rate is $1.78 to FC1
Foreign company reported net profit of FC380,000

DJPU
J U Hedge
g of a Net Investment in a Foreign
g Entity
y
Translation difference in foreign investment’s FS for 31/12/20x4
On net assets on 1/1/20x4 (FC 1,200,000 x $(1.70-1.85) ……. $(180,000)

On net profit for 20x4 (FC380,000 x $(1.70-1.85) …………….. (30,400)
Translation loss for 20x4 $(210,400)
Foreign currency translation reserves (credit balance) (195,400)
Journal entries for parent

31/12/20x3
Dr Cash …………………………….. 2 200 000
2,200,000
Cr Loan payable …………………... 2,200,000
The loan payable is designated as a hedge of the net investment:
FC1 200 000 x spott rate
FC1,200,000 t off $1
$1.85
85

DJPU
J U Hedge of a Net Investment in a Foreign Entity
31/12/20x4
Dr Interest expense
p ………………. 106,800
,
Cr Accrued interest ……………….. 106,800
Interest expense during the year at 5% x FC1,200,000 x $1.78
Dr Accrued interest ……………….. 106,800

Cr Cash …………………………….. 102,000
Taken to equity
Cr Exchange gain …………………. 4 800 to
4,800 t offset
ff t
Settlement of accrued interest at year-end translation loss
Dr Loan payable …………………... 180,000

Cr Foreign currency translation 180,000
reserves …………………………
Exchange gain on FC loan taken directly to equity:
FC 1,200,000 x ($1.70 - $1.85)
DJPU
J U Discontinuation or Termination
of Hedge Accounting
Consideration for discontinuation or termination of hedge accounting
Hedging instrument
Criteria for
has reached maturity Hedge designation
hedge accounting
date or is closed off or is revoked
is no longer met
terminated
Accounting treatment depends on type of hedge

DJPU
J U Penghentian Lindung Nilai
DJPU
J U Evaluation of Hedge Accounting
• Objective of hedge accounting

– Reflect effectiveness of hedging activities of a firm
– Reduce volatility of reported earnings
• Compliance with hedge accounting may result in considerable

expenditure of resources
• There are challenges in compliance with hedge accounting criteria

for macro hedges
• Issue is whether the additional costs of compliance more than offset

the benefit of applying hedge accounting

DJPU
J U Referensi
Tan & Lee Advance Financial Accounting, ch 9: Accounting
f Derivatives
for D i ti and
dHHedge
d A Accounting
ti
PSAK 50 dan 55
IAS 32 dan 39
International Financial Reporting Standards – Certificate
Learning Material The Institute of Chartered Accountants
Accountants,
England and Wales
Materi Public Hearing PSAK 55
dwimartani@yahoo.com atau martani@ui.ac.id
081318227080 / 08161932935
/

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Akuntansi

Derivatif dan Hedging

Presented : Dwi Martani

commodity price risk interest rate risk

Derivative securities, or simply derivatives,

 Sulit untuk mencari derivatif yang benar-benar

IAS 39:5 exempts contracts which meet the definition of a

 Instrumen keuangan atau kontrak lain

Example of derivative instruments and their underlying

Types of derivative Underlying Used by

Tan & Lee Chapter 9 ©2009 10

Fair Value Cash Flow Foreign

Fair Value Cash Flow Hedge of Net

Tan & Lee Chapter 9 ©2009 12

• An agreement between two parties (counterparties) whereby one

• Can either be a forward purchase contract or a forward sales

“Forward sales contract” “Forward purchase contract”

• Fair value of forward contract:

• A future contract is similar to a forward contract except that it is a

• Futures contracts are marked-to-market and settled on a daily basis

• Futures contracts require payment of a margin deposit which has to

• Wide range of exchange-traded future contracts

Tan & Lee Chapter 9 ©2009 15

• 2 type of option contracts

• Can be American option (exercisable anytime to expiration) or

• Can also be customized (not traded) or standard contract quoted on

Tan & Lee Chapter 9 ©2009 16

• Fair value of option contract

Fair value of an option = Intrinsic value + Time value

Listed options = quoted price

Tan & Lee Chapter 9 ©2009 18

• Derivative that is part of a hybrid financial instrument

• Example is bond whose ultimate proceed are linked to price of

Tan & Lee Chapter 9 ©2009 19

• IAS 39 requires embedded derivatives to be separately recognized

Conditions for separation of embedded derivative

Economic Hybrid instrument is not

Tan & Lee Chapter 9 ©2009 20

Default accounting treatment for derivatives under IAS 39:

Tan & Lee Chapter 9 ©2009 21

At inception During life of contract Closing position or

At inception During life of contract Closing position or

At inception During life of contract Closing position or

At inception During life of contract Closing position or

• Propose is to neutralize an exposed risk

• Other ways of hedging through non-derivative derivatives

• Special accounting rules called “hedge

Tan & Lee Chapter 9 ©2009 26

• Arises because of the mismatch of income-offsetting

• Situations requiring hedge accounting

Tan & Lee Chapter 9 ©2009 27

Interest rate risk Spec c risks

Risks must be specific risk, Possible for a derivative to

Tan & Lee Chapter 9 ©2009 28

• Instruments that qualify include:

Qualify Do not qualify

• Financial assets and liabilities • Held-to-maturity instruments

• Non-financial assets exposed to • Investment in an associated

• Net investment in foreign entity

Tan & Lee Chapter 9 ©2009 30

Enterprise must have exposure to risk that affects income

Derivative contract specifically entered to hedge underlying

Effectiveness of hedge can be reliably measured

Sulit untuk mencari derivatif yang benar-benar

Instrumen keuangan atau kontrak lain

Efektifitas dihitung secara prospektif dan

Risks must be identifiable