Hedge Accounting FASB Exposure Draft: Implications for Financial Institutions September 2016 On September 8, 2016, the FASB released an exposure draft to better align economic results of an entity’s risk management activities with its financial reporting and to make targeted improvements to simplify hedge accounting. This Bulletin provides an overview of the proposed changes to Accounting Standards Codification (ASC) 815, Derivatives and Hedging that are relevant to Financial Institutions. Refer to our Bulletin from August 31, 2016 for a high level summary. Download Our Full Review of the Exposure Draft Here

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Hedge Accounting FASB Update August 2016 In July 2015, we provided an update about the FASB’s project to change the hedge accounting rules. The FASB has been working on hedge accounting for over a year and expects the exposure draft to be published any day. The Board has proposed several changes that are primarily intended to better align the economics of hedging with the reported accounting results. This bulletin summarizes the key decisions the FASB has made over the past year that are relevant to financial institutions. Download This Bulletin

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In this week’s installment, Part III and our final installment of our series, we look at the impact hedge accounting rules and changes can have on your hedging program in 2014. In Part II, we looked derivatives regulation on your hedging program, and in Part I,  Fed Policy and its impact on hedging programs. Part III: Hedge Accounting. Several key developments in the world of hedge accounting last year could impact your derivatives and hedging programs this year. First, the FASB approved in July 2013 the use of the Fed Funds Effective Rate (or OIS) as a benchmark interest rate, which along with LIBOR and Treasury rates can now receive favorable hedge accounting treatment under many routine hedging strategies. This is great news for entities with floating-rate assets or liabilities indexed to the Fed Funds Effective Rate, as it simplifies their ability to hedge their…

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Valuation Failure to properly measure the fair value of a derivative can result in significant losses over the life of the instrument. Using outdated valuation modeling techniques or simply not understanding how derivative fair values are measured often lead to additional scrutiny from management, auditors and regulators, further increasing costs to the company. Knowledge and experience: Chatham has vast experience in derivative pricing. For more than 20 years, we have assisted our clients by injecting transparency into the pricing process. Using proprietary valuation models, honed and refined by our in-house quantitative experts, we execute more than $2 billion of derivative notional globally on a daily basis. By routinely engaging in market hedging transactions, Chatham gains tremendous insight into where transactions are currently being priced. We are able to share that information with clients to help them obtain the best pricing…

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Hedge Accounting Hedge accounting standards under US GAAP and IFRS are nuanced. Since accounting standards are subject to significant interpretation and judgment, complying with the requirements takes knowledge and experience. Since 2000, Chatham has assisted companies with navigating the complexities of ASC 815 and IAS 39/IFRS 9. We help properly align the accounting and economics of tens of thousands of transactions for over 500 clients annually. We customize hedge accounting solutions for each client and reduce complexity and administrative burdens through technical consulting, analysis, technology, education and key hedge accounting deliverables. Strong team of in-house practitioners: Chatham leads the industry in hedge accounting. Our reputation is based on setting a high standard and attracting the very best accounting practitioners. Members of our team come from the Big Four, including national practice groups, and several worked at the FASB, including work…

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The right hedge accounting can reduce volatility in your financials As a real estate company filing with the SEC or providing transparency to investors, you are responsible for financial reporting. If you’re hedging you have sensitivity to the resulting volatility in earnings, and you can benefit from hedge accounting that navigates standards from the FASB and IAS and aligns under US GAAP and IFRS. Chatham Financial pioneered the gold standard in hedge accounting for real estate companies when derivatives were first introduced. Our solutions are why most REITs applying hedge accounting use Chatham as their hedge accounting partner. How Chatham Hedge Accounting helps real estate companies We align optimal economic hedging and favorable hedge accounting: Our expertise in both structuring transactions and interpreting the nuances of the hedge accounting standards enable us to optimize accounting results. With a primary objective…

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Chatham Financial Comments on FASB’s Proposal on Financial Instruments and Hedge Accounting September 29, 2010 We recently provided our views to the FASB on its controversial proposal to modify the accounting for financial instruments, including revisions to the accounting for derivatives and hedging activities. With respect to financial instruments in general, we continue to believe that both fair value and amortized cost have merit, and we share the concerns of most constituents that the FASB proposal goes too far with fair value as the primary measurement attribute for nearly all financial instruments. As for derivatives and hedging, we agree with certain provisions of the proposal, including reducing the standard for hedge qualification from “highly effective” to “reasonably effective.” However, we have serious concerns about the FASB’s proposed prohibition against removing the designation of an effective hedge (no more de-designations) and…

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