Expert derivative accounting application reduces commodity compliance risk significantly
Many companies “get by” with only a marginal understanding of derivative accounting requirements and therefore only experience marginal compliance. Hedge Trackers’ consultants reduce company compliance risk significantly by setting up the accounting to ensure ASC 815-compliant commodity hedging programs.
Cash flow and fair value commodity price risk hedging is the most sophisticated application of the 1,000+ pages of ASC 815 (formerly FAS 133) because only overall change in purchase price or sales price of the physical asset to its delivered location is allowed to be considered for hedging such risk. We’ve read the guidance, re-read it, and we’ve incorporated the interpretive guidance provided by the Big 4 accounting firms into our accounting approach.
Strategy, documentation and implementation
- Identify achievable objectives and strategies for a commodity risk management program
- Ensure documentation and disclosure requirements are addressed
- Contemplate all the potential sources of ineffectiveness for testing and measuring “overall changes” in your exposures
- Outline control structures
- Design repeatable procedures to capture operational data required for both like items and retrospective/prospective effectiveness testing
- Develop designation documentation to leverage existing trading processes and procedures
Additional services, including derivative accounting preparation, are reviewed under Commodities Outsourcing Services.