Commodities

Skillful hedging protects margins —
skillful hedge accounting proves it

When it comes to managing commodity price risk, corporations understand their exposures, the hedging instruments, and the economics of commodity hedging. At Hedge Trackers, LLC, we understand how to navigate the complex world of derivative accounting, and we know how to implement special hedge accounting to align the timing and income statement geography of derivative gains and losses in your financial statements to support the economics.

Since bifurcation of commodity price risk is not allowed under ASC 815 (formerly FAS 133), we work with companies to capture and quantify the “overall” change in the underlying exposure driving the derivative accounting designation. Once collected, this overall change provides the foundation for designing appropriate strategies like item testing, hedge effectiveness assessment and measurement protocols. These assessments and measurements are critical to hedge accounting compliance. Frequently, we can rearrange structured derivatives into relationships that separately, or in pairs, qualify for hedge accounting.

Hedge Trackers has successfully provided effectiveness testing (including like items/portfolio/pooling testing), effectiveness measurement, accounting entries, and disclosure reporting for hedges of agricultural, energy, precious and non-ferrous metal commodities. Additionally, we can help evaluate whether to elect Normal Purchase/Normal Sale accounting treatment for firmly committed contracts or to implement hedge strategies to mitigate the profit and loss impact of related derivatives without applying burdensome hedge accounting.

We also offer consulting on the practical aspects of implementing ASC 815 (formerly FAS 133), outsourced derivative accounting entries, as well as commodity focused in-depth training on derivative accounting and hedge accounting requirements.

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