Case Study: Implementing an FX Hedge Program & SaaS Deployment In Days
Here at Hedge Trackers, we’ve helped hundreds of companies establish foreign currency hedge programs. We’re proud of all of our engagements – particularly since no public company has ever been required to restate their earnings due to our derivative accounting or reporting practices.
Occasionally, however, an engagement stands out – like the one described below.
Starting a Hedge Program – Fast
The client described here is a mid-sized corporation doing business across North America and Mexico. Keen on mitigating their FX risk for planning purposes, Accounting & Treasury personnel at the company had various informational conversations with Hedge Trackers – over the course of a year – about the possibility of establishing an FX hedge program. Actually establishing one, however, had never risen to the top of their list of priorities.
Things changed with one phone call to Hedge Trackers in late 2014. The corporation had become concerned with its exposure to Mexican peso volatility, and at the request of management had entered into a series of derivative contracts. Ready or not, their FX hedge program was in place – and the clock was ticking if they wanted to designate these hedges as cash flow hedges under ASC 815.
That’s where Hedge Trackers’ consulting team and the CapellaFX hedge program management software solution – came in.
Hitting the Deadline
In a typical engagement, Hedge Trackers consultants visit the client on-site to evaluate and discuss their FX exposures and help them determine a sustainable, best-practices plan to address their needs. In this case, however, the client was fairly well educated on their needs and wants, and felt confident enough to hedge first and ask Hedge Trackers for assistance later.
That put the pressure on Hedge Trackers and CapellaFX software to come through in the clutch. The peso hedges needed to be designated under ASC 815 as cash flow hedges, tested for effectiveness, and loaded into Capella for accounting purposes. If that wasn’t enough, GAAP requires these designations to be completed contemporaneously (common practice is that designations be completed within two business days). The consequences of this not happening would have been decidedly negative because they would have had to mark the derivatives to market through income creating more, not less, volatility. Essentially, the entire point of the hedge would have been made moot.
Hedge Trackers jumped into action and began deploying CapellaFX, our industry-leading hedge accounting SaaS tool, with the client’s information. Including system setup, effectiveness testing and designations, the entire process took just eight hours.
A week later, consultants were back on-site to help train the client on CapellaFX, ASC 815 nuances, and answer live questions from their audit firm. Everything held up: the client qualified for hedge accounting and passed their audit.
Doing What It Takes
Simply put, some consulting firms wouldn’t have cared: “This wasn’t part of the plan. You’re on your own.” Fortunately for the aforementioned client, Hedge Trackers operates in quite the opposite fashion. We take personal pride in our clients’ success – and we’re willing to do what it takes to make that success happen.
Want to learn more about what we can do for you? Contact us today, or call 408-350-8580.