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Don’t Let Derivative Accounting Hold You Back

Derivative accounting – or “hedge accounting,” if you prefer – is hard. There are no two ways about it; accounting for derivative instruments and hedging activities is a highly specialized skillset possessed by only a small minority of accountants.

While that may be the case, however, a lack of derivative accounting resources should not hold your organization back from hedging foreign currency. Even if you don’t have this particular expertise in-house, there are ways to get it – enabling you to enjoy the benefits of an effective FX hedge program.

Why Hedge Foreign Currency?

If your company does business internationally, there’s a very good chance you understand why hedging FX is important. If your foreign currency assets are not hedged, you are at the mercy of the market. FX volatility would impact you directly; gains and losses would come essentially randomly, at no fault of your own – harming predictability and drastically impacting the accuracy of forecasts.

Of course, understanding why hedging is important and actually implementing an FX hedge program are very different things. The former is easy; the latter is often waylaid by the seemingly insurmountable obstacle that is derivative accounting.

Know Who To Call

I said it before, I’ll say it again: Derivative accounting is hard. It’s a learned skill, and it’s certainly a difficult one for a general corporate accountant – who already has a full plate evaluating new revenue recognition rules and meeting segment reporting requirements – to pick up. And even if they can do it well, should it be their responsibility to explain their work to the C-suite or an auditor? Probably not.

Does that mean you need to bring on an FTE with a derivative accounting specialization to even think about embarking on an FX hedge program? Absolutely not!

At Hedge Trackers, we offer two options for corporations like these.

One possibility is simply outsourcing derivative accounting functions. We employ a team of highly specialized – and highly experienced – derivative accountants. It’s their job to handle these functions for companies that don’t have the expertise in-house, and don’t have the resources to build it. Best of all, they do it seamlessly – working as an extension of your existing team.

If you prefer to keep hedge accounting functions within your four walls, our consultants would be happy to help you set up your FX hedge program, then deploy CapellaFX, our industry-leading hedge program management software. Capella is designed to be easy to learn and use, making it the ideal solution for finance suites with plenty on their plate already.

Need a hand in a pinch, like when Accounting’s primary Capella user is out of work for an extended period, or an auditor is heading in? That’s no problem; we’re happy to pitch in. Our goal is to help clients succeed – period.

So don’t let the derivative accounting learning curve hold you back. You should be hedging foreign currency – chances are, you already know that. Let us know how Hedge Trackers can help; contact us today, or call 408-350-8580.