Derivative Accounting Principles and Rules

1
Derivative AccountingPrinciples and Rules

• Derivative Instrument -- Fair Value
• Gain or Loss -- Recognized in Income Statement

2
Fair Value Hedge

• Example Swap from Fixed Rate Mortgage to
  Variable Rate Mortgage
• Accounting Rules
• Derivative Instrument
• Valuation Fair Value
• Gain or Loss Recognized in Income
  Statement

3
Fair Value Hedge

• Derivative Instrument
• Valuation Fair Value
• Gain or Loss Recognized in I/S
• Underlying Financial Instrument
• Valuation From Modified Cost
• To Fair Value
• Gain or Loss Recognized in I/S

4
Fair Value Hedge

• Effective Hedge No Gain or Loss
• Ineffective Hedge Gain or Loss Recognized
• in Income Statement
• Partial Hedge Effective Vs Ineffective