Futures / options
Can anyone respond to my email below?
Thanks and regards
Catherine
Hi
I would need your assistance on how to account for futures/options in the financial statements.
Thanking you in advance for your kind assistance.
Regards
Catherine
Catherine,
Have you looked at IAS39 already, because depending on that you can or cannot apply hedge accounting. Basically you have 2 methods either Cashflow hedging or fair value hedging. If you want to do hedge accounting you will be required to do a lot of prospective and retrospective testing to prove the effectiveness of your hedges. If you don’t do hedge accounting the Fair value result on futures and options will flow directly in to P&L. Hope this helps.
Best regards,
John
Catherine
You account for futures and options at their fair value with changes in PL unless classified as hedging instruments. Margins for futures and premiums for options are transaction costs recognized in PLtogether with changes on fair value.
Best regards
A. Desssnti
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Hi,
I also have questions about hedge accounting.
What is the difference between prospective and retrospective test?
From the standard, prospective is justify justify an expectation that the relationship will be highly effective over future periods whereas the retrospctive to show hedging entity must determine whether the hedging relationship has been highly effective.
However, how this could be done in practise? What is exactly required to be calculated? Any templates, examples?
Many thanks!
Chloe
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