ASC 815 (FAS 133)
Hedge Effectiveness Testing and Documentation for ASC 815 (FAS 133)
Hedge HedgeStar provides full range of services to companies that elect to utilize the hedging provisions of ASC 815 (FAS 133) to record their derivative transactions. Services provided to our clients include: preparation of hedge documentation, mathematical testing of initial effectiveness, periodic evaluations of on-going effectiveness, and preparation of journal entries to be used to record the derivative in the client’s financial records.
ASC 815 (FAS 133) Accounting for Derivative Instruments and Hedging Activities is a comprehensive accounting standard that was originally issued in 2001 and provides entities with guidelines and requirements for measuring hedge effectiveness for derivative instruments. Generally, if a derivative is a hedge, the gains and losses associated with periodic changes in value will flow through other comprehensive income rather than be recognized in earnings immediately. ASC 815 (FAS 133) is not mandatory; it is elected by the company if the company decides to classify its derivatives as hedges.
Valuation Services and ASC 815 (FAS 133)
HedgeStar performs valuations on hedging derivatives that meet the rigorous reporting standards in today’s market. In addition we perform all of the ASC 815 (FAS 133) hedge effectiveness calculations and provide a report to our clients that can be used to prove the hedging relationship to their auditors.
Our services include:
Creation of the initial hedge documentation (a hedge designation memorandum)
Initial effectiveness testing
Retrospective and prospective testing using permitted testing methodologies (regression or dollar offset)
Ongoing testing period to period
Additional disclosure in financial statements