Energy Overview & Services
The energy market includes the following commodities: crude oil, ethanol, natural gas, electricity, heating oil, gasoline and coal. Most energy commodities can be traded using futures contracts on an exchange, with a handful also utilizing options in addition to the futures contracts.
Energy trading is a large global business with billions in notional amount traded among the producers, users of the products, and speculators. Several common commodities make up the energy market such as: coal, gasoline, heating oil, natural gas, crude oil, ethanol, and electricity. Most energy commodities are traded on an exchange using futures contracts or using futures contracts with options.
Valuation and Hedge Accounting Services for Commodities
HedgeStar provides valuation and hedge accounting services to entities of all types that utilize the commodities markets to hedge risks.
Fair Value (ASC 820) of Commodity Contracts
HedgeStar calculates the fair value as defined under ASC 820 of all types of commodity contracts, including futures, forwards, options, and swaps. To measure fair value, HedgeStar uses methodologies that are vetted and accepted by auditors. Our valuation methods use observable market data in combination with proprietary pricing models to arrive at risk-adjusted fair values as required under ASC 820. HedgeStar analyzes the underlying instrument to verify its asset classification and to decide which methodology is best suited for accurately determining the exit price of each commodity contract.
ASC 815 Hedge Accounting Services
For FASB reporting entities that hedge commodities, HedgeStar provides hedge accounting analytics to measure hedge effectiveness and provides supporting documentation that is required by auditors. HedgeStar also provides on-going analysis and journal entries for hedge accounting clients.
GASB 53 Hedge Accounting Services
HedgeStar provides a full range of services related to GASB 53, which requires that governments measure derivative instruments at fair value in their financial statements. HedgeStar’s GASB 53 services include: hedge effectiveness testing, preparation of a compliance report for annual financial statements that includes a summary of the testing methodology and assumptions used, and an independent fair value calculation of each derivative in a client’s portfolio.