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Basic Principles of Hedge Accounting

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  • Bunea-Bontaş, Cristina Aurora

Abstract

The development of the capital markets increases the key role of the financial manager both in using the new techniques for administrating the risks and in assessing hedge effectiveness. Risk means possible uncertainty regarding cash flows, influencing the fair value of assets and liabilities or the value of cash flow relating to future transactions of the entity. This article emphasizes that possible financial risk in international business, like as price risk, credit risk, risk of liquidity, can be hedged using financial instruments, especially derivatives, like as forward, futures, options and swaps. The accounting treatment for these instruments is presented in accordance to the basic principles of hedge accounting imposed by IAS 39. Additionally, there are references to the most important requirements regarding the accounting rules regarding recognition and measurement of hedged derivatives according to the Romanian regulations.

Suggested Citation

  • Bunea-Bontaş, Cristina Aurora, 2009. "Basic Principles of Hedge Accounting," MPRA Paper 17072, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:17072
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    File URL: https://mpra.ub.uni-muenchen.de/17072/1/MPRA_paper_17072.pdf
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    References listed on IDEAS

    as
    1. Rossi, Alessandro & Canpolongo, Francesca & Bichisao, Guido, 2002. "Hedge Accounting Within Ias 39," Economic and Financial Reports 2002/2, European Investment Bank, Economics Department.
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    Cited by:

    1. Bunea-Bontaş, Cristina Aurora & Petre, Mihaela Cosmina & Culiţă, Gica, 2009. "Issues on Hedge Effectiveness Testing," MPRA Paper 18131, University Library of Munich, Germany.

    More about this item

    Keywords

    hedge derivatives; fair value; hedge accounting; hedge effectiveness; risk management;

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • F30 - International Economics - - International Finance - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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