Thus, the definition of a
derivative instrument used in Statement 53 is based on the "essential characteristics" approach.
This Statement changes the disclosure requirements for
derivative instruments and hedging activities.
The Governmental Accounting Standards Board (GASB) today issued its Guide to Implementation of Statement 53 on
Derivative Instruments.
To be characterized as effective, the
derivative instrument must have the ability to offset between 80% and 125% of the changes in the fair value or cash flows of the hedged item.
By requiring the fair values of
derivative instruments to be reported on the face of financial statements prepared using the accrual basis of accounting, Statement 53 brings additional transparency to those transactions," said Robert Attmore, chairman of the GASB.
While the vast majority of organizations responding require a specific assessment of the risks being managed for
derivative instruments to qualify for special treatment, practice varied in the criteria organizations use to define and evaluate risk and the business levels at which risks are measured.
As a result of this accounting assessment, NJR has determined that certain of these
derivative instruments associated with its unregulated subsidiaries did not qualify as "cash flow hedges" under SFAS 133 and, as such, the change in the fair value of these instruments must be reflected in its consolidated statements of income.
Can the entity begin to use new strategies or
derivative instruments that will now qualify as hedges under Statement no.
Under the Funds' amended investment policies approved by the Boards of Directors, each Fund may use a variety of
derivative instruments for investment purposes as well as for hedging or risk-management purposes.
A
derivative instrument does not require an initial net investment in the contract that is equal to the notional amount (or the notional amount plus a premium or minus a discount) or that is determined by applying the notional amount to the underlying.
09 per share) in the first quarter of 2010, which included unrealised gains on
derivative instruments of USD2.
IFIs aim to utilise
derivative instruments to hedge against risk and to improve risk monitoring practices.
