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
IFIs aim to utilise derivative instruments
to hedge against risk and to improve risk monitoring practices.