About the Course
CAFTA’s Certificate in Treasury Hedge Accounting (CTHA) is a course for participants who want to understand detailed concepts of IFRS 9/Ind AS 109, widely used hedge accounting strategies and its real-world application in treasury domain.
This hedge accounting course uses a practical approach through a discussion of various use cases, challenges faced in application of the hedge accounting and potential solutions.
After attending the program:
- You will be able to apply hedge accounting to your derivative transactions and explain the principles to senior stakeholders
- In a client facing role, you will be able to explain your clients the benefits / impacts of hedge accounting and the derivative transactions
Program highlights
Overview of derivatives
- Need and use of derivatives
- Various types of derivative instruments available for hedging
- Understand how derivatives affect financial statements
- Classification and accounting of derivatives instruments and its impact on financial statements
Objective and need for hedge accounting
- Hedge accounting’s application by companies to
- Align risk management activities to reflect in accounting
- Reduce volatility in P&L statement
- Mitigate accounting mismatch in measurement of financial Instruments
Application of hedge accounting in practice
- Types of permitted hedge relationship such as Cashflow hedge, Fair Value hedge and Net investment hedge
- Accounting implications of each hedge relationship
- Pre-requisites of application of hedge accounting
- Hedged item, hedging instruments, risk components, Layering etc
- Eligibility criteria for designation in hedge relationship
- Key aspects of hedge documentation
- Hedge effectiveness testing requirements
- Apply hedge accounting to different components of hedging instruments (forwards and options)
- Criteria for highly probable forecast transactions
Hedge effectiveness methodologies
- Concepts of economic relationship, hypothetical derivatives, rebalancing and hedge ratio
- Different methods of assessing hedge effectiveness: Critical terms method, Dollar offset method, regression method
- Key aspects while performing effectiveness testing
- Role of credit risk in assessment of hedge effectiveness testing
- Hedge accounting for rollover hedging strategy
- Rebalancing of hedged item and hedged instrument
Discontinuation of hedge accounting
- Scenarios which result in discontinuation of hedge accounting
- Impact of discontinuation of hedge relationship
Practical scenarios in hedge accounting
- Common challenges in application of hedge accounting such as mismatch in critical terms, hedge designation post trade date, etc.
Case studies
- Currency risk: Designation of forward contract for hedge against highly probable sales
- Currency and interest rate risk: Designation of cross currency interest rate swap (CCIRS) against external commercial borrowing
- Commodity price risk: Designation of commodity futures contract against inventory
- Currency risk: Designation of currency option contract against foreign currency term loan
- Currency risk at subsidiary entity: Designation of Non-derivative financial instrument against net assets of a subsidiary
Program schedule
- 8+ hours of recorded videos
- 3 hours of live classroom interaction
- Templates and case studies
- 4 hours of CAFTA's FRM module recorded on-demand
Who should attend?
- Treasury manager/Treasury front-office
- Treasury back office/accounting professionals
- Finance manager/Finance controller
- Internal/External auditor
- Treasury/Derivative sales professional
- Finance professionals interested derivatives and hedge accounting
Benefits on attending the program
- Understand accounting impact of derivative / risk management strategies
- Appropriately reflect risk management strategy in financial reporting
- Use hedge accounting principals on derivatives to protect P&L volatility
- Advice clients on appropriate derivatives in line with hedge accounting principles
- Identify how derivatives are reflected in company's financial statements
- Recognize links between risk management practices and financial reporting