The module incorporates the newly issued hedge accounting standards
Derivative Path has announced the release of its Hedge Accounting application supplementing its DerivativeEDGETM platform. This Software as a Service (SaaS) platform provides hedge accounting compliance and reporting functions that fully support the new hedge accounting rules of ASU 2017-12, published by the Financial Accounting Standards Board on August 28, 2017.
While the new hedge accounting rules are generally effective in 2019, early adoption has been an important strategic consideration in 2018. Immediate and drastic strategy benefits are available under the new guidance and compliance requirements are less burdensome. For example, hedge effectiveness assessments are substantially simplified and more hedging strategies such as partial term fair value hedges and component hedging can now qualify.
The new standards more closely align fair value measurements of a hedge with the exposure hedged and in the case of a cash flow hedge, ineffectiveness may no longer be required to be reported, disclosed or recognized. Measurement of hedged items can now be based on changes in a designated benchmark rate or a variable contractually specified interest rate that provides for a smoother earnings impact over multiple accounting periods. Time value amortization under the new systematic and rational alternative is also supported as well as other simplification provisions contained in the new rules.
Many Derivative Path clients have already adopted ASU 2017-12 so they can benefit from the broader set of qualifying risk management strategies for existing or new hedging relationships. Derivative Path can assist clients in uploading their current hedge accounting relationships into DerivativeEDGE, evaluating their current risk management strategies, and analyzing the impact of the new hedge accounting provisions on their hedging program to help clients make an effective transition. The firm can also help in calculating necessary transition adjustment journal entries, conforming client hedge documentation to the new rules and assisting the client’s accounting department in understanding all the implications.
DerivativeEDGE is a cloud-based platform designed and built to facilitate the management of interest rate derivative portfolios. It is a state of the art derivative trading platform which automates key aspects of clients’ derivative operations and the tasks necessary from a trade servicing standpoint as well. The platform provides a company the confidence to operate a hedging program fully compliant with the requirements of its regulators/auditors.
DerivativeEDGE supports a multitude of interest rate derivative products including Interest Rate Swaps, Caps, Floors, Collars, Cancelable Instruments, Swaptions and Interest Rate Swaps with embedded options. The hedge accounting application matches these hedging instruments with an entity’s financial exposure and provides robust effectiveness assessments using regression analysis and other statistical assessment methods when needed. It also automates hedge inception documentation and all month-end valuations and journal entries. Fair value measurements are based on observable market inputs and the SSAE 16 SOC 1, Type 2 report provides assurance that user information is confidential and secure.
