Derivatives accounting and tax

Derivatives Accounting and Valuations Support

Accounting and tax implications of hedges are increasingly important when considering hedging choices. Vedanta Hedging assists many clients to achieve the desired accounting and tax outcomes when devising a hedging strategy.

We support our clients in accounting for derivatives under IFRS (IAS39, IFRS9, IFRS7), UKGaap (FRS102), USGaap and similar accounting standards. Specifically, we help with:

• Pre and post-transaction accounting analysis and discussions with stakeholders, particularly relevant in the context of refinancing or restructuring/amendments of derivative portfolios
• Post-trade periodic (monthly, quarterly, annually) calculations of derivatives’ fair values, with or without BCVA (Credit Valuation Adjustments), as per IFRS13
• Support with Hedge Accounting: drafting of Hedge Relationships, effectiveness assessments, ineffectiveness quantifications
• Year-end derivatives disclosures (IFRS7): quantitative and qualitative analysis, like sensitivity analysis and liquidity (cash flow buckets analysis)
• Year end audit requests and support with external auditors’ questions
• Fair value calculations of fixed and floating rate loans

The tax implications of dealing into hedges may seem overly complex for many accounting and tax teams. We help our clients to understand the use of derivatives and provide them with the necessary input to achieve their required tax objectives.

EMIR Regulatory Compliance and Libor Replacement

The OTC derivatives market in Europe has undergone significant change as a result of global financial regulatory reforms under the European Market Infrastructure Regulation (EMIR). At the same time, the upcoming replacement of Libor as the reference rate for liabilities and derivatives further complicates the use of derivatives as a tool for hedging risk. Companies need to change their derivatives-related documentation, policies and procedures, as well as risk management strategies and operations, with significant pricing and accounting if not done properly and timely.

Vedanta Hedging has the expertise to be able to remove the burden of these regulatory issues.

Whether your business uses derivatives to hedge risk daily or once a year, Vedanta Hedging can simplify and clarify the process of compliance.

Email: pcarballo@vedantahedging.com

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