Balance sheet hedging. Short introduction of our Know-How

IAS (International Accounting Standard) 21 directs that on every balance sheet date, assets and liabilities denominated in other than the functional currency be remeasured using the current rate. The Gain/Loss created by differences in the current rate and the prior rate is fixed to the Income statement. This income statement volatility is often undesirable for the management.

Balance sheet hedging is the use of FX derivatives to offset this gain or loss, and minimize unnecessary impact on the income statement.

The challenge in balance sheet hedging is determining the timing and notional size of the hedge. Forecasting local currency net monetary assets (NMA), and managing the required hedges is not an easy task.

AccuHedge.Solutions has engineered a balance sheet hedging protocol which:

Accurately forecasts the exposure and provides required hedge specifications. Generates complete reports of results (remeasurement and hedge Gain/Loss) and a variance report (source and size of variances).

The most important - it is very low workload - a few minutes, two days per month Integrates seamlessly with other cash flow hedging programs.

Interested?

Feel free to ask questions for Dainius: dainius@accuhedge.solutions