International Finance and Accounting Handbook

In total, there are five different accounting treatments, depending on how the
hedge is terminated and what kind of hedge it is:

1.An FV hedge fails the highly effective assessment (Paragraph 26).

• Amounts previously recorded as of the last assessment (which was highly ef-
  fective) remain deferred. If it is known exactly when the FV hedge failed the
  highly effective test, can defer the change in fair value on the hedged item up
  to the last day (week, month, etc.), it was highly effective.


• If it is not known when exactly the hedge failed, then there is no marking-to-
  market of the hedged item for the current period, and the entire current period
  change in fair value of the hedge instrument goes to P&L (Paragraph 26).
  2.The firm commitment side of an FV hedge is no longer firm or the FV hedged
  item no longer exists (Paragraph 26).


• Any amounts recorded on the balance sheet related to the change in fair value
  of the hedged itemare reversed out to P&L (Paragraph 26).


• Per Paragraph 44.a.(2), this is an annual report footnote disclosure item.
  3.A CF hedge fails the highly effective assessment (Paragraph 32.b.).


• Amounts previously recorded in AOCI as of the last assessment (which was
  highly effective) remain deferred. If it is known exactly when the CF hedge
  failed the highly effective test can defer the change in fair value on the hedged
  item in AOCI up to the last day (week, month, etc.) it was highly effective.


• If it is not known when exactly the hedge failed, then there is no adjustment
  to AOCI, and the entire current period change in fair value of the hedge in-
  strument goes to P&L (Paragraph 32).

19.6 TERMINATION EVENTS 19 • 7

Exhibit 19.1 FAS 133 Hedge Types.

© 2001 Greenwich Treasury Advisors LLC

Cash Flow

Hedges

Fair Value

Hedges

Foreign

Currency

Hedges

• Floating-rate assets


• Floating-rate liabilities


• Forecasted commodity
  transactions
  
  
  • Fixed-rate assets
  
  
  • Fixed-rate liabilities
  
  
  • Firm commitments
  
  
  • FX-denominated
    debt and AFS
    securities
  
  
  
  


• FX-Denominated forecasted
  third party or interco
  transactions

Foreign currency firm commitments

Net Investment

Hedges of

Foreign Units