Title

Implementation of SFAS 138, Amendments to SFAS 133

Document Type

Article

Publication Date

2001

Department

Accounting and Finance

Abstract

FASB issued Statement No. 133 to achieve its objective of measuring all financial assets and liabilities on company balance sheets at fair value. Hedge designations are critical. Each hedging relationship should fit into the overall risk management objective and strategy documented in the company's risk management philosophy. To qualify for hedge accounting, an entity must demonstrate a hedging relationship to be highly effective in achieving offsetting changes in fair value or cash flows for the risk being hedged. Hedge ineffectiveness can lead to earnings and equity volatility. Statement No. 133 alters the existing condition of derivatives.