CAFTA’s Certificate in Treasury Hedge Accounting (CTHA) is a course for participants who want to understand detailed concepts of IFRS 9/Ind AS 109, widely used hedge accounting strategies and its real-world application in treasury domain.

This hedge accounting course uses a practical approach through a discussion of various use cases, challenges faced in application of the hedge accounting and potential solutions.

After attending the program:

• You will be able to apply hedge accounting to your derivative transactions and explain the principles to senior stakeholders
• In a client facing role, you will be able to explain your clients the benefits / impacts of hedge accounting and the derivative transactions

Program highlights

Overview of derivatives

• Need and use of derivatives
• Various types of derivative instruments available for hedging
• Understand how derivatives affect financial statements
• Classification and accounting of derivatives instruments and its impact on financial statements

Objective and need for hedge accounting

• Hedge accounting’s application by companies to
  • Align risk management activities to reflect in accounting
  • Reduce volatility in P&L statement
  • Mitigate accounting mismatch in measurement of financial Instruments

Application of hedge accounting in practice

• Types of permitted hedge relationship such as Cashflow hedge, Fair Value hedge and Net investment hedge
• Accounting implications of each hedge relationship
• Pre-requisites of application of hedge accounting
  • Hedged item, hedging instruments, risk components, Layering etc
  • Eligibility criteria for designation in hedge relationship
  • Key aspects of hedge documentation
  • Hedge effectiveness testing requirements
• Apply hedge accounting to different components of hedging instruments (forwards and options)
• Criteria for highly probable forecast transactions

Hedge effectiveness methodologies

• Concepts of economic relationship, hypothetical derivatives, rebalancing and hedge ratio
• Different methods of assessing hedge effectiveness: Critical terms method, Dollar offset method, regression method
• Key aspects while performing effectiveness testing
• Role of credit risk in assessment of hedge effectiveness testing
• Hedge accounting for rollover hedging strategy
• Rebalancing of hedged item and hedged instrument

Discontinuation of hedge accounting

• Scenarios which result in discontinuation of hedge accounting
• Impact of discontinuation of hedge relationship

Practical scenarios in hedge accounting

• Common challenges in application of hedge accounting such as mismatch in critical terms, hedge designation post trade date, etc.

Case studies

• Currency risk: Designation of forward contract for hedge against highly probable sales
• Currency and interest rate risk: Designation of cross currency interest rate swap (CCIRS) against external commercial borrowing
• Commodity price risk: Designation of commodity futures contract against inventory
• Currency risk: Designation of currency option contract against foreign currency term loan
• Currency risk at subsidiary entity: Designation of Non-derivative financial instrument against net assets of a subsidiary

Program schedule

• 8+ hours of recorded videos
• 3 hours of live classroom interaction
• Templates and case studies
• 4 hours of CAFTA's FRM module recorded on-demand

Who should attend?

• Treasury manager/Treasury front-office
• Treasury back office/accounting professionals
• Finance manager/Finance controller
• Internal/External auditor
• Treasury/Derivative sales professional
• Finance professionals interested derivatives and hedge accounting

Benefits on attending the program

• Understand accounting impact of derivative / risk management strategies
• Appropriately reflect risk management strategy in financial reporting
• Use hedge accounting principals on derivatives to protect P&L volatility
• Advice clients on appropriate derivatives in line with hedge accounting principles
• Identify how derivatives are reflected in company's financial statements
• Recognize links between risk management practices and financial reporting