Mark-To-Market

Background to IAS 39

The introduction of new accounting standards (IAS 39) will require that most corporate entities need to take a radical new approach when reporting their derivative positions. It will also mean that entities which had previously relied on their bank to provide mark-to-market values will no longer be able to do so.

The key requirements of IAS39 are as follows:

• All financial assets and liabilities (including derivatives) must now be recognised in the Statement of Financial Position. e.g. interest rate swaps & options, foreign exchange swaps, futures and forward rate agreements.
• Derivatives must be accounted for at fair value at each reporting date with changes in fair value taken to the Statement of Financial Performance unless hedge accounting is achieved.
• If the financial instrument qualifies for hedge accounting, then changes in the instrument value are recognised in a manner consistent with the recognition of gains and losses on the hedged item.

Resolution can help you comply with your IAS39 requirements

Resolution is aware of the challenges that new IFRS rules will bring to clients, particularly in relation to IAS39. Many organisations have yet to decide on how to deal with the hedge accounting requirements even though the decision must be made, and appropriate systems implemented, before the commencement of the first accounting period for which IFRS will apply.

At Resolution we recognise that many clients simply want the entire process handled for them by the experts. We have therefore developed a service which will allow clients to effortlessly comply with new accounting regulations. This service has three elements depending on your requirements:

1. Provide mark-to-market values for all instruments within a defined client's portfolio
2. Assess the hedge effectiveness of each instrument, using a range of testing techniques
3. Determine accounting treatment based on the results of the effectiveness testing

This service is seamless, accurate and fully compliant with audit requirements, but most importantly it is independent. If you are interested in talking to us about this then please contact us to discuss your requirements.

Resolution specialises in derivative pricing

Resolution is a company that specialises in derivative pricing. That is our primary focus, with an objective to be the pre-eminent provider of independent derivative pricing advice. We have one of Australasia's leading experts in derivative pricing, Dr Greg Anderson, leading the development of our pricing and quantitative models. Greg is supported by a team of pricing and accounting experts. We believe this combination of specific derivative pricing and accounting expertise enables us to offer the highest quality independent advice on derivatives pricing in Australasia.

More information on IAS39 and hedge accounting