Fair Value Accounting – IAS 39 and FAS 133

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 General Introduction to Fair Value Accounting

• The Purpose of Accounting and Valuation
• Overview of Accounting Principles
  • Cost based accounting
  • Accrual accounting
  • Fair value accounting
• Pros and Cons of Using “Fair Value“ Accounting

International Accounting Standards

• US GAAP vs. IAS/IFRS
• Important US GAAP Standards Related to Financial Instruments
  • FAS 115 and FAS 133
• Important IAS Standards Related to Financial Instruments
  • IAS 30, IAS 32, and IAS 39

12.00 - 13.00 Lunch

13.00 - 16.30 Treatment of Loans and Non-Derivative Securities

• Treatment of Loans
  • The amortized cost principle
  • Case: Treatment of loan in “banking book“
• Treatment of Bonds
  • Classification as held for trading, available for sale or held to maturity
  • Calculating fair value for securities
  • Treatment of realized and unrealized capital gains
  • Recognition of impairment
  • Case: Zero Coupon Bond
  • Case: Coupon Bond
• Treatment of Stocks and other Equity Instruments
• Exercises

Day Two

09.00 - 09.15 Recap

09.15 - 12.00 Treatment of Derivatives

• Derivatives Defined According to IAS 39 and FAS 133
• General Rules for Treatment of Derivatives
  • Trading positions
  • Hedge accounting
• General Principles for Valuation of Derivatives
  • Valuation of “forwards“ and “options“
• Treatment of Pure Trading Positions in Derivatives (Cases)
  • FX Forwards
  • FRAs
  • Bond Forwards and Futures
  • Swaps
  • Interest Rate Options
  • FX, Equity and Bond Options
  • Credit Derivatives
• Exercises

12.00 - 13.00 Lunch

13.00 - 16.30 Hedge Accounting

• What Is “Hedge Accounting“?
• Criteria for Using Hedge Accounting
• Types of Hedges
  • Fair value hedge
  • Cash flow hedge
  • Hedge of a net investment in foreign entity
• Rules for Testing Hedge Efficiency
• Cases
  • Hedging FX risk using fair value and cash flow hedges (forwards and options)
  • Fair value hedge of fixed-rate interest-bearing debt
  • Cash flow hedge of forecasted interest payments with an interest rate swap
• Exercises

Day Three

09.00 - 09.15 Recap

09.15 - 12.00 Macro Hedging

• What Is a “Macro Hedge“?
• How Banks Use Swaps and Other Derivatives to Hedge the Banking Book
• IAS Criteria for Macro Hedging
• The EU Implemented Rules
• Case
  • Macro hedging of banking book (loans and deposits)
• Exercise

Treatment of Embedded Derivatives

• Criteria for Separation of Embedded Derivative from Host Contract
• Examples Illustrating Application of the Clearly-and- Closely-Related Criterion to Derivative Instruments Embedded in Hybrid Instruments
• Exercise

12.00 - 13.00 Lunch

13.00 - 16.00 Treatment of Asset Securitisation

• General Introduction to Asset Securitization
• Critical issues in Accounting for Securitizations
  • “True Sale“
  • “Retained Interest“
• The Accounting Framework
  • Accounting for transfers and servicing
  • Measurement (valuation)
  • Treatment of synthetic securitizations
• Cases and Examples
• Exercises

Evaluation and Termination of the Seminar