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

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