Understanding the Use of the Fair Value Option, Hedge Accounting and Identification of Embedded Derivatives Under IAS 39: Includes Practical Examples Which Illustrate the Application of the IAS 39 for Financial Assets and Liabilities, Initial Recognition, Subsequent Eva

The introduction of IFRS in more than 120 countries around the world brought a great challenge for accountants, internal and external auditors, tax authorities and users of financial statements of listed entities, financial institutions and insurance companies in the world. The challenge is to precisely understand the key differences in accounting treatment of the various elements of financial statements compared with the local accounting standards, as well as the exemptions and accounting policy choices that entities that adopt IFRS can enjoy. Additionally, IFRS brought a lot of prospective financial information, financial risk disclosures and other significant elements that were not considered in accounting practices prior to their adoption. IFRS certainly brought more transparency about these important elements of risk. Consequently, all accounting professionals who are directly involved in the analysis of balance sheets of companies adopting IFRS should be updated and prove that they have knowledge about the basic elements of these standards. The large number of professionals, academics, accountants and financial analysts indicates that professionals must keep up with this new market trends and evolution of IFRS. The book contains many complex concepts that are used in IFRS internationally. Understanding these elements is an important step for accountants, market analysts and investors and they will certainly bring a competitive advantage for those who wish to interpret IFRS financial statements efficiently. Includes: more than 30 practical exercises; answers to exercises; example of practical application of the Fair Value Option; designation of hedge accounting and types of hedge; hedge accounting in practice; identifying and accounting for embedded derivatives; criteria for bifurcation of embedded derivatives; and other relevant aspects for financial instruments. This work is suitable for undergraduates, graduates, MBAs and masters. For academic and professional use.

Table of Contents:
1. The Use of Hedge Accounting and its Risks 11 1.1 Introduction 11 1.2 Difference between economic hedge and accounting hedge 13 1.3 Object of the hedge 17 1.4 Hedge instrument 20 1.5 Minimum conditions for the use of hedge accounting 24 1.6 Fair value hedge 34 1.7 Cash flow hedge 35 1.8 Net investment hedge in an operation abroad 36 1.9 Discontinuation of accounting hedge 37 1.10 The practical implications of using accounting hedge 44 2. Using the Fair Value Option 47 3. Embedded derivatives 55 3.1 Embedded derivative identification and bifurcation process 56 4. Multiple Choice Questions 75 5. Notes 91 6. Answers to the multiple choice questions 99