Course dates
Course overview
In 2011 the UK’s House of Lords, inquiring into why banks were able to conceal substantial losses heard evidence that not only were the accounting standards flawed but more seriously, there was an inconsistency between the IFRS rules and Company Law. This inconsistency is not only confusing but may have operational risk implications if there is evidence that banks acted illegally by concealing losses.
Already, the IFRS has responded with substantial changes. For instance, new rules on off balance sheet accounting in the form if IFRS 10,11 and 12 will come into effect soon, as will changes in the use of Structured Products.
The controversial standard IAS 39 is to be phased out and replaced with new rules on derivative accounting as well as loan loss provisioning. Our detailed, practical and case study led course will outline the changes and the impact it will have for entities in Hong Kong and Asia.
Summary of course content
- New changes in the accounting standards IFRS 9 and incurred loss rules
- IFRS and company law – what are the implications
- An overview of financial instruments, why they are necessary and how they are priced
- The impact of recent rule changes on complicated structured products
- IASB and securitisation – the off balance sheet issues
- Accounting standards relating to financial instruments
- Mark-to-market principles
- Hedge vs. trade accounting – the practical challenges
- Accounting for complex structured instruments and securitisations
- Dealing with off balance sheet vehicles and risk management
- Practical examples from Barclays and Freddie Mac
Methodology
The programme relies on practical examples and case studies to ensure that by the end of the course, you are fully competent to understand and implement hedging strategies.
Who should attend this training course?
- Derivative sales executives
- Risk managers
- Accountants
- Auditors
- Senior operations managers
- Strategists and financial planners
Supporting publication
Day 1
Background and structure of company accounts
- Overview of profit and loss account
- Overview of balance sheet
- Cash flow statement
- Disclosures
- Notes to the accounts
Overview of financial instrument accounting standards
- Why were the standards devised?
- Off balance sheet abuse and their consequences
- How FASB and IAS intend to cope with these abuses
- How do accounting standards contribute to hedging?
- Market and treasury vs. accounting risk
Why financial instruments are necessary
- Cross currency swaps
- Interest rate swaps
- Swaptions
- Options
- Bond futures
- Index swaps
Accounting for future and forward contracts
- Initial and variation margin
- Differentiate and understand the distinction between futures and forwards contracts
- Identify problems affiliated with using futures for hedging
- Tick points
- Basis risk
Day 2
Development of accounting standards
- FASB vs. International Accounting Standards
- Understanding the distinction between hedge and trade accounting
- Learning how to apply marking to market principles
- Analysing the role of the Statement of Total Gains and Realised Losses
Fair value & cash flow hedge accounting
- Identifying ineffectiveness
- Splitting a hedge between effectiveness and ineffectiveness
- Excluding spot forward differential
- Addressing documentation issues
Embedded derivatives and structured products
- Breaking down contracts between vanilla bonds and derivatives
- Interest rate exposure
- Regular ways vs. derivative transactions
- Guidance on when to break down structured instruments
How traders price derivatives
- Using market data to price derivatives
- Learning the basics about spot and forward rates of interest
- Present value and future value
- Pricing derivatives on the basis of hedge costs
Dealing with structured products, exotic and credit derivatives
- Development of market
- Marking to market products
- Hedge vs. trade accounting
- Use of the OCI/STRGL accounts
Day 3
Market and credit risk management techniques
- Measuring market risk and credit risk on a portfolio basis
- Volatility - as measured by Value at Risk
- Hedging exposures as opposed to hedging assets and liabilities
- Portfolio risk hedging vs. accounting risk hedging – understanding the issues
Documentation processes that qualify for hedge accounting
- Effective hedging
- Matters to appear in documentation
- Regression analysis
- Testing for effectiveness - 80% / 125% rule
FASB and securitisation
- Benefits of securitisation
- Determining the difficulty from hedging with plain vanilla swaps
- Understanding the use of tailor made amortising swaps
- Constructing amortisation swaps from plain vanilla swaps
- Present value basis point calculations
Dealing with credit risk
- Measuring credit risk
- Basel committee on methods to measure credit risk
- Credit derivatives
- Total return swaps and credit default swaps
- How the accounting standards deal with credit derivatives
InterContinental Grand Stanford Hotel, Hong Kong, Hong Kong
This programme takes place on a non-residential basis at the InterContinental Grand Stanford Hotel. Non-residential course fees include training facilities, documentation, lunches and refreshments for the duration of the programme. Delegates are responsible for arranging their own accommodation, however, a list of convenient hotels (many at specially negotiated rates) is available upon registration.
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Cormac Butler
Cormac Butler is currently an active equity and options trader and a former consultant with Lombard Risk Systems London and has also worked with Peat Marwick and PricewaterhouseCoopers. He has considerable international experience as a training consultant in derivative accounting, Corporate Finance and Derivative Mathematics, working with major banks including Banque BNP Paribas. He has conducted in-house courses Morgan Stanley, PriceWaterhouseCoopers (Holland), Investec (South Africa) and ABB Switzerland and Asian Development Bank. In addition, he has worked for IIR and Euromoney in Singapore, Hong Kong, Thailand, America and Saudi Arabia. Cormac graduated from the University of Limerick, Ireland with a degree in Finance He has recently published Mastering Value at Risk (Financial Times Pitman) which is currently on the best sellers list (for Risk Management books) with Amazon.com, Gloriamundi.org and Financial World Bookshop (London). He has also published Accounting for Financial Instruments by Wiley.
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
Course dates