what is hedge accounting?
105757
Hedging is the attempt to mitigate the impact of economic risks on an entity's performance. Many businesses will engage in hedging activity to limit economic risk. Hedging activity can be as simple as borrowing in a foreign currency where an entity has a usual revenue stream in that currency. Many economic hedges will not meet the criteria to qualify for the special accounting treatment identified in IFRS as hedge accounting. \n\nHedge accounting means designating a hedging instrument, normally a derivative, as an offset to changes in the fair value or cash flows of a hedged item. Non-derivative financial instruments may be used as hedging instruments in certain limited circumstances . A hedged item can be an asset, liability, firm commitment, or forecasted future transaction that is exposed to a risk of change in value or changes in future cash flows [IAS39.10]. Hedge accounting attempts to match the offsetting effects of the fair value changes in hedged items and hedging instruments, and recognise them in net profit or loss at the same time. \n\nThe normal rules for financial instruments call for all derivatives to be carried at fair value with gains and losses in the income statement  . Hedge accounting allows departures from the normal recognition rules. Accounting rules for hedging are necessary to reflect the economics of hedging relationships in reporting performance. An entity using hedge accounting can impact on the timing of recognition of gains and losses from fair value changes in hedged items and hedging instruments, and avoid the significant volatility that might arise if the gains and losses were recognised in the income statement under normal accounting rules.
813228
Unfortunately, one can't simply just "buy" a hedge fund. A hedge fund is an investment vehicle for "accredited" investors. By accredited i mean over 250K in annual income and over 1M in net worth. Hedge funds can only have 99 investors in order to not register with the SEC and most of their clients include large institutions and high net worth individuals.
483476
My impression from my reading of the financial literature is that there is no combination that gives anywhere near assured returns.  Hedge funds try all sorts of combinations, but they have never hit on anything that is anywhere near a sure bet.  If you can figure out a combination that works, there are people who would like to invest millions of dollars in you.
449583
Losses recognized but not gains?  What accounting are you talking about?
781936
It's all about risk.  \n\nAn Asset Manager will manage your money by buying and selling assets (usually shares).  They are heavily regulated and are supposed to be experienced financial professionals who can get a higher rate of return on your savings than you would be able to on your own.  \n\nA Hedge Fund is more lighly regulated and employs all sorts of higher risk methods (selling shares short, derivatives, investing borrowed money) to get a higher rate of return.  They are able to go anywhere and do almost anything.  For years that meant they got a much higher rate of return than Asset Managers and were consequentially very highly paid.  These days they field uis much more crowded and the returns have come right down.  In addition regulators are paying more attention and also giving Asset Managers the fredom to do things like invest in derivatives.
1140521
It is a Public Income note - basically a hybrid equity/debt security.  Companies issue them to raise capital, much like a preferred stock.  People buy them for the dividend flow, typically.
342002
That your hedge will not be effective is the main one - that it will fall outside your country's tax rules is another.
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I am a trainee actuary working in a financial reporting department of a major Irish life assurance company.\n\nAt the moment, all of the modelling that we do is deterministic in nature - we set assumptions, run them through our model and analyse the results. We then might run the model with slightly different assumptions to see how sensitive the results are.\n\nHowever, this approach will have to change in the near future. IFRS (International Financial Reporting Standards) are being brought in many countries (including the UK and Ireland) which require products with guarantees to be modelled stochastically. This will require far more runs and will place a lot more demand on computing power.\n\nIndeed, in the UK, I believe they have already brought in some form of stochastic modelling as part of the reappraisal of the way that with-profit business (i.e. policies that pay bonuses) is valued by the life assurers in the UK. The financial regulators have brought in a "realistic balance sheet" for with-profits that uses market consistent stochastic modelling.\n\nI can't speak for the situation in the US as I'm not aware of the situation there. I imagine it's much the same - if not more advanced.\n\nI'm sure stochastic modelling will also be used more in the future in general actuarial modelling as well as financial reporting as it more accurately takes account of risk.\n\nSo to answer your question, stochastic modelling is being used and will be used increasingly over the near future as the computing power capabilities and regulatory requirements increase. It's the way of the future!\n\nI don't know much about the second part of your question but I did a couple quick searches on Google and they seemed to show up a few results (see below).\n\n(I hope my answer wasn't too long and technical - excuse me if it was.)
455865
there are future derivates exchanges in india where one can hedge..these futures currently span over 1-6 months, drivers are marriage, investment, speculation.
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Accounting conventions are called the pillars over the building of accounting is standing.\nThere are four accounting conventions that are:\n1. convention of disclosure\n2. convention of materiality\n3. convention of conservatism\n4. convention of consistency.
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Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of potential financial loss. Ideally, insurance is defined as the equitable transfer of the risk of a potential loss, from one entity to another, in exchange for a reasonable fee.\nAssurance is an evaluation method that uses a specified set of principles and standards to assess the quality on an organization's reporting of its performance and its underlying systems, processes and competencies that underpin its performance.
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There will be hedge funds on all currency exchanges in case there is a profit to be made.\n\nThe big ones are\n-EBS (they started allowing hedge funds on this inter-bank)\n-CME\n-Hotspot\n-Currenex\n-maybe Reuters, but this is a much smaller subset\n\nProbably a few other small ones too.
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Maybe look into GASB34.  It's an accounting standard for government.  It is causing a lot of uproar because of what it means for asset management.  Hot topic right now.
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Accounting is an activity that can be termed an art as well as a science.  \n\nAccouting (financial accounting more so) is the act of collecting, recording, financial information in order to derive information that is capable of being analysed, summarized and reported. \n\nIt generally considers only information (transactions) that are capable of being viewed (measured) in monetary terms. \n\nHowever, in modern day computerised accounting environments there is a lot of other relevant information that is recorded along with the financial information (like inventory data) to make accounting a complex information collection, processing and retreival system.\n\nAccounting can be a complete record of all the activities of a business, providing details of every aspect of the business, allowing the analysis of business, and providing insight into future prospects.\n\nBookkeeping is the practice of recording transactions. Bookkeepers tend to focus on the details, recording transactions in an efficient and organized manner, and they may or may not see the overall picture.\n\nAccountants use the work done by bookkeepers to produce and analyze financial reports. Although accounting follows the same principles and rules as bookkeeping, an accountant can design a system that will capture all of the details necessary to satisfy the needs of the business—managerial, financial reporting, projection, analysis, and tax reporting. A good accountant will create a system of financial reporting that gives a complete picture of a business.\n\nhttp://www.futureaccountant.com/\n\nhttp://www.schoolingkids.com/
339196
Who wouldn't say "numbers" and whether they add up to be legitimate or not? Mathematics is the fundamental knowledge being applied by an accountant. Most legal entities just want to obey the laws and report a proper mathematical accounting of their operations, whether personnal, corporate or nonprofit organizational in nature.
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In most countries when you sell an investment, you have to pay taxes on the profits immediately, even if you sold the investment to reinvest in something else.\n\nTo avoid this inconvenience banks and other investment firms invented the "fund of funds". The manager of this type of fund determines his own strategy of arbitrage and reinvestment within a number of mutual funds. For the buyer of the fund of funds the advantage is that his reinvested money did not leave the fund of funds, and he doesn't have to pay taxes.\n\nThe advantage for the bank is that the fund family used by the manager is often that of the bank, which means that the bank earns twice the manager fee, once on each fund.  \n\nThe details depend on the country and its tax rules.\n\nBeing a fund of funds is one of the investment strategies used by hedge funds as it permits arbitrage between stocks, bonds, commodities according to the model the manager uses\nbut without him being encumbered by the burden of having to choose individual investments.
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Actually it is the law that created them.  By defining who was and was not an accredited investor and by defining the rules under the Investment Company Act, it created a need for people who could skirt the rules of the Investment Company Act and the Investment Advisors Act.  Hedge funds, generally speaking, operate outside the disclosure and protection laws (except for true fraud).  Still because they are outside the disclosure laws, true fraud may be impossible to detect.  And some forms of fraud in the common sense understanding are written into the contracts and so are not fraud in the legal sense.  It is fraud if they illegally cheat you not if you contract away common sense rules.  Some of the abuses should be reigned in, but they cannot be because they are legal and contractual rights of the managers.