28

19

 

John Wiley & Sons, Inc. (Visit publisher website)

2007

English

 

 

 

Basic

 

 

Risk management, accounting and tax issues, internal reporting, valuation issues, price choices and nonsimulateous quotes, external reporting, Financial Accounting Standards Board (FASB), FAS 133, embedded derivatives, disclosure rules, hedge effectiveness, special purpose entities, Enron, International Accounting Standards Board (IASB), IAS 39, tax considerations

 

*** Excerpt from book *** Section 28.1 reviews the organizing principles of accounting for financial assets with a view toward internal reporting. Section 28.2 discusses two major issues in reporting, the valuation of positions and the choice of hedge accounting method. We then discuss external financial reporting, or disclosure rules, for derivatives. Section 28.3 focuses on pronouncements by the Financial Accounting Standards Board (FASB), which is an independent agency responsible for developing generally accepted accounting principles (GAAP) for U.S. corporations. The accounting treatment of special-purpose entities (SPEs) is also examined because of their importance in the Enron debacle. This topic is also important because it explains why Fannie Mae, a U.S. government agency, has recently run into trouble for failing to adhere to the FASB reporting standards for derivatives. Section 28.4 discusses required disclosures by the International Accounting Standards Board (IASB), which develops international accounting standards. Section 28.5 then briefly summarizes relevant tax issues. Finally, Section 28.6 provides some concluding comments. Given the complexity of these topics, the purpose of this chapter is only to provide a summary of the issues.

 

28.1 Internal Reporting 612
28.1.1 Purpose of Internal Reporting 612
28.1.2 Comparison of Methods 612
28.2 Major Issues in Reporting 613
28.2.1 Valuation Issues 613
28.2.2 Reporting Method for Derivatives 615
28.3 External Reporting: FASB 616
28.3.1 FAS 133 617
28.3.2 Definition of Derivative 617
28.3.3 Embedded Derivatives 618
28.3.4 Disclosure Rules 619
28.3.5 Hedge Effectiveness 620
28.3.6 General Evaluation of FAS 133 621
28.3.7 Accounting Treatment of SPEs 622
28.4 External Reporting: IASB 625
28.4.1 IAS 39 625
28.5 Tax Considerations 627
28.6 Answers to Chapter Examples 628

 

If you are interested in purchasing the book, please click here.

 

Risk professionals looking to earn the Financial Risk Management (FRM®) certification, corporate training programs, professors, and graduate students all rely on the Financial Risk Manager Handbook for the most comprehensive and up-to-date information on financial risk management.

Filled with in-depth insight and practical advice, the Financial Risk Manager Handbook is the core text for risk management training programs worldwide. Presented in a clear and consistent fashion, this completely updated Fourth Edition is one of the best ways to prepare for the Financial Risk Manager (FRM) exam.

Financial Risk Manager Handbook, Fourth Edition supports candidates studying for the Global Association of Risk Professional’s (GARP) annual FRM exam and prepares you to assess and control risk in today’s rapidly changing financial world. Authored by renowned risk management expert Philippe Jorion—with the full support of GARP—this definitive guide summarizes the core body of knowledge for financial risk managers, covering such topics as:

• Quantitative methods
• Capital markets
• Credit, operational, market, and integrated risk management
• Investment management and hedge fund risk
• Relevant regulatory, legal, and accounting issues essential to risk professionals