1995 Fiscal Year Final Research Report Summary

THEORETICAL AND PRACTICAL RESEARCH ON HEDGE ACCOUNTING

Research Project

Project/Area Number	06630106
Research Category	Grant-in-Aid for General Scientific Research (C)
Allocation Type	Single-year Grants
Research Field	Accounting
Research Institution	Waseda University
Principal Investigator	OTSUKA Muneharu Waseda Univ., School of Commerce, Professor, 商学部, 教授 (60063749)
Project Period (FY)	1994 – 1995
Keywords	Hedge Accounting / Hedging Instruments / Hedged item / Deferral Hedge Accounting
Research Abstract	Hedge accounting is a special treatment that ensures that changes in the values of the hedged item and the hedging instrument, from the date the hedge is established, are counterbalanced in the same periods. Major issues related to hedge accounting are (1) the interpretation of risk, (2) the assessment of risk reduction (3) the allocation of deferred gains and losses, and (4) the effectiveness of a hedging instrument. Either marking both the hedged item and hedging instruments to market or marking the derivatives to market will solve many of the hedge problems which are presented today. Disclosure about derivative financial instruments held for hedges of anticipated transactions is required by FASB statement 119. But survey on annual reports proves that only limited corporations disclose these information. Japanese corporations have not disclosed the financial instruments held for hedges. At least, it is necessary for Japanese corporations to disclose the details of the financial instruments held.