Bret Dooley, a PwC National Office Deputy Chief Accountant with over 25 years of experience in financial services, joins the discussion to untangle the complexities of derivatives and hedging. He shares practical insights on the balance sheet and income statement presentations, shedding light on classification dilemmas of derivative assets. The conversation also emphasizes the crucial disclosure requirements, ensuring transparency in financial reporting. Listeners will gain clarity on risk management strategies and the implications of hedging in financial statements.
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insights INSIGHT
Basics and Purpose of Derivatives
Derivatives derive their value from underlying assets like interest rates or stocks and are used for risk management, speculation, or market access.
They can hedge risks like exchange rate or commodity price fluctuations to stabilize cash flow and earnings.
insights INSIGHT
Balance Sheet Treatment of Derivatives
Derivatives must be recognized at fair value as assets or liabilities on the balance sheet.
Companies may elect to offset derivative assets and liabilities under specific legal and contractual criteria.
insights INSIGHT
Derivative Current vs Non-Current Classification
Classify derivatives as current if settled within a year or if the liability can be called by the counterparty at any time.
When practical, companies may present derivatives as entirely current or non-current based on their net asset or liability position.
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In this episode, we continue our miniseries on financial statement presentation and disclosure with a focus on derivatives and hedging. Derivatives and hedging are topics applicable to many companies, but the accounting and related presentation and disclosures can be complex. This episode breaks down the requirements with practical insights and guidance.
In this episode, we discuss:
1:10 – An overview of derivatives and hedging, including common examples
3:34 – Balance sheet presentation
9:03 – Income statement presentation
11:42 – Cash flow statement classification
15:19 – Key disclosure requirements
For more information, see chapter 19 of our Financial statement presentation guide and our Derivatives and hedging guide. You can also listen to the other episodes in this miniseries:
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About our guest
Bret Dooley is a PwC National Office Deputy Chief Accountant who leads teams focused on the financial services sectors and accounting for financial instruments. He has over 25 years of experience in the financial services, banking, and capital markets industries. Bret focuses on emerging financial reporting issues related to financial instruments, developing interpretive guidance, and assisting clients in resolving complex accounting matters.
About our host
Heather Horn is the PwC National Office Sustainability and Thought Leader, responsible for developing our communications strategy and conveying firm positions on accounting, financial reporting, and sustainability matters. In addition, she is part of PwC’s global sustainability leadership team, developing interpretive guidance and consulting with companies as they transition from voluntary to mandatory sustainability reporting. She is also the engaging host of PwC’s accounting and reporting weekly podcast and quarterly webcast series.
Transcripts available upon request for individuals who may need a disability-related accommodation.Please send requests to us_podcast@pwc.com.
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