Here is the synopsis of our sample research paper on The Problems of Accounting for Hedging. Have the paper e-mailed to you 24/7/365.
Essay / Research Paper Abstract
This 3 page paper looks at the problems that have been caused by recent changes to accounting standards concerning accounting for hedging. The paper puts forward the argument that the new methods of accounting use fair market value undermine the purpose of heading to reduce risk and create stability. The bibliography cites 4 sources.
Page Count:
3 pages (~225 words per page)
File: TS14_TEhedgprob.rtf
Buy This Term Paper »
Unformatted sample text from the term paper:
which has been used very effectively is that of hedging. However, despite this tool being used to reduce risk and as such volatility of result, when considering whether or not
to use hedging there has to be some consideration regarding the way that the firm will have to account for the contracts, as with recent moves in accounting standards the
tools that are designed to reduce volatility may actually increase it. To consider this we first need to look at how hedging is used and then consider the extent to
which accounting standard may undermine this. Hedging is a tool that helps reduce exposure to risks where a firm has a need
to purchase goods in the future where there may be volatility in the price, and where there is the potential for a firm to loose out as a result on
price fluctuation. Hedging usually take place with the purchase of derivatives, usually a future or an option (Howells and Bain. 2007). A future is a contract for a commodity, which
can include currency, which is bought where there is an agreement for a set amount of the specified goods, for a set price at a set point in time. This
takes out the risk as the firm then knows what they are going to pay for the good they need. If the spot price increases above the price in the
contract they win, and if the spot price falls they loose out (Howells and Bain, 2007). An alternative if to purchase a contract
that is very similar, but instead of agreeing to buy the commodity, it gives them the option to buy at a set price at the set point in the future.
...