Statement No. 133 Accounting for Derivative Instruments and Hedging Activities establishes accounting and reporting standards for derivative instrument embedded in other contracts and for hedging activities. The statement requires that an entity recognize all derivatives as either assets or liabilities in the statements of financial position and measure those instruments at fair value. If certain conditions are met, a derivative may be specifically designated as:

(a) A hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment.

(b) A hedge of the exposure to variable cash flows of a forecasted transaction or

(c) A hedge of the foreign currency exposure a net investment in a foreign operation, an unrecognized firm commitment, an available for sale security or a foreign currency denominated forecasted transactions.

Requirements

Review Statement No. 133 and evaluate the standard in terms of the conceptual framework.

Define a derivative from an accounting perspective.

Provide at least three characteristics of a derivative.

Name and describe three derivatives.

When was the implementation date of the statement?

Briefly summarize the statement.

Answer rating: 100% (QA)

From the conceptual framework perspective Statement No 133 aligns with the principle of relevance by ensuring that financial statements accurately ref... View the full answer