Expand
Resize
Add to favorites
Derivative instruments should be evaluated to determine if inclusion in the carve-out financial statements is appropriate. Generally, derivative contracts issued directly by the carve-out business are included in the carve-out financial statements. For some companies, the treasury function is managed centrally, and therefore, an evaluation would be performed to determine whether any parent entity derivative instruments should be recorded in the carve-out financial statements.
Derivative instruments issued by the parent entity designated as a hedging instrument of a hedged item that has been attributed to the carve-out financial statements should be included in the carve-out financial statements (e.g., an interest rate swap entered into by the parent on debt recorded in the carve-out financial statements). Any changes in the fair value of the derivative instrument previously recognized in the parent entity’s AOCI for cash flow hedges would be included in the carve-out financial statements. Similarly, for fair value hedges, the carve-out financial statements would include the applicable portion of any basis adjustments made to a hedged item.
For derivative instruments issued by the parent entity meant to economically hedge transactions recorded in the carve-out financial statements that have not been designated as hedges for accounting purposes (and the derivative has not been recorded in the carve-out financial statements), the carve-out business may elect to either record or exclude the income statement effect of the derivative instrument in its financial statements. In either case, the methodology should be followed consistently with appropriate disclosure.
In some circumstances, a parent entity may enter into a derivative instrument that relates to both transactions recorded in the carve-out financial statements and transactions related to operations not part of the carve-out business. In these circumstances, it is not necessary to attribute a derivative asset/liability to the balance sheet in the carve-out financial statements; however, companies should consider whether allocations to the income statement provide the most relevant view of the historical operations for the carve-out business.
Expand

Welcome to Viewpoint, the new platform that replaces Inform. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory.

signin option menu option suggested option contentmouse option displaycontent option contentpage option relatedlink option prevandafter option trending option searchicon option search option feedback option end slide