Case Study On Application Of Hedge Accounting Standards In A Company

With the develop of economic globalization,the price fluctuation of non-ferrous metals has increased substantially and has become more frequent.China's reserves of mineral resources are relatively insufficient,so we rely heavily on imports,and the business risk of domestic enterprises in related industries has increased as the price of non-ferrous metals has fluctuated.More and more companies in the non-ferrous metal smelting industry are trying to manage the price risk of inventories through futures hedging transactions,so as to avoid the impact of fluctuations in earnings.However,some companies have failed to utilize the hedging tool,fallen into the state of invalid hedges and can not apply hedge accounting standards.This paper conducts a case study of A company's application of hedging accounting standards,which has important theoretical and practical significance.Based on the modern hedging theory,this paper studied A company's inventory price risk,its process of hedging business,its internal control system and hedge accounting.Then this article researched a hedge transaction which was deemed invalid by the certified public accountant.It turned out that its effectiveness of hedging and its hedged item did not meet the requirements of the standard.Therefore,to adapt to hedge accounting standards,A Company should mprove the hedging program and measure the effect,cost,and efficiency of hedging accurately.This paper also provides case support for the reform of hedging accounting standards and proposed that the new standard is not flawless.In the new standard,the net-risk exposure hedging is not suitable for the dynamic risk management,there are no provisions for hedging of commodity futures and enterprises have too many independent choices.To further improve the hedge accounting standards and solve the difficulties that enterprises are facing in the application of the guidelines,it is necessary to increase communication between the theoretical and practical circles and follow the pace of the development of international accounting standards.