A modular approach to hedge accounting

We understand the complexities of moving away from IAS 39 and topic 815 to IFRS 9 and ASU 2017. Current hedge accounting practices are under pressure from market changes, such as Covid-19 and IBOR reforms. Our modular, flexible solution helps navigate changing markets and regulations. Better reflect profit and loss stability in line with risk mitigation strategies and help your firm remain compliant and competitive.

Our OneSumX Hedge Accounting software solution offers a full range of tasks related to hedging instruments and activities. From formal hedge designation through to the posting of the generated hedge accounting journals, including producing the required hedging valuations feeding effectiveness testing over the hedge lifecycle. It also supports cash flow hedge, net investment hedge and fair value hedge types.

Meet requirements

The comprehensiveness of OneSumX Hedge Accounting helps firms to satisfy all management and auditor requirements regarding their hedge accounting activity.

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Easy integration

Can be deployed as an end-to-end solution from designation to reporting, while incorporating your organization’s specific needs. Or it can be implemented as a point solution.

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Modular design

Hedge packages can be loaded from source, and valuations can be calculated by your Treasury solution or OneSumX as part of our modular design.

Types of hedges supported

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Cash-flow hedges
Cash flows of hedging instruments that offset those of the assets being hedged.

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Fair-value hedges
Compensates for changes in the fair value of hedged items by experiencing countervailing changes in the fair value of the hedging instruments.

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Net investment hedges
Fair-value hedges applied to investments in foreign entities.

OneSumX Hedge Accounting features

OneSumX Hedge Accounting is designed to fit within the contours of the evolving IFRS 9 accounting standards and U.S. Generally Accepted Accounting Principles (U.S. GAAP). Teams can model valuations, enhancing insight into sensitivities of assets to interest rate movements and other risk factors. This is equally useful in asset and liability management and stress testing.

A further dimension of hedge accounting is the hedge level, which can be applied to one micro hedge and another financial instrument, or to a macro hedge that applies to a portfolio of hedged items. The following features and process flow is supported for all combinations of hedge types and hedge levels.

  • Hedge designation and documentation

    Step one includes designation of the hedges. Setup and management of hedge designation (and rebalancing).
  • Fair value and hedged risk calculations

    Step two includes valuations of items and instruments. This means multi-curve and hypothetical derivative valuations can be covered.
  • Effectiveness testing

    This supports methodologies like Critical Terms Match, Dollar Offset Method and/or the Linear Regression Method. Our solution also offers the flexibility to test hedges with a combination of methods.
  • Dashboard, limit management and disclosures

    Explore options for integration with the dashboarding and business intelligence capabilities of OneSumX for Finance, which makes it fit for limit monitoring and trend analysis.
  • Support various events

    • Effectiveness
    • Unwinding
    • Underlying sold
    • Ineffectiveness analysis
    • Rebalancing
    • (Partial) discontinuation
    • Related amortization of hedged risk.
  • Includes a range of integration options

    • Integrates easily into any front or back-office system, providing the required fit for all middle-office needs from a product control perspective
    • Can be implemented with OneSumX Subledger Accounting. Based on the valuation and effectiveness results produced, hedge accounting entries can be posted with a standard or configured chart of accounts
    • Can operate as a standalone finance solution supporting the hedge accounting ledger if required
    • Can integrate with other capabilities like the valuation engine of OneSumX for Risk. This allows for broader risk management and regulatory reporting. For example when producing FINREP for the EBA.

Expert insights and related solutions

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