Derivatives and Hedge Accounting

The Application and Rationale for FAS 133

This report reviews U.S. generally accepted accounting practices (GAAP) applicable to derivatives and hedging applications. Statement of Financial Accounting Standards no. 133, “Accounting for Derivative Financial Instruments and Hedging Activities” (FAS 133) was implemented originally in 1999. International Accounting Standard 39 (IAS 39) for international reporting became effective in 2001. Canadian Institute of Charted Accountants statements 3855 and 3865 (CICAs 3855 and 3865) became effective in 2006 for Canadian reporting. 

Appendix 1 provides a high-level summary of the implications of these standards. While the standards applicable in different jurisdictions are a bit different, they generally align with the precedents established by FAS 133. 

We focus on the application of FAS 133 to U.S. entities using exchange-traded derivatives such as those offered by CME Group; and, to over-the counter (OTC) derivatives.

Futures & Options Trading

As the world's leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. CME Group exchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based on interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group brings buyers and sellers together through the CME Globex electronic trading platform and trading facilities in New York and Chicago. CME Group also operates CME Clearing, one of the largest central counterparty clearing services in the world, which provides clearing and settlement services for exchange-traded contracts, as well as for over-the-counter derivatives transactions through CME ClearPort.

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CME Group is the world's leading and most diverse derivatives marketplace. The company is comprised of four Designated Contract Markets (DCMs). Further information on each exchange's rules and product listings can be found by clicking on the links to CME, CBOT, NYMEX, and COMEX.