FPROTECT YOUR BUSINESS FROM CURRENCY FLUCTUATIONS

Fair Value Hedge

Some of our clients choose to create a comprehensive hedge of non-GBP* assets and liabilities which will eradicate material currency fluctuations in their reporting. These solutions provide clear monthly reporting visibility. (These hedges are not designed to hedge cashflows eg. to cover the profits generated by overseas operations).

We can provide a rolling hedge service via FX swaps. Swaps sound complicated, but essentially they are just a contract to create an asset / liability as a contra to the debit / credit in your financial reports that require regular restatement. This would have the effect of locking in the value of non-GBP* assets / liabilities at the date of agreeing the hedge. From an accounting perspective, this will:

  • Minimise any foreign currency adjustments in your Income Statement (P&L)
  • Create balance sheet stability
  • Allow the business to be more accurate in its forecasting

One important factor to note is that the profit / loss on the rolling swap will create a physical inflow/outflow of GBP. However the contra entry in your Income Statement will be a book entry. (This means that there will be an entry in the cashflow statement to deal with the physical inflow / outflow).

We will work with you for each reporting period to calculate the amount of each currency to be hedged, in order to minimise the effect of exchange rate movements. We will also give you a net settlement figure each month/quarter/year end, and will give you detailed workings for this.

We can also help with the reporting needed in your annual and interim financial statements. This will include disclosures and the effect of netting the hedge against the underlying asset / liability.

* Or any currency which is not your reporting currency

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