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Derivatives

BAA Searches For Hedge-Testing Tools As IAS39 Looms

BAA has started restructuring derivative positions to qualify for hedge accounting under new international accounting rules and is surprised that derivatives shops are not offering more tools to help with the project.

BAA has started restructuring derivative positions to qualify for hedge accounting under new international accounting rules and is surprised that derivatives shops are not offering more tools to help with the project. Wan Lung Chow, treasury manager at BAA in London, said testing these new positions is proving difficult.

"We are surprised there aren't more banks out there offering robust tools for testing hedge-effectiveness. This could be a lucrative business for them," said Chow. He noted the documentation process had been relatively straight-forward, compared to the difficulty of testing the effectiveness of hedges under International Accounting Standard 39.

Corporates that have decided to mark derivative positions to market under the IAS rules need to provide comparative numbers from April 2004, according to Chow.

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