The objective of this seminar is to give you a good understanding of important accounting and valuation issues related to loans, securities and other banking products.
First, we shall give a general introduction to fair value accounting, explaining the concept of "Fair Value", and we discuss the overall implications of fair value accounting for the income statement and the balance sheet.
We then take a closer look at the main accounting principles that govern financial reporting. Our main focus will be US GAAP and IAS, in particular the standards FASB 115, FASB133 and IAS39 that all relate to financial and derivative instruments. We discuss the differences in the treatment of assets and liabilities classified as "trading", "available for sale" and "held to maturity", and we carefully explain the exact meanings of "fair value accounting", "hedge accounting" etc. We also explain and discuss the controversial issue of "macro hedging", which has led to a dispute between the accounting standard setters and the EU Commission.
We then look in more detail into how fair value is calculated for selected financial instruments such as bonds, loans, leasing transactions, repos and derivatives. In each case, we explain how the valuation (and changes in the valuation) flows into the P&L and balance sheet statements, using a real-life financial report from a global bank as a practical case study.
Moreover, we also look at the treatment of foreign exchange transactions and of complex instruments with embedded derivatives. Finally, we explain how "Asset Securitization" and other structured finance products are valued and treated for accounting purposes.