Search
 

Derivatives: Not Just for Hedging

Researchers find 62% of derivatives used by oil and gas companies dont qualify for hedge accounting.

By Dave Lindorff | Updated on September 25, 2012

oil rig and derrickFor decades now, companies, especially those that are in the commodities business or depend heavily on commodities, have been hedging. Until recently, it was hard for investors and analysts to understand how companies used contracts. But in 2008, the Financial Accounting Standards Board’s Rule 161 required public companies to classify derivatives in their public filings as either hedging vehicles or non-hedge derivatives. 

A team of academic accountants recently examined the filings of 87 oil and gas companies and found a remarkable amount of the companies’ hedging was actually economic, or speculative, in nature. According to their paper, “More than six out of every ten firms studied actually use the instruments for purposes other than managing risks.”

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.

Already have an account?

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.

Recommended Stories

Why Companies Are Racing to the U.S. Debt Market

Why Companies Are Racing to the U.S. Debt Market

Caleb Mutua & Jeannine Amodeo |

Borrowing costs have become compelling, as markets are already pricing in expectations for reduced interest rates. And several external factors could reverse that trend.

Treasury & Risk

Join Treasury & Risk

Don’t miss crucial treasury and finance news along with in-depth analysis and insights you need to make informed treasury decisions. Join Treasury & Risk now!

  • Free unlimited access to Treasury & Risk including case studies with corporate innovators, informative newsletters, educational webcasts, and resources from industry leaders.
  • Exclusive discounts on ALM and Treasury & Risk events.
  • Access to other award-winning ALM publications including PropertyCasualty360.com and Law.com.

Already have an account? Sign In Now
Join Treasury & Risk

Copyright © 2024 ALM Global, LLC. All Rights Reserved.