Big 4's Whitepaper on 2006 SEC Speech Regarding Certain Hedge Accounting Relationships
Ernst & Young LLP (March 6, 2007)
Attached please find the Big 4's whitepaper as well as two illustrative examples recently authored regarding certain hedging relationships, including those where the Critical Terms Match, discussed by the SEC Staff at this year's AICPA National Conference on Current SEC & PCAOB Developments. This whitepaper was developed in connection with recent discussions among members of the Big 4, the SEC Staff and the FASB. We understand that no views have been expressed regarding these issues by either the FASB or the SEC.
The issues discussed in the attached whitepaper address certain questions that have arisen relating to the application of hedge accounting in circumstances where a hedging relationship is assumed to be perfectly
effective as well as the SEC Staff's belief that the assumption of perfect effectiveness is being inappropriately applied in certain cases.
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