Financial Reporting for Derivatives in the Romanian Banking System

Author:Associate Prof. Maria Carmen HUIAN, Ph. D.

JEL:M41, G21

DOI:

Keywords:derivatives, financial reporting, IFRS, hedge accounting

Abstract:
The objective of this paper is to critically assess the way in which commercial banks from Romania disclose information about derivatives in their annual financial statements. Consolidated and individual accounts prepared according to the IFRS rules for the 2010-2012 period are taken into consideration. The findings show that 80% of the banks use derivatives mainly as risk management tools but only 20% of them apply hedge accounting. The most common types of derivatives are currency/FX swaps and interest rate swaps, while exotic derivatives are only occasionally used. In addition, Romanian banks use exclusively OTC derivatives that represent 2% of the total financial assets measured at fair value in the statement of financial position. The statement of comprehensive income reports the effects of derivatives’ usage mostly as net trading income or net interest income, as part of net income, with aggregated positive figures. Overall, disclosures regarding derivatives meet the IFRS criteria, but do not go beyond minimal requirements which might lead to ambiguities and misinterpretations.\r\n

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