Short-Term Derivative & Hedging Assets

Category

Balance Sheet

Units

Currency

US-GAAP elements

DerivativeAssetsCurrentDerivativeInstrumentsAndHedges

Reference

ASC 815, Derivatives and Hedging

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

Short-term derivative and hedging assets are the fair value of derivative contracts that are currently in a company's favor and expected to be settled or realized within one year. They include forwards, futures, swaps, and options a company uses to hedge exposures such as foreign currency, interest rates, and commodity prices, as well as any derivatives it holds for other purposes.

A derivative is an asset when the company would receive value if the contract were settled at the balance sheet date, and a liability when it would have to pay.

ASC 815 requires every derivative to be recognized on the balance sheet at fair value. Whether gains and losses flow through earnings or through other comprehensive income depends on whether the company has designated the contract as a qualifying hedge and what type of hedge it is. Classification between current and noncurrent generally follows when the contract's cash flows are expected. In XBRL, the current balance is typically tagged DerivativeAssetsCurrent, and some filers use DerivativeInstrumentsAndHedges for current derivative and hedging assets.

Presentation varies. Where a master netting arrangement gives the right of offset, a company may present derivative assets and liabilities with the same counterparty net, so its balance-sheet figure can be much smaller than the gross fair value; the derivatives footnote shows both. Many companies do not show derivatives on their own line at all and fold them into other current assets, which makes this figure absent or understated in simple balance-sheet comparisons.

Derivative assets move with market prices, so the balance can swing from quarter to quarter without any change in the business. For a company that hedges, a large derivative asset often has an offsetting loss elsewhere, for example on the item being hedged, so the two should be read together. Analysts generally treat these balances as non-operating and look to the footnote for notional amounts, the hedged risks, and how much value is expected to be reclassified into earnings within the next year.