Derivative Instruments & Hedge Accounting for Energy Transactions

Properly Documenting & Reporting Commodities Fair Value Transactions in Accounting Statements & Disclosures

September 20-21, 2023 | Houston, TX ::

0923-derivatives-hedge-accounting

“Presenters were very knowledgeable and willing to answer all questions — very helpful.” Financial Services Coordinator, City of Garland (TX)

“I’m new to this industry, and the course was an excellent opportunity to accelerate my transition.” Accounting Manager, Liberty Power

“This course is a must-have for all areas of derivative accounting and risk.” Senior Accountant, First Choice Power

“The course exceeded my initial expectations.” Energy Commodity Risk Administrator, Tri-State G&T

This seminar addressing derivative, fair value and hedge accounting issues is tailored for accounting and finance staff operating in the energy and power industries. It provides attendees with an opportunity to delve into the nuanced application of FASB Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging (formerly FAS 133), and related amendments and disclosures.  The course will also cover ASC Topic 820, Fair Value Measurements and Disclosures (formerly FAS 157), including a discussion of strategies for determining fair values for hard-to-value energy and power contracts.  In addition, it will address key concepts of International Financial Reporting Standards (IFRS) 9, Financial Instruments, (formerly IAS 39) where they differ from U.S. GAAP requirements. Finally, the program will examine specific considerations around applying these concepts to power markets and energy trading activities. 

An overview will include a summary of the standard itself, changes from existing accounting practices and a discussion of how these standards impact energy companies. There will be an optional workshop that focuses specifically on renewable energy products and the associated accounting considerations.

Learning Outcomes

Attendees will receive instruction and cover materials that will allow them to:

• Apply the understanding of ASC 815 (FAS 133) and 820 (FAS 157) requirements and its application to the energy industry
• Demonstrate key accounting concepts and the related key controls and processes for application to derivative and hedging activities in operations
• Explain and apply the latest disclosure requirements for derivatives and hedging activities
• Discuss and address the current developments in the power and energy trading markets
• Differentiate some of the key differences between U.S. GAAP and IFRS in relation to the aforementioned main topics

Wednesday, September 20, 2023 : Central Time

9:00 – 9:15 a.m. :: Overview and Introductions

9:15 – 10:45 a.m. :: Overview of ASC 815 Requirements for Energy and Power Companies

• Commodity Contract Assessment Framework
  • Overview
  • IFRS/GAAP differences
  • Variable interest entities (VIE) considerations
  • Lease accounting overview
• Scope & Definition of a derivative
  • Underlying
  • Notional – including “full requirements” contracts
  • Net settlement criteria
  • IFRS/GAAP differences

10:45 – 11:00 a.m. :: Morning Break

11:00 a.m. – 12:00 p.m. :: Overview of ASC 815 Requirements for Energy and Power Companies (cont.)

• Derivative accounting basics
  • Case studies – forward/swap contracts
• Embedded derivatives
  • Definition
  • Examples
  • IFRS/GAAP differences
• ASC 815 disclosure examples

12:00 – 1:00 p.m. :: Lunch Break

1:00 – 1:45 p.m. :: ASC 815 Disclosure Requirements

• Overview
• Public vs. private application
• IFRS/GAAP differences
• Illustrative examples

1:45 – 3:00 p.m. :: Overview of ASC 820 Fair Value

• Fundamentals of ASC 820 as it relates to energy transacting and application
  • Definition
  • Fair value at inception (day 1 gains)
• Illustrative examples of hierarchy levels (1, 2, 3)
• Consideration of counterparty risk in valuation
• Disclosure requirements
  • Overview
  • Public vs. private application
  • IFRS/GAAP differences
  • Illustrative examples
• Commodity pricing and forecasting models for level 2 or 3
• Q&A

3:00 – 3:15 p.m. :: Afternoon Break

3:15 – 4:30 p.m. :: Power and Energy Accounting Issues

• Application of scope exceptions available to energy contracts (normal purchase, normal sale)
  • Overview
  • Capacity exception
  • Documentation requirements
  • Common pitfalls
• Accounting for financial transmission and congestion revenue rights (FTRs and CRRs)
• Accounting for bundled contracts
• Internal controls, compliance, and best practices

4:30 – 4:45 p.m. :: Q&A

4:45 p.m. :: Course Adjourns for Day

4:45 – 6:00 p.m. :: Reception (in person)

 

Thursday, September 21, 2023 : Central Time

 

9:00 – 10:15 a.m. :: Cash Flow & Fair Value Hedge Designation Overview

• Types of hedges and hedge criteria
• Requirements and accounting updates
• Documentation requirements and timeline
• Effectiveness testing requirements

10:15 – 10:30 a.m. :: Morning Break

10:30 – 11:45 a.m. :: Cash Flow & Fair Value Hedge Designation Overview (cont.)

• Application of hedge accounting
• Example journal entries
• Disclosure requirements
• Public vs. private application
• IFRS/GAAP differences

11:45 a.m. – 12:00 p.m. :: Q&A

12:00 p.m. :: Course Adjournment

Renewable Energy Instruments and Their Associated Accounting Considerations

Thursday, September 21, 2023 : Central Time

Transactions involving the generation, trading and consumption of renewable energy – as well as the buying and selling of environmental credits and carbon offsets including renewable energy credits (RECs) – are now commonplace in the power industry as more business organizations and governments embark on the road to net-zero carbon emissions and transition to clean energy.  Such transactions are often complex in structure and require special accounting treatment, which often depend on the entity’s role(s) in the transaction. 

This workshop will provide an overview of accounting considerations around these renewable energy instruments, including a deep dive into contract assessments for renewable energy PPAs – both physical and financial (“virtual”).

Learning Outcomes

Attendees will receive instruction and cover materials that will allow them to:

• Examine emerging types of renewable energy products in the marketplace
• Evaluate the accounting considerations related to different renewable energy products
• Assess renewable energy contracts under the appropriate accounting framework
• Apply best practices for environmental, social and corporate governance (ESG) disclosures related to the energy industry

 

Agenda

 

1:00 – 1:15 p.m. :: Introduction and Overview

1:15 – 2:15 p.m. :: Renewable Energy Overview

• Renewable energy consumption
• Renewable generation trends
• Renewable energy credits (RECs)
• Emerging trends

2:15 – 3:00 p.m. :: Contract Assessment – Renewables

• VIE accounting considerations (ASC 810)
• Derivative accounting considerations (ASC 815)

3:00 – 3:15 p.m. :: Afternoon Break

3:15 – 4:30 p.m. :: Contract Assessment (cont.)

• Lease accounting considerations (ASC 842)
• Battery storage lease accounting considerations (ASC 842)
• Conditions precedent
• Physical PPA example
• Virtual PPA differences

4:30 – 5:00 p.m. :: ESG Disclosure Overview

5:00 p.m. :: Workshop Adjournment

Tawanda Chadenga, Partner – Energy Trading & Marketing Group, Deloitte

Tawanda Chadenga is a Houston-based partner with more than 22 years of experience serving a variety of large, complex public and private companies in the energy industry, primarily power and utilities (conventional and renewable) and oil & gas, energy trading and marketing companies. He leads the firm’s energy trading and marketing audit and accounting advisory practice, which provides specialized audit and accounting advisory services to companies with energy trading, marketing, or hedging activities.

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Adam Weingarten, Senior Manager – Energy Trading & Marketing Group, Deloitte

Adam Weingarten is a Senior Manager, who has served Deloitte’s energy clients for more than a decade. He is a member of Deloitte’s energy trading and marketing audit and accounting advisory practice, which primarily focuses on auditing energy trading companies and providing related accounting advisory services, including cash flow and fair value hedge accounting, valuation, and disclosure requirements.

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David Sackllah, Manager – Energy Trading & Marketing Group, Deloitte

David Sackllah is Audit & Assurance Manager, who has served Deloitte’s energy clients for some seven years.  He is a member of Deloitte’s energy trading and marketing audit and accounting advisory practice, and primarily focuses on auditing both energy trading companies and regulated power and utilities companies, related to commodity transactions (including natural gas and power trading) valuation and contract assessments.  Mr. Sackllah has considerable experience auditing internal controls over financial reporting for SEC. He has provided various accounting advisory services, ranging from contract accounting assessments, internal control assessments and recommendations, and valuation methodology implementation.

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Elaine Luquet, Manager – Commodities & Energy Markets Group, Deloitte

Elaine Luquet is Audit & Assurance Manager, who has served Deloitte’s energy clients for over 5 years.  She is a member of Deloitte’s commodities and energy markets audit and accounting advisory practice and specializes in the audit and advisory of accounting and valuation risk areas for energy commodity contracts. Further, Ms. Burbank has experience serving trading organizations in an advisory capacity, including developing process recommendations for growing trading organizations. She also has experience with assessing contracts for derivative reporting requirements under both IFRS and GAAP standards and the related internal controls and processes throughout the life cycle of a deal.

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Mirela Horn, Audit & Assurance Manage, Deloitte

Mirela Horn is Audit & Assurance Manager, with more than 14 years of public accounting experience primarily in energy and consumer business industries. She has extensive energy trading and marketing experience, including dealing with related risk management issues. Ms. Horn primarily focuses on auditing the recording, valuation and reporting of energy commodity contracts, including natural gas and power contracts and on auditing the related internal controls and processes. She has a thorough understanding of both International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (US GAAP) derivatives accounting guidance, as applied to energy transacting activities.

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Steven Murphy, Audit & Assurance Manage, Deloitte

Steven Murphy is Audit & Assurance Manager, who has served Deloitte’s energy clients for more than six years.  He has extensive experience auditing and advising energy trading companies and the relevant accounting matters, related to commodity transactions (including cash flow and fair value accounting), valuation modeling, contract assessment, and SEC disclosure requirements.  Mr. Murphy has considerable experience in risk assessment, auditing internal controls over financial reporting for SEC filers, ASC 606 and 842 adoption, and management estimates, including areas involving internal specialists.

REGISTER NOW FOR THIS EVENT:

Derivative Instruments & Hedge Accounting for Energy Transactions

September 20-21, 2023 | Houston, TX

Buy 4 in-person seats and only pay for 3! For this event every fourth in-person attendee is free!

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RELATED WORKSHOPS:

Renewable Energy Instruments and Their Associated Accounting Considerations

September 21

Individual attendee(s) - $ 595.00 each
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Your registration may be transferred to a member of your organization up to 24 hours in advance of the event. Cancellations must be received on or before August 18, 2023 in order to be refunded and will be subject to a US $195.00 processing fee per registrant. No refunds will be made after this date. Cancellations received after this date will create a credit of the tuition (less processing fee) good toward any other EUCI event. This credit will be good for six months from the cancellation date. In the event of non-attendance, all registration fees will be forfeited. In case of conference cancellation, EUCIs liability is limited to refund of the event registration fee only. For more information regarding administrative policies, such as complaints and refunds, please contact our offices at 303-770-8800

EUCI is accredited by the International Accreditors for Continuing Education and Training (IACET) and offers IACET CEUs for its learning events that comply with the ANSI/IACET Continuing Education and Training Standard. IACET is recognized internationally as a standard development organization and accrediting body that promotes quality of continuing education and training.

EUCI is authorized by IACET to offer 0.9 CEUs for this course and 0.4 CEUs for the workshop.

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Upon successful completion of this event, program participants interested in receiving CPE credits will receive a certificate of completion.

Course CPE Credits: 10.5
Workshop CPE Credits: 4.5
There is no prerequisite for this Course.
Program field of study: Specialized Knowledge
Program Level: Basic
Delivery Method: Group Internet Based
Advanced Preparation: None

EUCI is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its web site: www.nasbaregistry.org

 

Who Should Attend

Operating Functions

• Accountants
• Auditors
• Controllers
• Treasurers
• Financial analysts
• Structured credit
• Credit risk analysts
• Portfolio managers
• Front office / Traders
• Middle office / Risk
• Back office

Representative Industries

• Integrated electric utilities
• Market operators and transmission companies
• Public power
• Generation companies
• Retail power marketers
• Wholesale power trading and marketing companies
• Gas utilities and distribution companies
• Retail gas marketers
• Wholesale gas trading and marketing companies

This course is open to utilities, power and energy industry operating companies (see above), software vendors, consumer groups, and regulators only.  Registrations received from other tax, accounting and consulting practitioners will be evaluated on a case-by-case basis and may not qualify for attendance.  Questions re: the application of this restriction can be addressed to [email protected].  Any determination as to the fulfillment of a registration to attend this program shall reside solely with EUCI.