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Copy of Spartan Casino - Interest Rate Swaps Case
Transcript of Copy of Spartan Casino - Interest Rate Swaps Case
What is interest rate swaps?
Definitions of hedges
815-20-25-1 through 25-6
Criteria and document for hedging instruments;
815-20-25-13 through 25-15
Criteria requirements for cash flow hedge only
Types of the hedge designated.
Identify the criteria and document that IRS achieve hedge accounting based on ASC 815,
Derivatives and Hedging Activities
JE accounting for the 2 hedging relationships for the year 2009.
Implication of paying down $25 million in 2010.
An interest rate swap (IRS) is a highly liquid financial derivative instrument in which two parties agree to exchange interest rate cash flows, based on a specified notional amount from a fixed rate to a floating rate (or vice versa) or from one floating rate to another.
1/1/2009: Spartan Casino executed $ 250 million revolving credit facility with Uber Bank.
1/1/2009: designated interest rate swap on $50 million debt.
7/1/2009: designated another interest rate swap on $ 75 million debt.
12/31/2010: Spartan decided to pay $25 million of $125 million borrowed.
8% or 8.5%
Q & A
815-20-25-102 through 25-106
Assuming no hedge ineffectiveness → Short-cut method
Illustration for measurement