More than half of U.S. public companies with commodities hedging programs applied hedge accounting to them, according to new Chatham Financial research.
Hedge accounting allows companies to avoid earnings volatility associated with the fluctuating value of assets underlying derivative contracts negotiated with financial institutions, which companies enter into for the purpose of hedging financial exposures.
A new hedge accounting standard, designed to make hedge accounting more accessible to more companies, went into effect in late 2018. Early adopters of the standard drove an uptick in the use of hedge accounting in 2018.