Hedge accounting is a topic that has created much confusion and
consternation amongst energy and commodity trading organizations over
the last several years, a situation which has been exacerbated most
recently with additional pronouncements by the accounting boards both
in the US and the EU. CommodityPoint has been watching these
developments (including an examination of the issues in our various
research projects over the last couple of years) and our data indicates
that few energy and commodity trading organizations are properly
equipped to deal with the various issues associated with the proper
accounting of their hedged positions. In fact, our research, and anecdotal
evidence, suggests that most energy trading companies have simply
"thrown up their hands", essentially ignoring the advantages offered by
proper hedge accounting and have, instead, made the decision to allow
their corporate financials to be potentially battered by mark
