Hedge accounting software that documents every hedge on the trade date and tests it every quarter, so earnings stay steady
Every hedge documented on the trade date and tested each quarter, so earnings stay steady.
See one case, screen by screen ↓Software that prepares the hedge documentation, effectiveness tests and journals a company needs to apply hedge accounting under ASC 815 and IFRS 9, so derivative gains and losses reach earnings with the items they hedge. Hedge Accounting adds seven agents that draft the memo at the trade, test each hedge every quarter, watch hedged forecasts, draft journals and the derivatives note and check each other's work, while the hedge accountant signs.
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Hedge accounting keeps a derivative's gains and losses out of earnings until the hedged sales, purchases or interest land, but only on three conditions. Each hedge is documented formally at inception, it is shown to be highly effective at least every quarter, and the hedged forecast transactions stay probable. Today the designation memo is often a template filled in days after the trade. The quarterly test is a spreadsheet regression against a hypothetical derivative rebuilt by hand, and a forecast drop reaches accounting by email at quarter-end.
The risk sits in what nobody re-reads: a hypothetical derivative that no longer matches the contract after an amendment, a cancelled order the business never mentioned, a reclassification posted to the wrong income-statement line, disclosure tables re-keyed from five spreadsheets. Documentation and testing cannot be repaired later. Missing or late hedge documentation has led companies to restate results they had already filed. And ASU 2025-09 changes five areas of ASC 815 from 2027 for public companies, so hedge files will be revisited.
Our estimate for 46 hedge relationships and a team of two: about 10 working days by hand; with the solution, the 3-day design goal.
Seven agents document every trade, test every hedge, watch every forecast and check each other; the hedge accountant signs.
Kestrel & Vane Group runs 46 hedge relationships, $2.84B notional, under ASC 815, with its Dutch holding also reporting under IFRS 9. It is Wednesday 14 October 2026, the Q3 close, and the 10-Q is due on Monday 9 November. Here is how Laura Kim works through it with the agents, screen by screen, in the working solution.
The agents finished the overnight run at 06:05: 46 hedges tested, 38 forecasts checked, the waiting journals and the derivatives note drafted. Laura has signed 41 of 46 Q3 assessments; 4 journals for $1.90M wait for her. Five decisions need her before the audit fieldwork on Mon 26 Oct, each with its amount.
Probability agent: “KV Process Equipment’s Q4 EUR sales fell 40% in the October forecast, after Norrvale cancelled tender lot 3. €6.0M of HR-2026-018 is probable not to occur; I drafted the partial de-designation.”
HR-2026-031 hedges €48.0M of Q1 2027 EUR sales of Kestrel & Vane Manufacturing with three sell-EUR forwards. Across the top, what each agent did. On the left, the designation memo: trade 09:31, drafted 09:52, signed 10:14, each element cited to the trade confirmation, the forecast or the standard. On the right, 36 monthly observations: slope −0.97, R² 0.94, F 536.3, dollar offset 97.0%, all inside the bands.
“Trade 09:31 · Memo drafted 09:52 · Signed 10:14” — the memo's own timeline, on the record.
The second-check agent rebuilt the hypothetical derivative from the memo without seeing the testing agent's inputs, re-ran the regression (slope −0.968, R² 0.940) and recomputed the journal: a difference of $0. Each step shows the source it read. Overnight it did the same for all 15 quantitative tests, and all 15 agree.
“Laura Kim decides; nothing changes until she signs. Agents never post, send or change a method on their own.”
Laura asks the file a question in plain words. The probability agent answers with its sources: the hedge covers €48.0M of €71.4M forecast Q1 2027 sales, 67%, and policy allows 50–75% four to six months out. The July forecast was €70.2M, so cover has barely moved. Above the answer, the decision waits: approve, edit or send back.
Laura picks reason A1, “Highly effective, as tested”, and signs. The same signature approves journal J-Q3-031: Dr AOCI — cash flow hedge reserve, Cr derivative liabilities — FX forwards, $1,146,000. The entry goes to OCI, not earnings, so her signature completes it, and it posts to the ledger only after approval.
“The reason goes on the file and the audit trail.”
HR-2026-018 hedges €24.0M of Q4 EUR sales of compressor packages. The forecast was €30.0M at designation; the October S&OP cycle says €18.0M. So €6.0M, 25% of the hedged sales, is probable not to occur, and its share of AOCI, $312,000 of $1,248,000, goes to earnings now. Option A is recommended; B is not available because it would take cover on HR-2026-015 to 102%; C makes the same reclassification and closes out the €6.0M with an offsetting forward.
“Pattern guard: 2 missed forecasts in 8 quarters for this entity; review starts at 3.”
Every number in the finding opens its source. Norrvale Regional Rail's letter of 6 Oct 2026, read by the probability agent from the sales inbox, says tender lot 3 is cancelled and no replacement is planned. Mei Tanaka, the S&OP lead, confirmed it. Asked why “probable not to occur” and not just “no longer probable”, the agent explains: a written cancellation with no replacement sends the AOCI to earnings now; if the sales were only uncertain, it would wait.
“…we hereby give notice that tender lot 3 (compressor packages, 24 units) is cancelled following the withdrawal of programme funding. No replacement order is planned for 2026 or 2027…”
Laura approves option A with reason D2, “Probable not to occur: de-designate and reclassify”. Because $312,000 hits earnings, the decision goes to Tomás Ferreira, the corporate controller, who co-signs. Journal J-Q3-018R is approved: Dr Other income (expense), net — missed forecasts, Cr AOCI, $312,000. The other €18.0M stays designated.
“D2 · Probable not to occur: de-designate and reclassify · Laura Kim, Wed 14 Oct 2026, 09:20 · co-signed by Tomás Ferreira. On the audit trail”
HR-2026-027's first quantitative test gives R² 0.78, below the 0.80 minimum, with slope −0.84. The cause: the hypothetical derivative still used Redfern Copper & Rod Co.'s old price formula, although contract amendment 2 changed the premium on 1 Jul, before the hedge began. So the swaps' $418,000 Q3 gain belongs in cost of sales, not OCI. Rebuilt on the amended formula, the same swaps test at R² 0.91, so the agent offers two outcomes, both recorded as never qualified: F1, re-designate today on the amended formula, or F2, no new hedge.
The second-check agent agrees it fails on both runs; a new relationship can start on the day Laura signs its memo, never earlier.
Daniel Osei sold £12.0M forward at 16:02 to hedge Q2 2027 GBP sales. The trade capture agent matched the bank's confirmation; the documentation agent drafted HR-2026-035 at 16:40, one step for each element ASC 815 asks for. The initial test passes: slope −0.99, R² 0.96, F 829.3. Laura checks each step, edits if she needs to, and signs today.
Documentation agent: “Sign today so the record shows it was in place at inception.”
The same close, seen by the five people who carry it — what their quarter looked like, and what it looks like now.
Seven agents document every trade, test every hedge, watch every forecast and check each other; the hedge accountant signs.
Reads every hedge trade from the treasury system, matches the bank's confirmation and finds the forecast or item it hedges.
Drafts the designation memo within the hour of the trade from the trade, the forecast and the hedging policy, cites each element to its source and keeps the time it was written.
Checks every hedged forecast each Monday against the S&OP cycle, the order book and customer and supplier letters; proposes partial de-designations and keeps the pattern guard on missed forecasts.
Runs prospective and retrospective tests — regression, dollar offset, critical terms, qualitative — and works out the options when a test fails.
Rebuilds the hypothetical derivative and recomputes every test and journal from the sources on its own run.
Drafts the OCI, reclassification and de-designation entries for each test and decision, and posts them to the ledger after approval.
Drafts the 10-Q derivatives note and the IFRS 7 tables, and answers the auditor's requests with cited files.
Signs every designation, test and journal; the controller co-signs above $250,000. The agents propose; a named person decides.
Ask a hedge file, the close or the audit pack a question, and the agent that did the work answers with its sources.
Why does HR-2026-031 pass?
Regressing the forwards’ monthly value changes on the hedged sales’ over 36 months gives a slope of −0.97 and R² of 0.94: inside −0.80 to −1.25 and above 0.80. The quarter’s dollar offset is 97.0%: −$1,146,000 against +$1,182,000. The second check got the same answer.
What hits earnings this quarter?
$2,174,000 of hedge results reclassified as hedged sales, purchases and interest landed (revenue $1,612,000, cost of sales $284,000, interest $278,000); plus $312,000 if you approve HR-2026-018, and a $418,000 gain if HR-2026-027 is found never to have qualified. The $5,130,000 Q3 loss on the other hedges stays in OCI.
Are we close to losing hedge accounting for this business?
Not yet. Two missed forecasts in 8 quarters: €2.1M in Q2 2025 and this €6.0M. Policy review starts at 3, because a pattern can put hedge accounting for similar sales in doubt. I suggest Mei Tanaka’s team marks tender orders as “at risk” in S&OP.
How do I know the regression wasn’t tuned?
The window (36 months), the data source and the criteria are fixed in the memo and in policy HA-07. A second agent re-ran each test without seeing the first, and you can re-perform any of them here.
13 screens from the working solution, on its sample data. Pick one to see it large.
The agents work only inside the policy the group treasurer approved. Changes become a new version only when she approves them.
| Setting | Default | Choose from |
|---|---|---|
| Cover bands, share of the latest forecast | 0–3 months 60–80% · 4–6 months 50–75% · 7–12 months 25–50% | Set per horizon; above the band, the group treasurer approves |
| Regression test | 36 monthly observations · R² at least 0.80 · slope −0.80 to −1.25 | Window, minimum R² and slope band are set in policy |
| Qualitative assessment after | An initial R² of 0.90 | ASU 2017-12 election; threshold set in policy |
| Dollar offset (reported) | 80% to 125% | Range set in policy |
| Check hedged forecasts | Every Monday 06:00 | Every Monday 06:00 · Daily |
| Pattern guard | 3 misses in 8 quarters | Then the controller approves new hedges for that entity |
| Missed-forecast reclassification | Other income (expense), net | Other income (expense), net · Same line as the hedged item |
| Excluded components | None (forward method) | None (forward method) · Forward points, amortised |
Every figure is labelled: a target the solution is built to, an estimate, a typical published result, or a proven one.
“demo” = seen in the working solution, on its sample data · “target” = the design goal, measured in the live solution · “estimated” = our estimate (the split of a quarter's hedge close days) · “typical” = published figures (MillTech 2026 Global FX report — 88% of companies hedge currency exposure, up from 81% a year earlier). Context, not claims: FASB ASC 815-20-25-3 (documentation at inception), 815-20-35-2 (assessment at least quarterly), 815-30-40 (discontinuation); ASU 2017-12; ASU 2025-09; IFRS 9 6.4.1. Kestrel & Vane Group, its banks, auditor, customer and supplier, and the people named on this page are fictional — characters and sample data in the working solution.
Software that prepares the hedge documentation, effectiveness tests and journals a company needs to apply hedge accounting under ASC 815 and IFRS 9, so derivative gains and losses reach earnings with the items they hedge. Hedge Accounting adds seven agents that draft the memo at the trade, test each hedge every quarter, watch hedged forecasts, draft journals and the derivatives note and check each other's work, while the hedge accountant signs.
The trade capture agent reads the trade from the treasury system and matches the bank's confirmation; the documentation agent then drafts the designation memo, usually within the hour, with each element cited to the trade, the forecast, the policy or the standard. The memo records the trade, draft and signature times, so the file shows it was in place at inception.
The testing agent runs prospective and retrospective tests by regression, dollar offset, critical terms or a qualitative assessment, as the memo documents, against criteria set in your policy. A second-check agent rebuilds the hypothetical derivative and recomputes every test without seeing the first answer, and the auditor can re-perform any test.
Each Monday the probability agent compares every hedged forecast with the latest S&OP cycle, the order book and customer and supplier letters. When part of a hedged forecast is probable not to occur, it proposes the partial de-designation, works out the reclassification out of AOCI with options and sources, and tracks missed forecasts against the pattern guard.
The failed test arrives with its cause, its earnings effect and worked outcomes, such as recording the hedge as never qualified and re-designating it from the day the new memo is signed. The second-check agent confirms the result on its own run, the hedge accountant decides with a reason code, and the controller co-signs.
Yes. Each hedge carries the standards it is reported under, so an entity that files IFRS statutory accounts uses the same file. The disclosure and audit agent drafts the 10-Q derivatives note and the IFRS 7 tables from the signed files.
Yes. The agents draft, test and propose; they never book trades, change forecasts, back-date memos, post unapproved journals or send anything to the auditor unapproved. The hedge accountant signs every item with a reason code, the controller co-signs earnings effects above $250,000, and every action is on the audit trail.
The Agentic Solution Engine builds and deploys it from your requirements and documents — your hedging policy, existing designation memos and a sample of trades and forecasts — and it goes live once every quality gate has passed. In first-time setup the agents read your existing memos and point out any gaps before the first close.
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