Accounting for futures and options in terms of IASC proposals: practitioners’ views in South Africa

Abstract

This paper outlines the development and nature of the International Accounting Standards Committee’s proposals in relation to financial instruments. It considers the applicability of the specific principles therein in relation to accounting for futures and options traded on the South African Futures Exchange (SAFEX).

Using a questionnaire approach, views of preparers and users of financial statements were canvassed, in relation to the reliability of SAFEX prices, and the accounting treatment of gains and losses.

Both users and preparers were agreed that speculative gains and losses should be included in income, whereas in relation to hedged transactions, the findings suggest a desire to follow the accounting treatment awarded to the underlying. Preparers were found to consider SAFEX pricing reliable, whereas no conclusion could be drawn from users in this respect.

Key Words:

• international standards
• financial instruments
• futures
• options
• reliability
• speculative gains
• mark to market
• hedge transactions
• hedging mismatches
• derivatives