Tables in pdf format

TABLE 1TYPES OF RISK UNDER CANADIAN ACCOUNTING STANDARDSFinancial risks,as defined in section 3861Risks eligible for hedge accounting, asstipulated in section 3865Credit riskRisk of incurring a loss because a receivable amounthas not been receivedLiquidity riskRisk of encountering difficulty in raising the fundsrequired to meet commitments (including the inabilityto sell a financial asset quickly at close to its fairvalue)Market riskRisk associated withchanges in fair valuesPrice riskRisk that the value of a financial instrument fluctuatesdue to certain variations (market price, rate ofexchange, interest rate on fixed rate securities)Cash flow riskRisk that the amounts of future cash flows associatedwith a monetary financial instrument will fluctuate (onfloating rate securities)Currency riskRisks associated with interestrates:- on fixed rate securities- on floating rate securitiesRisk associated withchanges in cash flowsMichel Blanchette – CMA Management October 2006

TABLE 2EXAMPLES OF HEDGING STRATEGIESHEDGING STRATEGIES AGAINST CURRENCY RISKSample receivable positionsSample payable positions- Cash denominated in a foreign currency (FC) - Accounts payable denominated in an FC- Accounts receivable denominated in an FC - Other liabilities denominated in an FC- Other receivables denominated in an FC - Future accounts payable in an FC resulting- Future accounts receivable in an FC resultingfrom sales that are projected, but as yetfrom purchases that are projected, but as yetunrealizedunrealized- Futures involving CA$ receivable in- Investments in equities denominated in an FC exchange for FCs payable- Investments in bonds denominated in an FC - Options to sell FCs in exchange for CA$- Futures involving FCs receivable in exchange forCA$ payable- Options to purchase FCs in exchange for CA$HEDGING STRATEGIES AGAINST INTEREST RATE RISKSample receivable positionsSample payable positions- Financial securities held and bearing interest at a - Fixed rate debtfixed rate (bonds or other)- Swaps involving payments determined on- Swaps involving receipts determined at a fixedrate in exchange for floating rate paymentsthe basis of a fixed interest rate in exchangefor floating rate receiptsHEDGING STRATEGIES AGAINST CASH FLOW RISKSample receivable positionsSample payable positions- Financial securities held and bearing interest at a - Floating rate debtfloating rate- Swaps involving payments determined on- Swaps involving receipts determined on the basisof a floating rate in exchange for fixed ratepaymentsthe basis of a floating interest rate inexchange for fixed rate receiptsMichel Blanchette – CMA Management October 2006

TABLE 3POSITIONS ELIGIBLE FOR HEDGE ACCOUNTING UNDER GAAPHedged positionsAssetsLiabilitiesAnticipated transactions 1Hedging positionsDerivativesandFinancial assets to hedge currencyFinancial liabilities risk onlyTABLE 4COMPARISON OF BOTH TYPES OF HEDGE ACCOUNTINGFair value hedgeCash flow hedgeHedgedpositionHedgingpositionBalance sheetaccountingmeasureFair valueFair valueGains/losses onchanges in fairvalueRecognizedimmediately innet incomeRecognizedimmediately innet incomeBalance sheetaccountingmeasureCost or offbalancesheet(anticipatedtransactions)Fair valueUnrealizedgains/lossesNot recorded,therefore excludedfrom net incomeRecognized in othercomprehensiveincomeRealizedgains/losses andcash flowsRecognized in netincomeTransferred fromothercomprehensiveincome to netincome1 Anticipated transactions must be covered by a firm commitment in the case of fair value hedges.Michel Blanchette – CMA Management October 2006