How are Derivative Accounting Applied for Hedging Activities?

Abstract The derivative instruments accounting plays an important role in the development of the financial instruments markets, commodity market and in the risk management process. Because, the close relationship between the methods of derivative instruments accounting and the derivative instruments in the financial markets, commodity market for hedging activities. Moreover, they bring the relevance and reliability of Financial statements. Application of derivative instruments accounting is an essential factor for the development of financial market and economy. Currently, Vietnamese accounting is using historical cost methods for the financial assets; the fair value is not applied by the enterprises. How is difference between the historical method and fair value accounting? If the enterprises apply derivative instruments accounting, how will they have benefits? The article analyses and emphasizes usage of the derivative instruments accounting method and fair value of evaluating models to find out benefits to help managers and investors manage the risk. Key words Fair value, forward contracts, futures contracts, derivative accounting, financial statements, hedging activitie