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FRP » Topics » Accounting for Certain Derivative Instruments and Certain Hedging Activities, an Amendment to SFAS No. 133This excerpt taken from the FRP 10-K filed Mar 14, 2006. Accounting
for Certain Derivative Instruments and Certain Hedging Activities, an Amendment
to SFAS No. 133. SFAS No. 133 and SFAS No. 138
require that all derivative instruments be recorded on the balance sheet at
their respective fair values. The Company adopted SFAS No. 133 and SFAS No. 138
on January 1, 2001. In accordance with the transition provisions of SFAS No. 133,
the Company recorded a cumulative-effect-type loss adjustment
(the transition adjustment) of $(4.7) million in other comprehensive
income (loss) to recognize at fair value all interest rate swap agreements. As
of December 31, 2004, the Company has reclassified to nonoperating income
(expense) the entire transition adjustment that was recorded in other
comprehensive income (loss). The fair value of the Company’s interest rate swap
agreements is determined from valuations received from financial institutions.
The fair value indicates an estimated amount the Company would pay if the
contracts were canceled or transferred to other parties.
Amounts receivable or payable under interest rate swap agreements are accrued at each balance sheet date and gains and losses related to effective hedges are reported, net of tax effect, as a separate component of comprehensive income. Changes associated with swap agreements that did not qualify as accounting hedges are included as adjustments to realized and unrealized gains (losses) on interest rate swaps. The following is a summary of amounts included in realized and unrealized gains (losses) on interest rate swaps for the twelve months ended December 31, 2004 and 2003 (in thousands):
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