See http://www.wikinvest.com/stock/Forest_Oil_(FST)/Realized_Unr...

effectively they are discussing "off-balance sheet" transactions with gains or losses whose realization is highly likely.

Many derivative transactions (stock options, for instance) remain off-balance sheet because they are contingent on certain things happening; if they are likely to happen, a gain or loss would be realized.

http://www.investopedia.com/exam-guide/cfa-level-1/derivativ...


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Note added at 1 hr (2016-09-05 18:25:02 GMT)
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Just to be perfectly clear what the sentence in question says: "I derivati di copertura sono finalizzati a neutralizzare gli effetti economici negativi riconducibili a variazioni avverse dei flussi di cassa attesi relativi ad un’operazione non contabilizzata la cui realizzazione è altamente probabile"

means: "Hedge derivatives are aimed at neutralizing the negative economic effects attributable to adverse changes expected in cash flows related to an off-balance sheet transaction whose realization is highly probable."

The text says "cash flows," which are realized. Hedge transactions are already "executed" in the sense they are made; certain ones, such as options, may not be EXERCISED under certain conditions, which is why they are off-balance sheet.

"Executed" is absolutely impossible, and I do have a degree in finance and economics & worked at 2 Big 4 accounting firms.





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Note added at 3 hrs (2016-09-05 19:59:47 GMT)
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Jim, it doesn't matter how "long" you've been doing financial translations. There are all sorts of derivative transactions; some, like options, are EXERCISED, not EXECUTED except in the sense that you enter into them. But others, like interest rate swaps, are not EXERCISED: you swap a fixed-income for a variable-income cash flow. What gets "realized" is the difference in cash flows between the two, positive or negative.

Applying hedge accounting is OPTIONAL:

"To mitigate the income statement volatility of recording a swap’s change in fair value, Topic 815 permits an entity to elect hedge accounting if certain requirements under that Topic are met. Some private company stakeholders contend that because of limited resources and the fact that hedge accounting is difficult to understand and apply, many private companies lack the expertise to comply with the requirements to qualify for hedge accounting. Therefore, they do not elect to apply hedge accounting, which results in income statement volatility."

https://asc.fasb.org/imageRoot/87/49126787.pdf

The Italian is an instruction regarding when to REALIZE the CASH FLOW effects of hedge transactions. Let me repeat what the Italian says, taking out the extraneous bits:

"Hedge derivatives are aimed at neutralizing [...] adverse changes [...] in cash flows [...] whose realization is highly probable."

Which means - if you know what they're going to be, book them. If not, don't.

To conclude: it is an "off-balance sheet" (actually off-income statement, but nobody says that) transaction because the company does not engage in hedge accounting and therefore does not "mark to market" the transaction. HOWEVER, once the PROBABLE cash-flow effects of the hedge transaction are known, they will be booked to the income statement.

That would comply with two GAAP standards: the effects of transactions are not recorded unless they are known (they remain off-balance sheets, as contingencies), and companies are not required to use hedge accounting if they don't want to.

Unless you can explain what that sentence means better than that, you should concede.

A basic, fundamental rule of accounting is that you do not book anything unless it is likely that it will happen.