It is more than five years since a Partner at one of the leading accounting firms approached us to see if we could solve an internal problem they were wrestling with. The challenge posed to Hedgebook was, “How can we validate the valuations of financial instruments provided by our clients during the year-end audit engagement?”
The Partner was looking for a cost-effective solution (they are accountants after all) but just as importantly it needed to be simple to use. Valuing financial instruments is a complex area and many auditors struggle – spending a disproportionate amount of time on what is often a small part of the audit.
Rapid Hedgebook Audit launch
As it turned out we had a simple solution. From some of the existing functionality of Hedgebook we developed a new product targeted directly at auditors’ needs. So in 2015 Hedgebook announced the launch of Hedgebook Audit, an online derivative valuation tool designed specifically for auditors.
Hedgebook CEO, Richard Eaddy, recalls:
“Following a number of conversations with CA firms around the world, it became evident that most simply did not have access to the tools they needed to calculate, or validate, fair values of even vanilla currency, interest rate or commodity derivatives.
“The implementation of IFRS 13, and the rigour that brought to the calculation of fair values, meant that the requirement for truly independent valuations was greater than ever. Bank supplied valuations just don’t cut it anymore.”
Aligning with IFRS 13
IFRS 13 was implemented at the start of 2013 and defines fair value on the basis of an ‘exit price’. It uses a ‘fair value hierarchy’, which results in a market-based measurement. At the time, Richard Eaddy commented:
“We worked closely with key personnel within audit teams to understand what IFRS 13 meant to them and what their requirements were. They recognised that their processes needed to improve so Hedgebook Audit was born based on the insights that these interactions generated.”
Hedgebook Audit is a cloud-hosted application that gives audit teams access to accurate, independent fair values for a large range of currency, interest rate and commodity instruments. The software can be accessed from anywhere. It doesn’t matter if an auditor is in the office, or out in the field, they can record and value their clients’ financial instruments.
A client’s portfolio is recorded in the system and the instruments can be valued quickly, either individually, or as an entire portfolio. The auditor simply selects the valuation date and currency before valuing.
Since its launch, Hedgebook has grown to be the financial instrument valuation tool of choice for auditors in our key markets of the UK, Australia and New Zealand – including industry leaders such as Grant Thornton and Menzies.
It comes back to the old adage “what problem are you solving?” Which is a whole lot easier when someone comes knocking on your door with the problem. Fortunately, we had the solution at our fingertips. If only it was always that easy.