b) Following is the link to an article from 2007 related to the use of derivatives by Southwest Airlines at a time when fuel prices were rising significantly. This article discusses how these derivatives's value to their income fell as fuel prices starting coming back down.
Research and find other examples of derivatives that have been used by other companies successfully (or not)?
a) Are all derivatives held at fair value on the balance sheet or are there some exceptions?
There is only one exception to this rule. All derivatives are held at fair value on the balance sheet unless the derivative meets the qualifications to be treated as a hedge. If the criteria for a hedge are met, the derivatives do not have to be held at FV on the balance sheet. For instance, if the forecasted transaction results in a gain, the FV gain is recognized in equity but not carried on the balance sheet. The majority of derivatives must be held at ...
The following posting helps with real life applications of derivatives.