Wheels Group Inc GRFJF

Hedging liability

[mlmack]

In the 2nd quarter report's balance sheet, the company is showing a short and long-term hedging liability of $91.8 million. They used a price of $930. with 429,000 oz. hedged at $801 this works out to $55.3 million. What kind of accounting voodoo is this, below is the explanation 

"The Company’s forward gold sales contracts are valued using pricing models which require a variety of inputs, including contractual terms and yield curves, and correlation of such inputs. The Company utilizes the market approach to measurement of fair value for these derivative instruments. This approach uses prices and other relevant information generated by market transactions involving comparable liabilities. Such derivative contracts trade in liquid markets and, as such, model inputs can generally be verified and do not involve significant management judgment. Such instruments are typically classified within Level 2 of the fair value hierarchy."

Anyway if you don't include the hedge in liability, the book value is approx $1.00 with cash flow of $52 million or $.39 / share for 2009.