Creative Traders Ltd. (CTL) is a Canadian company that conducts business in several countries, using a variety of currencies. The notes to the financial statements pertaining to fair values of financial instruments for the past year, the year ended 31 December 20X1. CTL is quite thorough in explaining its exposure to risk of foreign currency fluctuations, interest rate changes, and changes in the fair value of financial instruments. Some of these risks are managed through derivatives.

Fair values have been included in the disclosure notes but not recorded, up to the current year. This coming year, derivatives will be recognized on the statement of financial position at fair value. Changes in fair value are to be included in earnings.

You are a professional accountant in the financial reporting group at CTL. A report for the audit committee has been requested, as a basis for discussion at an upcoming meeting. Specifically, you've been asked to quantify the impact of recording derivatives. You also must explain why recording fair value is required. Finally, your report should explain any concerns about accurately measuring fair value.

Required:

Prepare a report addressing the issues raised.