Ameresco, Inc. (NYSE:AMRC), a leading energy efficiency and renewable energy company, today announced that it is postponing the release of its financial results for the fourth quarter and full year 2012, as well as its related conference call, because it is evaluating the designation of an interest rate swap used in its hedging strategy to manage interest rate risk.
The Company maintains a portfolio of eight interest rate swaps used to hedge exposure to adverse changes in short-term market rates related primarily to renewable energy project financings. Each of the interest rate swaps has been designated as a fair value hedge using hedge accounting under ASC 815-20-25. Seven of the interest rate swaps have been designated as hedges using the “long-haul” method; one was entered into and designated as a hedge in March 2010 using the “short cut” method. Based on a review of its swaps conducted in connection with entering into new swaps in the fourth quarter of 2012, the Company has retrospectively determined that designation of this particular interest rate swap using the “short cut” method was not appropriate.
Under ASC 815-20-25, for interest rate swaps designated as hedges using either of the “short cut” or “long-haul” methods, the fair value of the swap is recorded in the consolidated balance sheet and any changes in fair value of the swap are recorded as adjustments to other comprehensive income (loss). The analysis underlying the determination to rely upon the “short-cut” method is complex and subject to interpretation. If an interest rate swap designated using the “short cut” is retrospectively determined not to have qualified for that method, then hedge accounting treatment for prior periods is not appropriate. In that event, any changes in fair value would be recorded, as a non-cash item, in other income (expense) in the consolidated statements of income for any periods during which the swap does not qualify as a hedge.
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