Matching Convention is the basic rule underlying accrual accounting. Revenues are recognized as earned. All expenses incurred in earning those revenues are reported also in the period in which those revenues are recognized.What Is Matching Convention?
Matching Convention FAQs
A matching convention is an agreement between the purchaser and seller of financial instruments that sets out how the price for each instrument should be calculated. It also specifies when payments should be made, and where any disputes should be addressed.
Matching conventions often apply to derivatives such as options, futures, and swaps, as well as debt securities like bonds or notes. They can also include other financial products such as commodities and currencies.
The two most common types of matching conventions are those based on International Swap Dealer Association (ISDA) standards and those based on Bloomberg protocols. ISDA agreements are used for trading derivatives, while Bloomberg conventions are typically used for debt securities.
The specifics of each matching convention agreement can vary depending on the type of instrument being traded and the parties involved in the transaction. Generally speaking, however, these agreements will require details about the parties entering into the contract, as well as terms related to payment schedules, exchange rates, and dispute resolution procedures.
The length of time required to negotiate a matching convention agreement depends on several factors such as the complexity of the agreement, the number of parties involved in the transaction, and how quickly responses are received. Generally speaking, however, most matching convention agreements can be negotiated within a few days to weeks.
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.
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