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GASB 53: Accounting and Financial Reporting for Derivative Instruments Presented by: Roger Martinez, Kathy Lai, KPMG LLP, and Ben Cheng, CO AUDIT. Agenda. Overview of GASB Statement No. 53 Definition of a Derivative Instrument Settlement Factors Leverage Net Settlement Scope Exceptions - PowerPoint PPT Presentation
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GASB 53: Accounting and Financial Reporting for Derivative Instruments
Presented by:
Roger Martinez, Kathy Lai, KPMG LLP, and Ben Cheng, CO
AUDIT
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Agenda
Overview of GASB Statement No. 53
Definition of a Derivative Instrument
Settlement Factors
Leverage
Net Settlement
Scope Exceptions
Hybrid Instruments
What is a Derivative
Recognition and Measurement
Deferred Inflows and Outflows
Presentation
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Agenda Cont.
Miscellaneous Recognition and Measurement Items
Determining Fair Value
What is Hedging?
Types of Hedges
Association with a Hedgeable Item
What Can Be Hedgeable Items?
Overview of Hedge Effectiveness
Hedge Effectiveness Testing Methods
Other Quantitative Methods
Termination of Hedge Accounting
Disclosures for Hedging Derivative Instruments
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Agenda Cont.
Effective Date and Transition
CSU Survey Results
Questions?
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Overview of GASB Statement 53
Statement issued in June 2008
Effective for periods beginning after June 15, 2009
Will require derivative instruments to be reported at fair value in financial statements prepared under the economic resources measurement focus
Reporting changes in fair value will depend on whether derivative instrument is an effective hedge
GASB has also issued a plain-language document on derivative instruments
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Overview of GASB Statement 53
Certain aspects of GASB Statement 53 are conceptually similar to FASB Statement 133, as amended:
– Definition of a derivative instrument
– Certain scope exceptions
– Hedge accounting
Although conceptually similar, there are many differences in application:
– Hedge accounting required under GASB 53 if applicable
– “All or nothing” approach to reporting changes in fair value using hedge accounting
Not required to quantify ineffectiveness
– Use of deferred inflows and outflows No other comprehensive income item
– Methods of testing hedge effectiveness
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7
Definition of a Derivative Instrument A derivative instrument is a financial instrument or contract that
has all of the following:
– Settlement factors One or more reference rates (underlyings)
One or more notional amounts or payment provisions or both
– Leverage Requires little or no net investment yet responds to market changes
– Net settlement Contract terms require or permit net settlement
Can be readily settled net outside the contract through a market mechanism; or
Provides for delivery of an asset that is readily convertible to cash or is itself a derivative instrument
See also Implementation Guide
7
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Settlement FactorsReference Rates
– Reference rate can be any variable with changes that are observable or otherwise objectively verifiable (cannot be the asset or liability itself)
– Value of a derivative instrument generally changes by direct reference to changes in the reference rate
Notional Amount
– The number of units specified in a derivative contract (e.g. currency, shares, etc):
– Amount applied to change in reference rate to determine settlement
Payment Provisions
– Fixed or determinable payment made if an underlying changes in a specified manner (e.g. payment if commodity price increases 10%)
– Often included in lieu of a notional amount
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Leverage
No initial net investment or smaller initial investment than required for other types of contracts having a similar response to changes in market factors
Evaluated from perspective of one party to contract but determines the accounting for both parties
Commodity example:
– To buy 10,000 gallons of diesel fuel today at $3 gallon, must pay $30,000
– No money required to enter into forward contract for 10,000 gallons of oil at future date at forward spot price
– Fair value of both the purchased diesel fuel and forward contract change similarly with changes in market price of diesel fuel
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Net SettlementContractual Terms
Net settlement characteristic has been met if neither party to the contract is required to deliver an asset that:
– is associated with the underlying, and
– has a principal amount, stated amount, face value, number of shares, or other determination that is equal to the notional amount in the contract
Generally contracts with only a payment provision will meet net settlement under contractual terms
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Net SettlementMarket Mechanism
A market mechanism that facilitates net settlement must have ALL of the following characteristics:
– Enables one party to the contract to readily liquidate its net position
– Results in one party to the contract becoming fully relieved of its rights and obligations under the contract
– Liquidation of net position: Does not require significant transaction costs
Occurs without significant negotiation and due diligence
Occurs within a customary time frame
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Net SettlementReadily Convertible to Cash
Puts the recipient in a position not substantially different from net settlement through the contract
Key characteristics:– Interchangeable (fungible) units
– Quoted prices available in an active market
– Market can rapidly absorb the quantity held by the entity without significantly affecting the quoted price
– Significance of transaction costs
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Scope Exceptions
Normal purchases and normal sales contracts Insurance contracts covered under Statement 10Financial guarantee contracts that provide payments to the
holder only for losses incurred because a specified debtor fails to make payment
Certain contracts not exchange traded with an underlying based on:
– A climatic, geological or other physical variable– A price or value of a nonfinancial asset
Loan commitments
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Hybrid Instruments
Derivative instruments are often free-standing instruments:
– Swaps
– Forward contracts
Other times, derivative instruments may accompany or be embedded within a companion instrument:
– Combined instrument referred to as a hybrid instrument
– Important to identify because derivative instrument may require separate reporting from the companion instrument
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Hybrid Instruments
Where to look:
– Financial assets and liabilities
– Purchase and service contracts
– Leases
What to look for:
– Renewal, extension, cancellation and prepayment options
– Caps, floors, collars
– “If…then” contract provisions
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Reporting Hybrid Instruments
The derivative and the companion instrument should be reported separately if:
– Companion instrument is not measured at fair value– A separate instrument with the same terms as the embedded
component would meet definition of a derivative instrument; and– Economic characteristics and risks of the derivative instrument
are not closely related to those of the companion instrument
Contracts outside the scope of GASB 53 need not be evaluated as a hybrid instrument
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Knowledge Check #1
Which factor is not considered a settlement factor based on the definition of a derivative:
A. Reference rates
B. Notional amount
C. Leverage
D. Payment provisions
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Knowledge Check #1: Answer
C. Leverage
A derivative must have settlement factors, leverage and net settlement. The settlement factors are reference rates, notional amount and payment provisions.
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Common Derivative Instruments Common Derivative Instruments
AUDIT
2009 GASB 53 IMPLEMENTATION TEAM TRAINING
Common Derivative Instruments Common Derivative Instruments
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What is a Derivative?
An instrument value “depends on” or is “derived from” the value of an underlying asset, reference rate, or index
GASB 53 defines derivatives based on characteristics versus listing instruments
Continued innovations in financial markets render any definitions based on listing obsolete
Understanding characteristic-based definition is essential to applying the statement
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Types of Derivative Instruments
Common Types
– Futures
– Forwards
– Swaps
– Options
– Combinations of the above Synthetic financial
instruments
Uncommon Types
– Basket Options
– Barrier Options
– Contingent Forwards
– Currency Translated or Quanto- products
– Combinations of items from both columns
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Futures/ Forward Contracts
Futures ContractsAn exchange-traded security to buy or sell a security, commodity, foreign currency, or other financial instrument at a certain future date for a specific price
Examples include:Commodity futures (including oil and natural gas)
Interest rate futures
Forward ContractsContract to buy or sell a financial asset or commodity at a specified date in the future for a price agreed upon at inception
Examples include:Forward rate agreements
Forward commodity contracts
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Forward Purchase Contract Value at Maturity
V = Value of Contract
P = Price$400
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Swap Agreements
Agreement between two counterparties to exchange sequences of cash flows over a specified period of time (e.g. interest rate swaps, currency swaps, commodity swaps)
Exotic swapsForward-starting swaps
Index-amortizing swaps
Leveraged swaps
Swaptions – can be used to monetize a call feature in a bond
Swaps with embedded options
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Option Contracts
Provide holder the right, but not the obligation, to buy or sell underlying instrument at a specified price
Strike price
Exercise styleAmerican options
European options
Bermudan options*
Asian options*
Premium
Call vs. put options
Option value = time value + intrinsic value
Exotic option types (includes Bermudan and Asian)
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Examples of Option Contracts
Equity options
Interest rate and currency options
Embedded options
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Combinations of Options
CapsSeries of individual call options
Gives buyer the right to receive positive difference between the cap rate and reference rate
Requires payment of a premium
FloorsSeries of individual put options
Gives buyer the right to receive the negative difference between the floor rate and reference rate
CollarsCombination of a purchased cap and a written floor
Combination of a written cap and a purchased floor
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Valuation of Derivative Instruments
GASB 53 paragraph 21Zero coupon method (for swaps)
Par value method (for forwards)
SAS No. 92, Auditing Derivative Instruments, Hedging Activities, and Investment Securities
SAS No. 101, Auditing Fair Value Measurements and Disclosures
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Knowledge Check #2
29
An entity enters into an agreement with a supplier to purchase a quantity of heating oil at a certain future time, for a certain price, and a certain quantity. What type of derivative is this considered?
A. Futures Contract
B. Forward Contract
C. Option
D. Swap Agreement
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Knowledge Check #2: Answer
30
B. Forward Contract
A forward contract is a contractual agreement to buy or sell a security, commodity, foreign currency, or other financial instrument, at a certain future date for a specific price.
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Valuation Examples
Valuation is outside the scope of this course
Examples:
– Valuing Forwards
– Valuing Interest Rate Swaps
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Common Derivative Instruments Common Derivative Instruments
AUDIT
2009 GASB 53 IMPLEMENTATION TEAM TRAINING
Recognition and Measurement ProvisionsRecognition and Measurement Provisions
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33
Recognition and MeasurementDerivative Instruments are Reported at Fair Value
Generally, all derivative instruments within the scope of GASB 53 should be reported on the statement of net assets at fair value
– Exception for certain synthetic guaranteed investment contracts
Reporting the changes in fair value depends on the classification of the derivative instrument:
1. Hedging derivative instrument (HDI) → Apply hedge accounting Entire fair value change is deferred on the statement of net assets
(deferred inflow and outflow accounts)
Continue to apply hedge accounting until a termination event occurs
2. Investment derivative instrument → Apply investment accounting
All derivative instruments not considered HDIs are investment derivative instruments
Fair value change is reported on the change statement in the period it occurs (investment revenue classification)
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Recognition Under Hedge Accounting
For HDIs that have positive fair values:
– Report HDI as an asset
– Report deferred inflow (credit) offsetting the asset
For HDIs that have negative fair values:
– Report HDI as a liability
– Report deferred outflow (debit) offsetting the liability
Unlike under FASB 133, entire amount of the HDI is offset by the deferred inflow or outflow:
– No calculation of “ineffectiveness” amount that would be reported as a current period change statement item
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Presentation of Derivative Instruments
Currently, there is no specific guidance on how to present derivative instruments on the Statement of Net Assets:
– Aggregated gross under “derivatives” captions within assets and liabilities sections?
– Aggregated net under a single “derivatives” caption?
– HDIs netted with hedged assets and liabilities?
– Investment derivative instruments reported within investments captions?
– Combination of all of the above?
– How should derivatives be classified within the net asset categories?
Where derivatives are reported in Statement of Net Assets will be part of required note disclosures
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Miscellaneous Recognition and Measurement Items
Hedge accounting is mandatory under GASB 53
HDIs should be reported in the same fund as the item being hedged
Transactions for exchange-traded derivatives should be accounted for based on the trade date, not the settlement date
Entities applying FASB 71 for regulated utilities must still apply hedge accounting
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37
Determining Fair Value
Use market price if there is an active market for the derivative instrument
If a market price is not available, then use a forecast of expected cash flows (discounted)
Also acceptable:
– Formula-based methods
– Mathematical methods Zero-coupon method
Par-value method
Matrix pricing
Black-Scholes-Merton Model
– Pricing services, provided they use the principles described above
FASB 157 approach may, but is not required, to be applied
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38
Knowledge Check #3
Except certain synthetic guaranteed investment contracts, all derivative instruments within the scope of GASB 53 should be reported on the statement of net assets at fair value
A. True
B. False
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39
Knowledge Check #3: Answer
A. True
An entity should use market price if there is an active market for the derivative instrument to estimate fair value. If a market price is not available, then use a discounted cash flows methods. Formula or mathematical based methods or pricing services are also acceptable
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Common Derivative Instruments Common Derivative Instruments
AUDIT
2009 GASB 53 IMPLEMENTATION TEAM TRAINING
Hedge Accounting Hedge Accounting
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What is Hedging?
Hedging is a method governments employ to reduce identified financial risks:
– Increases in interest costs
– Increases in commodity prices
– Losses due to counterparty default
– Fair value declines due to changes in market interest rates
Governments use derivative instruments as a mechanism to hedge identified financial risks
– Risks hedged through changes in cash flows or fair values of derivative instruments offsetting changes in cash flows or fair values of associated items
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Types of Hedges
Cash flow hedges:– Address risks that arise due to prices or rates that are variable:
– Manage risks by eliminating variable or market fluctuations to which the cash flows of the associated item are subject:
– Majority of hedges undertaken by governments are cash flow hedges
Fair value hedges:
– Address risks of changes in fair values of items that have prices or rates that are fixed or known
– Manage risks by “unlocking” fixed prices and rates thereby allowing item to be valued as if it had current market rate/price
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43
Hedging Derivative Instruments
A Hedging Derivative Instrument (HDI) is established, and hedge accounting MUST be applied if there is:
– Association: Derivative instrument is associated with a hedgeable item
AND
– Substantial Offset: Derivative instrument is effective in substantially offsetting changes in cash flows or fair value of the hedgeable item resulting from the identified financial risk hedge effectiveness
Hedge accounting is NOT an option
Contemporaneous documentation of the hedge is encouraged, but NOT required for application of hedge accounting
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Association with a Hedgeable Item
Absent a documentation requirement, it may not always be apparent whether a derivative instrument is associated with a hedgeable item
Consider facts and circumstances of derivative instrument, including whether:
– Notional amount of derivative instrument is consistent with principal/quantity of hedgeable item
– Derivative instrument will be reported in the same fund as the hedgeable item
– Term or time period of derivative instrument is consistent with that of the hedgeable item
Derivative instrument that is associated with a hedgeable item, but has yet to be determined effective is referred to in GASB 53 as a potential hedging derivative instrument (PHDI)
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What Can Be Hedgeable Items?
Hedgeable items can be all or a portion of:– A single asset or liability
An entire bond issuance $60 million of a $100 million bond issuance may be hedgeable item
– Groups of similar assets and liabilities Individual assets or liabilities in the group must be exposed to the same identified
financial risk being hedged
– An expected transaction Expected bond issuance Expected commodity purchase/sale
Assets and liabilities measured at fair value cannot be hedgeable items– Fair value of hedgeable item reported in change statement so no need for
hedge accounting
Transactions within primary government cannot be hedgeable items
Transactions between primary government and discretely presented component units can be hedgeable items
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What Can Be Hedgeable Items?Expected Transactions
For an expected transaction to be a hedgeable item, it should be probable of occurring
Probability should be supported by observable facts, including:
– The frequency, volume and amount of past transactions
– The financial, operational, and legal ability of the government to carry out the transaction
– The extent of loss or disruption to a government’s activities that could result if the transaction does not occur
– The government’s budget or other planning documents
If the hedgeable item is an expected transaction, the evaluation of effectiveness should consider the probable terms of the transaction
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Knowledge Check #4
An entity issues fixed-rate bonds and at the same time, it enters into an interest rate swap that would swap its fixed bond payments for interest payments that are at market. What type of hedge is this?
A. Cash flow hedge
B. Fair value hedge
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Knowledge Check #4: Answer
B. Fair value hedge
By entering into the interest rate swap, the entity would synthetically be paying the market interest rate, keeping the fair value of the bond liability consistently at par.
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Overview of Hedge Effectiveness
Hedge effectiveness testing should be performed for each PHDI:
– At the end of the reporting period of the inception of the hedge; and
– At the end of each subsequent reporting period for as long as the hedge is effective
End of reporting period applies to interim periods if financial statements are prepared on a GAAP basis
Hedge effectiveness testing is not required at the inception of the hedge
Different testing methods may be used across the population of PHDIs
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Hedge Effectiveness Testing Methods
GASB 53 provides the following methods for testing hedge effectiveness:
– Consistent Critical Terms Method
– Quantitative Methods Synthetic Instrument Method
Dollar-Offset Method
Regression Analysis Method
GASB 53 also provides conceptual requirements for other quantitative methods not specified in Statement
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51
Overview of Hedge EffectivenessOrder of Application of Methods
The methods for testing hedge effectiveness should be applied as follows:
First Reporting Period
If use CCT first and it fails MUST use at least one quantitative method before concluding the relationship is ineffective
If use quantitative method first and it fails MAY, but not required to use other methods before concluding the relationship is ineffective
Subsequent Reporting Periods
First use method applied in previous period if fails, MAY, but not required to use other methods before concluding the relationship is ineffective
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52
Evaluation of Hedge EffectivenessNew Market Conditions
New market conditions are caused by events that significantly change the historical relationship between the derivative and the hedgeable item
Examples of new market conditions:
– Changes in income tax rates that affect the demand for tax-exempt debt
– Natural disaster that upsets the supply of a commodity
If new market conditions occur, only hedge effectiveness methods that use forward-looking data should be used:
– Dollar-offset method (change in fair values or expected cash flows)
– In some instances, regression analysis that uses fair values
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53
Other Quantitative Methods
GASB 53 allows for use of other quantitative methodsTo be used, method should:
– Demonstrate through analysis of quantitative critical terms that hedged changes in cash flows or fair values of PHDI offset those of hedgeable item
– Generate replicable, consistent evaluations of effectiveness such that different evaluators would achieve similar results
– Incorporate consideration of substantive characteristics of PHDI and hedgeable item that could affect cash flows or fair values
If used, details of method should be disclosedTo date, GASB has not specifically identified any other
quantitative methods
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54
Knowledge Check #5
If an entity uses a quantitative method first (in the first reporting period) and it fails they are required to use other methods
before concluding the relationship is ineffective.
A. True
B. False
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Knowledge Check #5: Answer
B. False
If an entity uses a quantitative method first (in the first reporting period) and it fails, they MAY, but are not required to use other methods before concluding the relationship is ineffective
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56
Termination of Hedge Accounting
GASB 53 identifies 6 events that result in termination of hedge accounting:
a. HDI is no longer effective
b. Likelihood that a hedged expected transaction will occur is no longer probable
c. Hedged asset or liability is sold or retired, but not refunded or defeased
d. HDI is terminated
e. Hedged debt is refunded or defeased
f. Hedged expected transaction occurs
Key decision to be made when hedge accounting is terminated is how to dispose of the related deferred inflow or outflow
Disposition depends on the event resulting in the termination of hedge accounting
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Common Derivative Instruments Common Derivative Instruments
AUDIT
2009 GASB 53 IMPLEMENTATION TEAM TRAINING
Required Note DisclosuresRequired Note Disclosures
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58
Summary of Derivative Instrument Activity
Summary of derivative instrument activity provided by:1. Governmental activities, business-type activities, and fiduciary
activities
2. Then by fair value hedges, cash flow hedges, and investment derivatives
3. Then by type: Receive-fixed interest rate swap Rate caps Futures contracts
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Summary of Derivative Instrument Activity
Summary should include the following information:– Notional amount– Fair values and changes in fair value and where such
amounts are reported in the financial statements– Fair values of derivatives reclassified from hedging to
investment derivatives and the deferral amount reported in investment revenue upon termination of hedge accounting
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60
Summary of Derivative Instrument Activity
Change in Fair ValueChange in Fair Value Fair Value at June 30, 2008Fair Value at June 30, 2008
Dr. (Cr.)Dr. (Cr.) Dr. (Cr.)Dr. (Cr.)
NotionalNotional ClassificationClassification AmountAmount ClassificationClassification AmountAmount
Governmental Governmental activitiesactivities
Fair value hedgesFair value hedges Receive-fixed interest Receive-fixed interest
rate swaprate swap$ 30,000$ 30,000 DeferralDeferral $(277)$(277) DebtDebt $ 1,572$ 1,572
Cash flow hedgesCash flow hedges Pay-fixed interest rate Pay-fixed interest rate
swapsswaps$ 84,000$ 84,000 DeferralDeferral (143)(143) DebtDebt (1,253)(1,253)
Rate capRate cap $ 10,000$ 10,000 DeferralDeferral 2828 DebtDebt 7777
Investment derivativesInvestment derivatives Pay-fixed interest rate Pay-fixed interest rate
swapswap$ 18,000$ 18,000 Investment Investment
incomeincome1,2771,277 Investment Investment (1,277)(1,277)
Business-type Business-type activitiesactivities
Cash flow hedgesCash flow hedges Pay-fixed interest rate Pay-fixed interest rate
swapswap$ 37,000$ 37,000 DeferralDeferral (548)(548) DebtDebt 4,2364,236
Commodity forward Commodity forward 1,000,000 1,000,000 MMBTUsMMBTUs
DeferralDeferral (111)(111) DerivativesDerivatives 111111
Fiduciary fundsFiduciary funds Investment derivativesInvestment derivatives Foreign currency Foreign currency
forwardforward20,000UK20,000UK Investment Investment
incomeincome721721 InvestmentInvestment (721)(721)
The pay-fixed interest rate swap listed as an investment derivative under governmental activities was evaluated to be an The pay-fixed interest rate swap listed as an investment derivative under governmental activities was evaluated to be an ineffective hedge for accounting and financial reporting purposes during fiscal year 2008. Accordingly, the changes in fair value ineffective hedge for accounting and financial reporting purposes during fiscal year 2008. Accordingly, the changes in fair value of the swap that had been deferred through June 30, 2007 of $(1,409) along with the change in fair value of the swap in fiscal of the swap that had been deferred through June 30, 2007 of $(1,409) along with the change in fair value of the swap in fiscal year 2008 of $132 have been recorded as investment income for the year ended June 30, 2008.year 2008 of $132 have been recorded as investment income for the year ended June 30, 2008.
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Summary of Derivative Instrument Activity
If derivative instrument fair values are determined by other than quoted prices, disclose methods and significant assumptions used to estimate fair value
If fair value determined by pricing service, not required to disclose significant assumptions if pricing service:
– Considers them proprietary; and
– Declines to make information available
Disclose pricing service would not make information available
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Disclosures for Hedging Derivative Instruments
Disclosures in the following areas should be provided for hedging derivative instruments (HDIs):
– Objectives and strategies
– Terms
– Financial risks
– Impact on cash flows related to hedged debt
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Disclosures for Hedging Derivative Instruments
Credit risk
Interest Rate Risk
Basis Risk
Termination Risk
Rollover Risk and Market Access Risk
Foreign Currency Risk
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Knowledge Check #6
Which of the following risk(s) is/are required disclosures under GASB 53?
A. Credit Risk
B. Interest Risk
C. Basis Risk
D. All of the above
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Knowledge Check #6: Answer
D. All of the above
Credit risk, interest rate risk, and basis risk are all required disclosures in addition to termination risk, rollover risk, market access risk and foreign currency risk.
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Other Disclosure Requirements
Disclosures for Hedging Derivative Instruments—Use of Other Quantitative Method
Disclosures for Investment Derivative Instruments
Contingent Features
Other Required Disclosures
Miscellaneous Disclosure Items
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Effective Date and Transition
Effective for financial statements for periods beginning after June 15, 2009
Provisions should be retroactively applied; restate prior periods presented if practical
Perform effectiveness testing of existing HDIs at the end of the period of implementation:
– If effective, apply as if effective since inception– If ineffective, test as of end of prior period:
If effective, write-off deferral during implementation period If ineffective, fair value incorporated into cumulative effect of change
in accountingTake note of retroactive application for hybrid instruments and
termination of hedge accounting provisions
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CSU Applicability Survey Results
68
Campus Auxiliaries
1 Bakersfi eld No No
2 Chancellor’s Offi ce No No
3 Channel I slands No No
4 Chico No No
5 Dominguez Hills No No
6 Fresno No No
7 Fullerton No Yes
8 East Bay / Hayward No No
9 Humboldt No No
10 Long Beach No No
11 Los Angeles No No
12 Maritime Academy No No
13 Monterey Bay No No
14 Northridge No No
15 Pomona No No
16 Sacramento No No
17 San Bernardino No Yes
18 San Diego No No
19 San Francisco No No
20 San J ose No No
21 San Luis Obispo No No
22 San Marcos No Yes23 Sonoma No No
24 Stanislaus No No
May 2010Year-End GAAP Training
© 2
01
0 K
PM
G L
LP
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. A
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Presenters
Roger Martinez
KPMG Partner
(213) 955-8671
Kathy V. Lai
KPMG Senior Manager
(949) 885-5516
Ben Cheng
Sr. Financial Reporting Manager
(562) 951-4548
69May 2010Year-End GAAP Training
© 2
01
0 K
PM
G L
LP
, a D
ela
wa
re li
mite
d li
abili
ty p
artn
ersh
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nd th
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.S.
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PM
G n
etw
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of i
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pend
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mem
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firm
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with
KP
MG
Int
ern
atio
nal C
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tive
(“K
PM
G I
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nat
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l”),
a S
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. A
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59
96O
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Questions?
70May 2010Year-End GAAP Training