FASB proposes clarifications to certain areas of the derivatives and hedging standard

November 12, 2019

Published: FASB

The Financial Accounting Standards Board (FASB) today issued a proposed Accounting Standards Update (ASU) to clarify certain sections of its 2017 hedge accounting standard.  Stakeholders are asked to review and comment on the proposed ASU by January 13, 2020.

“During our outreach to help stakeholders understand and implement the new hedging standard, we identified areas of the guidance that could be better aligned with the standard’s stated objectives,” said FASB Chairman Russell G. Golden. “The proposed ASU would address these areas and help promote a better, more consistent application of the standard.”

The proposed ASU primarily addresses the change in hedged risk in a cash flow hedge. The 2017 guidance allowed the risk causing variability in cash flows of the forecasted transaction to change (for example, from one variable interest rate to another variable interest rate or from one commodity index to a different index for the same commodity) if certain criteria are met.

The proposed ASU would clarify whether that change can happen both prospectively (that is, before the forecasted transaction occurs) and retrospectively (that is, after the forecasted transaction occurs) and, if so, how hedge accounting guidance should be applied in those instances.


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