FASB proposes updates to derivatives and hedging accounting

Changes would clarify certain requirements.

FASB is seeking comments on two Proposed Accounting Standards Updates related to derivatives and hedging.

The exposure drafts address ASC Topic 815, Derivatives and Hedging. Both resulted from consensuses of FASB's Emerging Issues Task Force.

One proposal, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships, would clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument under Topic 815 does not, in and of itself, require dedesignation of that hedge accounting relationship, provided that all other hedge accounting criteria (including those in Paragraphs 815-20-35-14 through 35-18) continue to be met.

The other proposal, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments, would clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts.

Comments on both proposals are being accepted until Oct. 5 and can be submitted at fasb.org.

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