FASB staff Q&As address hedge accounting amid the pandemic

By Ken Tysiac

FASB’s staff addressed hedge accounting issues related to the coronavirus pandemic in a staff Q&A document posted to the board’s website Tuesday.

Stakeholders have asked FASB how the postponement or cancellation of forecasted transactions related to the effects of the pandemic should be considered when applying cash flow hedge accounting under FASB ASC Topic 815, Derivatives and Hedging.

The staff Q&As address those questions by answering:

  • When cash flow accounting has been discontinued, whether delays in the timing of the forecasted transactions related to the effect of the pandemic may be considered rare cases caused by extenuating circumstances outside the control or influence of an entity.
  • If an entity determines that amounts deferred in accumulated other comprehensive income should be reclassified in earnings in accordance with ASC Paragraph 815-30-40-5 because of missed forecasts related to the effects of the pandemic, whether those forecasts should be considered when determining whether the entity has exhibited a pattern of missing forecasts that would call into question its ability to accurately predict forecasted transactions and the propriety of using cash flow hedge accounting in the future for similar transactions.

FASB is monitoring other accounting issues related to the pandemic and plans to provide additional guidance as necessary. The FASB staff previously issued Q&As related to lease accounting amid the pandemic.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.

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