FASB seeks input on hedge accounting ASU

FASB published a proposed Accounting Standards Update (ASU) that would aim to clarify certain aspects of the guidance on hedge accounting. The proposed ASU also addresses incremental hedge accounting issues arising from the global reference rate reform initiative.

The proposed ASU, according to the news release, would enable entities to apply hedge accounting to a greater number of highly effective economic hedges, improving the decision-usefulness of information provided to investors.

In 2017, FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, to better portray the economic results of an entity’s risk management activities in its financial statements and to make certain targeted improvements to simplify the application of the hedge accounting guidance.

During FASB’s 2021 agenda consultation project and other outreach, stakeholders expressed concerns that, in certain circumstances, the current guidance increases the risk of not being able to apply hedge accounting for otherwise highly effective hedging relationships.

Stakeholders also identified some areas of hedge accounting guidance requiring further updates to address the effects of reference rate reform on hedge accounting.

FASB is seeking feedback on the ASU though Nov. 25. Comments can be made by electronic form on FASB’s website or emailed to director@fasb.org.

To comment on this article or to suggest an idea for another article, contact Kevin Brewer at Kevin.Brewer@aicpa-cima.com.