FASB ISSUES IMPROVEMENTS TO HEDGE ACCOUNTING
Effective for public companies in 2019 and private companies in 2020, with early adoption permitted
FASB) today issued a final Accounting Standards Update (ASU) that will improve and simplify accounting rules around hedge accounting. The ASU is effective for public companies in 2019 and private companies in 2020. Early adoption is permitted.
“Companies and investors alike have expressed overwhelming support for this long-awaited standard,” stated FASB Chairman Russell G. Golden. “Thanks to their input, the final ASU better aligns the accounting rules with a company’s risk management activities, better reflects the economic results of hedging in the financial statements, and simplifies hedge accounting treatment.”
The new standard refines and expands hedge accounting for both financial (e.g., interest rate) and commodity risks. Its provisions create more transparency around how economic results are presented, both on the face of the financial statements and in the footnotes, for investors and analysts.
In September 2016, the FASB issued an Exposure Draft that generated 60 comment letters. Additionally, the FASB engaged in extensive stakeholder outreach, including numerous discussions with investors and other financial statement users; two public roundtables, which included preparers, auditors, regulators, and other stakeholders; and meetings with advisory groups (FASAC, IAC, NAC, PCC).
The new standard takes effect for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, for public companies and for fiscal years beginning after December 15, 2019 (and interim periods for fiscal years beginning after December 15, 2020), for private companies. Early adoption is permitted in any interim period or fiscal years before the effective date of the standard.
On Monday, September 25, 2017, the FASB will host a one-hour webinar, IN FOCUS: FASB Accounting Standards Update on Hedging, from 1:00 to 2:00 p.m. Eastern Daylight Time. Offered free of charge to those who preregister, the webinar will feature FASB Vice Chairman James L. Kroeker, FASB Member R. Harold Schroeder, and members of the FASB project team discussing key aspects of the new standard. Viewers of the live webcast will be eligible to receive up to 1.2 continuing professional education (CPE) credits. Registration and other information is available on the FASB website.
The final ASU, a FASB in Focus overview, an educational video, and an Understanding Costs and Benefits document are available at www.fasb.org.
About the Financial Accounting Standards Board
Established in 1973, the FASB is the independent, private-sector, not-for-profit organization based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized by the Securities and Exchange Commission as the designated accounting standard setter for public companies. FASB standards are recognized as authoritative by many other organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB. For more information, visit www.fasb.org.