FASB Proposes Clarifications to Certain Areas of the Derivatives and Hedging Standard
Norwalk, CT, November 12, 2019—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.
The proposed ASU, as well as a FASB In Focus is available at www.fasb.org.
About the Financial Accounting Standards BoardEstablished in 1973, the FASB is the independent, private-sector 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.