FASB Proposes Expanding Allowed Interest Rates to Hedge Accounting Standard
The list of permissible U.S. benchmark interest rates for the Financial Accounting Standards Board’s (“FASB”) hedge accounting standard could expand. In its recently issued Proposed Accounting Standards Update (“ASU”), the FASB would add the Overnight Index Swap rate based on the Secured Overnight Financing Rate as a fifth U.S. benchmark interest rate. The addition would help companies avoid any potential expenses and complexities related to using varying cash flows and discount rates to evaluate the hedged item and the hedging instrument. Comments are due Friday, March 30.
FASB Finalizes Updated Hedge Accounting Guidance
Announced on Monday, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) that improves the guidance related to hedge accounting. ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, aligns the accounting provisions with an entity’s risk management activities, as well as reflects the economic impact of hedging in financial statements, and streamlines hedge accounting treatment. In addition, the new standard expands hedge accounting for financial and commodity risks. The requirements provide additional clarity regarding how economic results are disclosed in financial statements. ASU No. 2017-12 will be effective for public. Read More.
FASB Approves Hedge Accounting Standard
The Financial Accounting Standards Board (“FASB”) will move forward with a new accounting standard to simplify hedge accounting guidance. Voted on last Wednesday, the standard will refine and expand hedge accounting for financial and commodity risks. In addition, the standard will help investors and analysts by improving transparency to the presentation of economic results in financial statements. Speaking on the new guidance, FASB Chairman Russell Golden said the standard will enhance the alignment of accounting rules with an entity’s risk management activities and simplify hedge accounting. The final Accounting Standards Update is scheduled for an August release. For public companies,. Read More.
Highlights from the Private Company Council’s Tuesday Meeting
The following is a recap of Financial Accounting Standards Board (“FASB”) projects discussed at Tuesday’s Private Company Council (“PCC”) meeting: Disclosure Framework. Numerous PCC members expressed support for the project, particularly the inventory exposure draft. The PCC also provided feedback on various portions of the project. Financial instruments—Hedge Accounting. Many PCC members favor the standard, including guidance to give private companies additional time to disclose hedge effectiveness. Liabilities and Equity—Targeted Improvements. Feedback received on the Exposure Draft was discussed, as well as the FASB’s research on an alternative to help streamline financial instruments accounting with “down round” features. The FASB was encouraged. Read More.
Topics: Cloud Computing, FASB, FASB Disclosure Framework Project, Financial Accounting Standards Board "FASB", Hedge Accounting, liabilities and equity, Private Company Council "PCC", Variable Interest Entity "VIE"
FASB Reaches Decisions on Proposed Hedge Accounting Updates
Last week while discussing its proposed Accounting Standards Update, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, the Financial Accounting Standards Board agreed to include a cross currency basis spread in a currency swap to the list of excluded amounts from hedge effectiveness assessments. In addition, the FASB agreed on using an amortization approach with respect to the base recognition model for excluded components. Companies will also be allowed to use a mark-to-market through earnings method. Further, when a hedging relationship ends and an amortization approach is applied, the fair value changes of excluded components in. Read More.
FASB Reaches Decisions on Hedge Accounting Project
During a review last week on its proposed Accounting Standards Update, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, the Financial Accounting Standards Board (“FASB”) reached conclusions on the following topics: The market yield test. The FASB decided to exclude the market yield test from the final standard. Companies would have been required to use the total contractual coupon cash flows to determine fair value of the hedge item attributable to interest rate risk, if the hedge item’s market yield is below the benchmark interest rate at hedge inception. Companies now have the freedom to use. Read More.
Topics: Derivatives and Hedging (Topic 815), FASB, Financial Accounting Standards Board "FASB", Hedge Accounting, Hedging, Last Layer Approach, Market Yield Test, Prepayable Assets, Proposed Accounting Standards Update