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 companies for fiscal years, including interim periods within those years, starting after December 15, 2018. Private companies must apply the new hedge accounting standard for fiscal years starting after December 15, 2019, and the interim periods for fiscal years starting after December 15, 2020. Early adoption will be permitted.