FASB Proposes to Update Accounting Standard on Derivatives and Hedging

The amendments in this proposed update would clarify the accounting for, and promote consistency in the reporting of, fair value hedge basis adjustments applicable to both the current single-layer model and the proposed multiple-layer model. The amendments would allow multiple-layer hedging relationships to be designated for a single closed portfolio of prepayable financial assets or one or more beneficial interests secured by a portfolio of prepayable financial instruments. Thus, an entity would be able to achieve hedge accounting for hedges of a greater proportion of the interest rate risk inherent in the assets included in closed the portfolio, further aligning hedge accounting with risk management strategies. The amendments in this proposed update would apply to all entities that elect to apply the portfolio layer method (also known as the last-of-layer method) of hedge accounting in accordance with Topic 815. The effective date will be determined after the Board considers stakeholder feedback on the amendments in this proposed update. Any entity wishing to adopt a multiple-layer hedge strategy would be able to do so on a prospective basis upon adoption. The proposed GAAP taxonomy improvements will be required upon finalization of the proposed Accounting Standards Update on Topic 815.

Related Links

• Proposed Standard (PDF)
• Notification on Taxonomy Improvements (PDF)
• Release Notes on Taxonomy Improvements (PDF)
• Proposed Taxonomy Improvements (XLSX)
• GAAP Taxonomy Improvements

Comment Due Date: July 05, 2021

Keywords: Americas, US, Banking, Accounting, Accounting Standards Update, Topic 815, GAAP, Derivatives and Hedging, Taxonomy, IFRS Equivalent, IFRS 9, Portfolio Layer Method, FASB