FASB Proposes to Update Accounting Standard on Derivatives and Hedging
FASB published an Exposure Draft on the Accounting Standard Update on derivatives and hedging (Topic 815), along with the proposed Generally Accepted Accounting Principles (GAAP) taxonomy improvements for the Accounting Standards Update on Topic 815. The amendments in this update relate to accounting for fair value hedge basis adjustments under the portfolio layer method. FASB also published an Excel document presenting the proposed taxonomy improvements. The comment period for the Exposure Draft on Topic 815 ends on July 05, 2021. Additionally, as per the published notification, the comment period on the proposed taxonomy improvements also ends on July 05, 2021.
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
Featured Experts
Scott Dietz
Scott is a Director in the Regulatory and Accounting Solutions team responsible for providing accounting expertise across solutions, products, and services offered by Moody’s Analytics in the US. He has over 15 years of experience leading auditing, consulting and accounting policy initiatives for financial institutions.
Masha Muzyka
CECL, IFRS 9, and IFRS 17 expert; credit risk and insurance risk specialist; strategic planning and credit analytics solutions consultant
Anna Krayn
CECL adoption expert; engagement manager for loss estimation, internal risk capability enhancement, and counterparty credit risk management
Previous Article
Danish Central Bank to Continue Cyber Testing With TIBER-DK ProgramRelated Articles
ISSB Sustainability Standards Expected to Become Global Baseline
The finalization of the two sustainability disclosure standards—IFRS S1 and IFRS S2—is expected to be a significant step forward in the harmonization of sustainability disclosures worldwide.
IOSCO, BIS, and FSB to Intensify Focus on Decentralized Finance
Decentralized finance (DeFi) is expected to increase in prominence, finding traction in use cases such as lending, trading, and investing, without the intermediation of traditional financial institutions.
BCBS Assesses NSFR and Large Exposures Rules in US
The Basel Committee on Banking Supervision (BCBS) published reports that assessed the overall implementation of the net stable funding ratio (NSFR) and the large exposures rules in the U.S.
Global Agencies Focus on ESG Data, Climate Litigation and Nature Risks
At the global level, supervisory efforts are increasingly focused on addressing climate risks via better quality data and innovative use of technologies such as generative artificial intelligence (AI) and blockchain.
ISSB Standards Shine Spotlight on Comparability of ESG Disclosures
The finalization of the IFRS sustainability disclosure standards in late June 2023 has brought to the forefront the themes of the harmonization of sustainability disclosures
EBA Issues Several Regulatory and Reporting Updates for Banks
The European Banking Authority (EBA) recently issued several regulatory publications impacting the banking sector.
BCBS Proposes to Revise Core Principles for Banking Supervision
The Basel Committee on Banking Supervision (BCBS) launched a consultation on revisions to the core principles for effective banking supervision, with the comment period ending on October 06, 2023.
US Proposes Final Basel Rules, Transition Period to Start in July 2025
The U.S. banking agencies (FDIC, FED, and OCC) recently proposed rules implementing the final Basel III reforms, also known as the Basel III Endgame.
FSB Report Outlines Next Steps for Climate Risk Roadmap
The Financial Stability Board (FSB) recently published the second annual progress report on the July 2021 roadmap to address climate-related financial risks.
EBA Plans on Ad-hoc ESG Data Collection and Climate Scenario Exercise
The recognition of climate change as a systemic risk to the global economy has further intensified regulatory and supervisory focus on monitoring of the environmental, social, and governance (ESG) risks.
