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.
- 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
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.
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