FASB proposed an Accounting Standards Update, on codification improvements to hedge accounting under Topic 815, to clarify certain sections of the 2017 hedge accounting standard (Update 2017-12). Also proposed are the taxonomy improvements for this proposed Accounting Standards Update. The comment period on the proposed Accounting Standards Update and the taxonomy improvements ends on January 13, 2020.
The proposed Accounting Standards Update primarily addresses the change in hedged risk in a cash flow hedge. The 2017 guidance allowed the risk causing variability in cash flows of the forecasted transaction to change (for example, from one variable interest rate to another variable interest rate or from one commodity index to a different index for the same commodity) if certain criteria are met. The proposed Accounting Standards Update would clarify whether that change can happen both prospectively (that is, before the forecasted transaction occurs) and retrospectively (that is, after the forecasted transaction occurs) and, if so, how hedge accounting guidance should be applied in those instances.
The proposed amendments would be effective for all entities for fiscal years beginning after December 15, 2020. For public business entities, the proposed amendments would be effective for interim periods within fiscal years beginning after December 15, 2020. For all other entities, the proposed amendments would be effective for interim periods within fiscal years beginning after December 15, 2021. Early adoption would be permitted for all entities on any date on or after issuance of a final Update if an entity has already adopted the amendments in Update 2017-12.
- Press Release on Proposed Update
- Proposed Accounting Standards Update (PDF)
- Notification on Taxonomy Improvements (PDF)
- Release Notes on Taxonomy Improvements (PDF)
Comment Due Date: January 13, 2020
Effective Date: December 15, 2020/December 15, 2021
Keywords: Americas, US, Banking, Accounting, Accounting Standards Update, Derivatives and Hedging, Hedge Accounting, Codification Improvements, Taxonomy, Topic 815, 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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