FASB Proposes Improvements to Derivatives and Hedging Standard
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.
Related Links
- 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
Featured Experts

Laurent Birade
Advises U.S. and Canadian financial institutions on risk and finance integration, CCAR/DFAST stress testing, IFRS9 and CECL credit loss reserving, and credit risk practices.

David Fihrer
Skilled life insurance actuary; subject matter expert on IFRS 17 and source of earnings

Cayetano Gea-Carrasco
Offers wide-ranging expertise on capital markets, AI analytics, and software management.
Previous Article
EC Amends Rule on Mapping of External Credit Assessment InstitutionsRelated Articles
EBA Clarifies Use of COVID-19-Impacted Data for IRB Credit Risk Models
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
EP Reaches Agreement on Corporate Sustainability Reporting Directive
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
PRA Consults on Model Risk Management Principles for Banks
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
EC Regulation Amends Standards for Calculating Credit Risk Adjustments
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
BIS Hub Updates Work Program for 2022, Announces New Projects
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
EIOPA Issues Cyber Underwriting Proposal, Statement on Open Insurance
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
US Senate Members Seek Details on SEC Proposed Climate Disclosure Rule
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
EIOPA Consults on Review of Securitization Framework in Solvency II
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
UK Authorities Issue Regulatory and Reporting Updates for Banks
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
BCBS Issues Climate Risk Principles while HKMA Expresses Its Support
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.