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Journal Entry — EITF — FASB Issues ASU in Response to EITF Consensus Related to Hedge Accounting

Published on: Jul 18, 2013

The FASB issued ASU 2013-10,1 which amends ASC 8152 to include the Fed Funds Effective Swap Rate as an appropriate benchmark interest rate in the accounting for fair value and cash flow hedges in the United States, in addition to UST3 and LIBOR.4 The ASU, which was issued in response to a final consensus reached at the EITF’s June meeting, also eliminates the following sentences from ASC 815-20-25-6:

Ordinarily, an entity shall designate the same benchmark interest rate as the risk being hedged for similar hedges, consistent with paragraphs 815-20-25-80 through 25-81. The use of different benchmark interest rates for similar hedges shall be rare and shall be justified.

As a result, entities are no longer prohibited from using different benchmark interest rates for similar hedges except in rare and justifiable circumstances.

Editor’s Note: The ASU does not affect an entity’s requirement to assess hedge effectiveness for similar hedges, as described in ASC 815-20-25-81.

The ASU applies prospectively to qualifying new hedging relationships entered into on or after July 17, 2013 (i.e., the ASU’s issuance date), or to hedging relationships redesignated on or after that date.

Editor’s Note: Entities that have not yet issued financial statements for the reporting period ended June 30, 2013, would not be able to apply this ASU to financial information as of or for the period ending June 30, 2013.

Watch for Deloitte’s forthcoming Special Edition Financial Services Industry Spotlight, which will discuss the ASU and related issues in detail.



[1]    FASB Accounting Standards Update No. 2013-10, Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.

[2]    For titles of FASB Accounting Standards Codification (ASC) references, see Deloitte’s "Titles of Topics and Subtopics in the FASB Accounting Standards Codification."

[3]    The interest rates on direct Treasury obligations of the U.S. government.

[4]    The London Interbank Offered Rate.

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