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Journal entry — Hedging — FASB discusses direction of hedging project

Published on: Sep 23, 2014

Today, the FASB met to discuss the future direction of its hedging project. At the meeting, the FASB staff presented to the Board a summary of feedback received on the hedging sections of its 2010 proposed ASU1 on financial instruments. On the basis of this feedback, the staff proposed to the Board the following alternatives for proceeding with the hedging project:

  • Option 1 — “Pursue an approach that would address specific issues from the feedback summary and stakeholder outreach, but would have as its starting point the base hedge accounting model in [ASC 8152].”
  • Option 2 — “Pursue a more broad-based approach that could involve comprehensive changes to the basic hedge accounting model, similar to the approach taken in IFRS 9.3

While no formal decisions were reached, Board members expressed a preference for Option 1. In the coming weeks, the FASB staff will continue its research, focusing on the “sub-issues” arising from that approach. Formal deliberations of the hedging project will continue on a future date.

Editor’s Note: The Board meeting handout lists the following as sub-issues that the FASB staff would expect to present to the Board for Option 1:

  • “Hedge effectiveness requirements.”
  • “Whether the shortcut and critical terms match methods should be eliminated.”
  • “Voluntary dedesignations of hedging relationships.”
  • “Reporting of ineffectiveness for cash flow underhedges.”
  • “Hedging components of nonfinancial items.”
  • “Benchmark interest rates.”
  • “Disclosures.”      

At the meeting, the Board also asked the staff to consider and present the following issues as part of Option 1:

  • Hedge documentation.
  • Convergence opportunities.
  • Presentation.


1 FASB Proposed Accounting Standards Update, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities.

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 IFRS 9, Financial Instruments.

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