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Heads Up — FASB issues standard bringing targeted improvements to hedge accounting

Published on: 30 Aug 2017

Download PDFVolume 24, Issue 22

by Mark Bolton, Denis Rolfes, and Jon Howard, Deloitte & Touche LLP

On August 28, 2017, the FASB issued ASU 2017-12,1 which amends the hedge accounting recognition and presentation requirements in ASC 815.2 The Board’s objectives in issuing the ASU are to (1) improve the transparency and understandability of information conveyed to financial statement users about an entity’s risk management activities by better aligning the entity’s financial reporting for hedging relationships with those risk management activities and (2) reduce the complexity of and simplify the application of hedge accounting by preparers.

For public business entities, the ASU is effective for fiscal years beginning after December 15, 2018, and interim periods therein; however, early adoption by all entities is permitted upon its issuance. See the Effective Date and Transition section below for details.

This Heads Up summarizes the ASU’s key provisions. The appendix of this Heads Up highlights important differences among the ASU’s amendments, U.S. GAAP before the ASU’s adoption, and the IASB’s hedging model under IFRS 9.3

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1 FASB Accounting Standards Update (ASU) No. 2017-12, Targeted Improvements to Accounting for Hedging Activities.

2 FASB Accounting Standards Codification (ASC) Topic 815, Derivatives and Hedging.

3 IFRS 9, Financial Instruments, also allows entities to elect to continue to follow the hedge accounting provisions of IAS 39, Financial Instruments: Recognition and Measurement.

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