FASB has voted to proceed with a new accounting standard expected to improve and simplify accounting rules around hedge accounting. The final Accounting Standards Update (ASU) is expected to be published in August 2017.
“Over the past year, the FASB has received overwhelmingly positive feedback on the proposed changes to the hedge accounting model from both companies and investors,” noted FASB Chairman Russell G. Golden. “The resulting standard will better align the accounting rules with a company’s risk management activities, better reflect the economic results of hedging in the financial statements, and simplify hedge accounting treatment.”
Under the new standard, hedge accounting would be refined and expanded for both financial (e.g., interest rate) and commodity risks. The economic results would be presented in a more transparent way, both on the face of the financial statements and in the footnotes, for investors and analysts.
In September 2016, FASB issued an Exposure Draft that generated 60 comment letters. Additionally, the FASB engaged in extensive stakeholder outreach, including numerous discussions with investors and other financial statement users; two public roundtables, which included preparers, auditors, regulators, and other stakeholders; and meetings with the Private Company Council to discuss private company hedge documentation issues.
The new standard will take effect for fiscal years, and interim periods within those fiscal years, beginning after Dec. 15, 2018, for public companies and for fiscal years beginning after Dec. 15, 2019 (and interim periods for fiscal years beginning after Dec. 15, 2020), for private companies. Early adoption will be permitted in any interim period or fiscal years before the effective date of the standard.