FASB Proposed Changes—Commodity Hedge Accounting

 

September 2017

The new hedge accounting guidance recently issued by FASB in ASU 2017-12 (the “Update”) will better align the accounting for commodity hedges with how companies manage their commodity risk. Similar to today’s accounting for interest rate and foreign exchange hedges, Companies will be allowed to point to a specific commodity risk component, as long as that component is contractually specified. This is a big change from current guidance that requires consideration of the overall changes in fair value or the variability in total cash flows.

 
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