The FASB Approves Proposed Changes to Hedge Accounting
On June 7, 2017, all seven FASB board members confirmed their intention to vote to approve the proposed changes to the hedge accounting guidance in ASC 815. Formal voting is expected to occur via written ballot within the next few weeks and final guidance is expected to be issued in August. The mandatory effective date of adoption for public business entities will be fiscal years beginning after December 15, 2018 with early adoption permitted as early as upon issuance of the final guidance, which is a change from the previously expected early issuance date of fiscal years beginning after December 15, 2017. The new standard will better align economic results of an entity’s risk management activities with its financial reporting and make targeted improvements to simplify hedge accounting. This bulletin provides an overview of the proposed changes to Accounting Standards Codification (ASC) 815, Derivatives and Hedging that are relevant to financial institutions. Each of the changes has a positive impact on the application of hedge accounting. Individual strategies are impacted differently.