Project Update

Accounting for Financial Instruments—Hedge Accounting—Joint Project of the FASB and IASB

Last updated on February 6, 2014. Please refer to the Current Technical Plan for information about the expected release dates of exposure documents and final standards.

(Updated sections are indicated with an asterisk *)

This project update summarizes the project activities and decisions of the IASB and the FASB (Boards). It was prepared by the staff and is for the information and convenience of their constituents. All decisions of the Boards are tentative, may change at future Board meetings, and do not change current accounting and reporting requirements. Decisions of the Boards become final only after extensive due process. Please refer to the main Accounting for Financial Instruments project page for overall information related to the Accounting for Financial Instruments project.

Due Process Documents
*IASB Due Process Documents
Decisions Reached at the Last Meeting
Summary of Decisions Reached to Date
*Next Steps
*Board/Other Public Meeting Dates—Current
Background Information
Contact Information

Due Process Documents

On February 9, 2011, the FASB issued a Discussion Paper—Invitation to Comment—Selected Issues about Hedge Accounting to solicit input on the IASB’s Exposure Draft, Hedge Accounting. The comment period ended on April 25, 2011.

On May 26, 2010, the FASB issued one comprehensive proposed Accounting Standards Update, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities—Financial Instruments (Topic 825) and Derivatives and Hedging (Topic 815). The comment period ended on September 30, 2010.
On June 6, 2008, the Board issued an Exposure Draft, Accounting for Hedging Activities. The comment period ended on August 15, 2008.
In March 2008, the FASB and IASB issued for comment a comprehensive Discussion Paper, Reducing Complexity in Reporting Financial Instruments. The comment period ended September 19, 2008.

*IASB Due Process Documents

In November 2013, the IASB completed its Hedge Accounting phase of the Accounting for Financial Instruments Project with the issuance of a final standard, Hedge Accounting and Amendments to IFRS 9, IFRS 7 and IAS 39.

Decisions Reached at the Last Meeting

The Board has not begun redeliberations. See minutes below for a summary of discussions to date.

*Summary of Decisions Reached to Date

The Board has not begun redeliberations. See the May 2010 proposed Update on financial instruments  for decisions reached to date.

*Next Steps

The FASB will perform research and consider feedback received through comment letters and outreach activities to determine the best path forward for redeliberations on its hedge accounting phase of the project. During research and redeliberations, the FASB will also consider the IASB’s hedge accounting standard.

The IASB completed its deliberations on general hedge accounting with the issuance of a final standard in November 2013. The IASB is deliberating issues relevant to macro hedge accounting in a separate project.

*Board/Other Public Meeting Dates—Current

The Board meeting minutes are provided for the information and convenience of constituents who want to follow the Board’s deliberations. All of the conclusions reported are tentative and may be changed at future Board meetings. Decisions become final only after a formal written ballot to issue a final standard.

*January 29, 2014 Board Meeting—Decision to perform research on the scope of the hedge accounting phase of the project
May 2, 2012 Education Session—Discussions about the major themes that emerged through outreach efforts with financial statement users regarding derivatives and hedge accounting.
November 30, 2011 Education Session—Discussions about the IASB’s hedge accounting model, presented by the IASB staff. Click here for the slides used in the IASB’s presentation.
August 24, 2011 Board Meeting—Discussions about the comments received on the Invitation to Comment, Selected Issues about Hedge Accounting
March 16, 2011 Joint Board Meeting—Discussions about the outreach and comment letter summaries on the IASB’s Exposure Draft.
Click here for minutes of public meetings on the accounting for financial instruments project that were held prior to the issuance of the May 2010 proposed Update on financial instruments.

Background Information

In addition to the items discussed on the main accounting for financial instruments project page, the FASB was asked to address numerous practice issues on many aspects of hedge accounting. As a result, at its January 31, 2007 meeting, the Board directed the staff to research (a) issues causing difficulties in the application of hedge accounting and (b) potential approaches to accounting for hedging activities.

Based on that research, the staff identified seven issues that cause significant difficulties in hedge accounting:
  1. Strict documentation requirements 
  2. Lack of clarity regarding when dedesignation and redesignation is necessary 
  3. Which hedged items or hedged transactions could be included in a group 
  4. How effectiveness should be assessed and what should be included in effectiveness testing 
  5. How cash flows and different aspects of the discount rate should be incorporated into the measurement of a hedged item to determine the change in value attributable to an individual hedged risk 
  6. How ineffectiveness should be measured in a cash flow hedge and what features should be included in a perfect hypothetical derivative 
  7. What the consequences should be for failing to meet the criteria for hedge accounting
On June 6, 2008, the FASB issued an Exposure Draft, Accounting for Hedging Activities, to address the issues identified.

A majority of respondents to both the Discussion Paper on reducing complexity and the Exposure Draft on hedging urged the Boards to work together on a joint project to improve, simplify, and converge the guidance for accounting for hedging activities.

Contact Information

Upaasna Laungani
Project Manager
ulaungani@fasb.org

Nick Milone
Practice Fellow
nkmilone@fasb.org