FASB Summary of November 21, 2001 Board Meeting Discussion

FASB: Summary of November 21, 2001 Board Meeting Discussion

Derivatives Implementation Group

Summary of November 21, 2001 Board Meeting Discussion on Statement 133 Implementation Issues

Open Discussion: At its November 21, 2001 meeting, the Board decided not to object to the staff’s issuing revised guidance in a question-and-answer format (Q&A) on the following five Statement 133 Implementation Issues related to FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities:

Issue E18

Designating a Zero-Cost Collar with Different Notional Amounts as a Hedging Instrument

Issue E19

Methods of Assessing Hedge Effectiveness When Options Are Designated as the Hedging Instrument

Issue G1

Hedging an SAR Obligation

Issue G11

Defining the Risk Exposure for Hedging Relationships involving an Option Contract as the Hedging Instrument

Issue H15

Using a Forward Contract to Hedge a Forecasted Foreign Currency Transaction That Becomes Recognized

The previously issued guidance on those Implementation Issues is being revised to remove any implied inconsistencies with Statement 133 Implementation Issue No. G20, “Assessing and Measuring the Effectiveness of a Purchased Option Used in a Cash Flow Hedge,” which had been cleared by the Board on June 27, 2001. In view of the nature of the modifications made to those Issues, no effective date for the revised guidance will be specified. The revision to Implementation Issue H15 involves changing its title. A downloadable Word file that presents a marked draft of the revisions made will be posted on the FASB website in December 2001.