Derivatives Implementation Group
Summary of February 1,
2000 Board Meeting Discussion on Statement 133 Implementation
Issues
Derivatives and hedging-possible amendment of
Statement 133. The Board discussed two requests for amendment
of FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. The first request focused on
intercompany derivatives issued by one member of a consolidated
group (for example, an entity functioning as a treasury center) to
another member of the consolidated group desiring to hedge an
exposure. The Board discussed whether to extend hedge accounting to
situations in which intercompany derivatives are designated as
hedges of offsetting risks and derivatives with third parties are
acquired to hedge the net exposure.
The Board decided to permit that hedge accounting for
cash flow hedges of foreign exchange risk. The Board decided not to
extend hedge accounting for other situations. The Board also
considered a request to modify the transition provisions of
Statement 133 to permit hedge accounting for intercompany
derivatives designated as hedging instruments prior to January 1,
1999. The Board decided not to make that change.
The second request for amendment addressed permitting
hedge accounting for recognized assets and liabilities denominated
in a foreign currency. The Board decided to permit hedge accounting
for cash flow hedges and fair value hedges of debt instruments
(either held or owed) denominated in a foreign currency.
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