FASB Summary of February 1, 2000 Board Meeting Discussion

FASB: Summary of February 1, 2000 Board Meeting Discussion

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.