Project Updates
Accounting for Hedging Activities
Last Updated: June 9, 2008 (Updated sections are indicated with an asterisk *)
The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.
Objective
*Due Process Documents
*Decisions Reached at the Last Meeting
*Summary of Decisions Reached to Date
*Next Steps
*Board Meetings/Other Public Meeting Dates
Background Information
Contact Information
Objective
The objective of the Accounting for Hedging Activities project is to amend Statement 133, Accounting for Derivatives and Hedging Activities, to achieve the following:
- Resolve practice issues that have arisen under Statement 133.
- Simplify accounting for hedging activities.
- Improve the financial reporting of hedging activities to make the accounting model and associated disclosures easier to understand for users of financial statements.
- Address differences in the accounting for derivative instruments and hedged items or transactions.
*Due Process Documents
The Board issued an Exposure Draft, Accounting for Hedging Activities, on June 6, 2008. The comment period ends on August 15, 2008.
*Decisions Reached at the Last Meeting
View the FASB Action Alert for a summary of decisions reached at the April 30, 2008 meeting.
*Summary of Decisions Reached to Date
See the Exposure Draft for decisions reached to date.
*Next Steps
The Board will consider comments from respondents to the Exposure Draft.
*Board Meetings/Other Public Meeting Dates
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 Statement, Interpretation, FSP, or Statement 133 Implementation Issue.
| *April 30, 2008 |
Board Meeting—Board discusses final technical issues, effective date, and comment period |
| December 20, 2007 |
Board Meeting—Board discusses fair value approach to foreign currency hedges and instructs staff to draft an Exposure Draft for vote by written ballot |
| November 7, 2007 |
Board Meeting—Board discusses fair value approach to cash flow hedge accounting and possible exception to fair value approach for an entity’s own debt |
| October 17, 2007 |
Board Meeting—Board discusses fair value approach to fair value hedge accounting |
| May 23, 2007 |
Board Meeting—Board adds project to the agenda. |
| January 31, 2007 |
Board Meeting—Board instructs staff to research accounting for hedging activities. |
Background Information
FASB Statement No. 133, Accounting for Derivatives and Hedging Activities, was originally issued in 1998. That Statement provides special accounting for hedging activities because of differences in the way derivative hedging instruments and hedged items or transactions are recognized and measured. However, since Statement 133 became effective, the FASB has been asked to address numerous issues on many aspects of hedge accounting. As a result, at the 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:
- Strict documentation requirements
- Lack of clarity regarding when dedesignation and redesignation is necessary
- Which hedged items or hedged transactions could be included in a group
- How effectiveness should be assessed and what should be included in effectiveness testing
- 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
- How ineffectiveness should be measured in a cash flow hedge and what features should be included in a perfect hypothetical derivative
- What the consequences should be for failing to meet the criteria for hedge accounting
Those issues were presented to the Board at the May 23, 2007 meeting, where the Board officially added a project to its agenda to address the accounting for hedging activities.
*Contact Information
Kevin Stoklosa
Assistant Director of Technical Activities
kmstoklosa@fasb.org
Shea Malcolm
Practice Fellow
shmalcolm@fasb.org
|
