Tentative Board Decisions
Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
Accounting for financial instruments—hedging. The Board discussed the following issues in the proposed Accounting Standards Update, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities:
- Returning to qualitative assessments of hedge effectiveness after performing a quantitative assessment of hedge effectiveness
- Potential changes to the requirements for private company hedge documentation.
The Board decided that an entity should be permitted to return to qualitative assessments of hedge effectiveness after a change in facts and circumstances requires a quantitative assessment to be performed or after the entity performs a quantitative assessment to validate whether qualitative assessments of hedge effectiveness remain appropriate. The Board also decided that the same principle and factors should be used to evaluate whether an entity could perform qualitative assessments both at hedge inception and after a quantitative test has been performed subsequent to hedge inception.
Potential Changes to the Requirements for Private Company Hedge Documentation
The Board decided to allow private companies additional relief as it relates to the timing of hedge documentation. Specifically, a private company must prepare a statement of intent to hedge concurrently with hedge inception, but all initial and subsequent hedge effectiveness assessments (on either a quantitative basis or a qualitative basis as permitted or required by Topic 815) would not be required to be performed and documented until the next set of financial statements is available to be issued. The statement of intent to hedge would include the following information in accordance with paragraph 815-20-25-3(b)(2):
- The hedging instrument
- The hedged item or transaction (including required documentation requirements for hedges of forecasted transactions)
- The nature of the risk being hedged.
The Board also decided not to extend this incremental relief for private companies to private companies that are financial institutions.
Revenue recognition research. The Board discussed research on the accounting for non-recurring engineering and preproduction costs and the related reimbursement from customers.
The meeting was informational and no technical decisions were made. The Board did not request any additional information before the adoption of the new revenue standard.