Defining Issues | September 2016

FASB proposes targeted changes to hedge accounting

KPMG reports on the FASB’s proposed ASU impacting down-round financial instruments. The proposals on equity-linked instruments with down-round features aim to make the accounting guidance easier to use.


Proposed ASU on ASC Topic 815

  • Company with derivative instruments that does not currently qualify for hedge accounting
  • Company that currently applies or will apply hedge accounting

Relevant dates

  • September 8, 2016 – FASB issued exposure draft
  • November 22, 2016 – Comment deadline

Key impacts

The proposed ASU would:

  • Expand the types of hedging activities that could qualify for hedge accounting to provide additional opportunities to align hedge accounting with an entity’s existing risk management activities
  • Reduce the cost and complexity of monitoring the effectiveness of hedge relationships and implementing hedge accounting


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Report contents

  • Risk component hedging
  • Changes to recognition and presentation
  • Reduced cost and complexity for preparers
  • Proposed transition and effective date



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