Issues In-Depth   |   March 2018
 

Hedging – Targeted improvements

Filed under: Financial instruments (FASB Project), Hedge accounting

KPMG’s in-depth guidance on and interpretation of the new hedging standard. KPMG explains the targeted changes to the hedging standard, provides examples and analysis, and compares to legacy US GAAP.

Applicability

  • Companies that apply hedge accounting

Effective dates

Mandatory effective dates and early adoption provisions:

Annual periods:

For public business entities entities the effective date for annual periods is the fiscal years beginning after Dec. 15, 2018.

For all other entites the effective date for annual periods is the fiscal years beginning after Dec. 15, 2019.

Interim periods:

For public business entities entities the effective date for interim periods is the fiscal years beginning after Dec. 15, 2018.

For all other entites the effective date for interim periods is the fiscal years beginning after Dec. 15, 2020.

Early adoption allowed?
Yes, any time after the issuance of the ASU including in an interim period.

Key impacts

The standard changes the recognition and presentation requirements of hedge accounting, including:

  • Eliminating the requirements to separately measure and report hedge ineffectiveness
  • Presenting all items that affect earnings in the same income statement line item as the hedged item

The standard also provides new alternatives for:

  • Applying hedge accounting to additional hedging strategies
  • Measuring the hedged item for fair value hedges of interest rate risk
  • Reducing the cost and complexity of applying hedge accounting

Report contents

  • Recognition and presentation
  • New hedging strategies
  • Fair value hedges of interest rate risk
  • Improvements to reduce cost and complexity
  • Effective dates and transition

Related content

KPMG's Handbook providing comprehensive guidance on hedge accounting (post ASU 2017-12) Hedging 

Spotlight on contributors

Mahesh Narayanasami

Mahesh Narayanasami

Principal, DPP, KPMG (US)

+1 212-954-7355
Mark Northan

Mark Northan

Partner, DPP, KPMG (US)

+1 212-954-6927