FASB Discussion Paper Seeks Input on Issues About Hedge Accounting

The Financial Accounting Standards Board (FASB) has issued a discussion paper to solicit input on how to improve, simplify, and converge the financial reporting requirements for hedging activities.

In May 2010, the FASB proposed its revisions to improve and simplify standards for financial reporting of financial instruments, including hedge accounting guidance, in its proposed Accounting Standards Update, Accounting for Financial Instruments and Revisions to the Accounting for Derivative Instruments and Hedging Activities – Financial Instruments (Topic 825) and Derivatives and Hedging (Topic 815). In December 2010, as part of its project to improve the accounting for financial instruments, the IASB issued its exposure draft (ED), Hedge Accounting, which seeks to align hedge accounting more closely with risk management while addressing inconsistencies and weaknesses in the existing hedge accounting model.

Differences exist between International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (GAAP) relating to hedge accounting. The revisions proposed by the IASB in its ED would result in more differences compared with the FASB’s current and proposed hedge accounting guidance. The FASB discussion paper asks stakeholders whether the International Accounting Standards Board’s (IASB) proposals are a better starting point for any changes to US GAAP as it relates to derivatives and hedging activities.

“The FASB is issuing this discussion paper to determine whether our constituents think the IASB’s proposed changes would improve the accounting for hedging activities,” said FASB chairman Leslie Seidman. “The information received during the comment period will be helpful to both the FASB and the IASB as we deliberate issues pertaining to hedge accounting.”


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