![]() ![]() Allow all companies more time to perform the initial quantitative hedge effectiveness assessment, with additional relief provided to certain private companies and not-for-profit organizations.Allow a company to perform subsequent assessments of hedge effectiveness qualitatively if certain conditions are met.The ASU also includes targeted improvements to simplify assessment of hedge effectiveness. For cash flow and net investment hedges, all changes in value of the hedging instrument included in the assessment of effectiveness will be deferred in other comprehensive income and released to earnings when the hedged item affects earnings. ![]() Mismatches between changes in value of the hedged item and hedging instrument may still occur but they will no longer be separately reported. To simplify the reporting of hedge results for financial statement preparers and decrease the complexity of understanding hedge results for investors, the FASB has eliminated the separate measurement and reporting of hedge ineffectiveness. The new standard also will enhance the presentation of hedge results in the financial statements and disclosures about hedging activities. Requiring a new disclosure that will provide investors with more information about basis adjustments in fair value hedges of interest rate risk.Amending the current tabular disclosure of hedging activities to focus on the effect of hedge accounting on individual income statement line items.Requiring changes in the value of the hedging instrument be presented in the same income statement line item as the earnings effect of the hedged item.The new standard also will enhance the presentation of hedge results in the financial statements and disclosures about hedging activities by: The amendments in the new standard will permit certain strategies undertaken for risk management purposes to qualify for fair value hedge accounting and will make it easier for companies to apply fair value hedge accounting to portfolios of prepayable financial assets. Current GAAP contains limitations on how a company can measure changes in fair value of the hedged item attributable to interest rate risk in certain fair value hedging relationships. ![]()
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