Treasury and accounting professionals across the country are keenly anticipating the issuance of a FASB exposure draft that is expected to simplify hedge accounting—and eliminate much of the drag that stifles hedging among corporations with market risk.
The FASB has announced that the exposure draft will make "targeted improvements to the hedge accounting model." We believe the FASB intends for the impending changes to drive an increase in the number of hedging entities that take advantage of the benefits of special hedge accounting. These would be welcome changes. If the FASB succeeds in increasing the number of corporates using hedge accounting, that should, in turn, reduce non-GAAP reporting among U.S. multinationals and increase the usefulness of those companies' financial statements to end users of the statements.
The current rule set around hedge accounting and the diversity of interpretations by audit firms (which increases exponentially when multiplied by the number of audit partners in each firm) have combined to artificially reduce usage of hedge accounting. In fact, the hedge accounting rules have even discouraged some non-financial companies from using derivatives to manage their financial risks. The rules were designed to ensure appropriate controls and reporting on derivatives trades, but instead they've become a barrier to entry.
Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.
Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Critical Treasury & Risk information including in-depth analysis of treasury and finance best practices, case studies with corporate innovators, informative newsletters, educational webcasts and videos, and resources from industry leaders.
- Exclusive discounts on ALM and Treasury & Risk events.
- Access to other award-winning ALM websites including PropertyCasualty360.com and Law.com.
*May exclude premium content
Already have an account? Sign In
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
