The Financial Accounting Standards Board (FASB) recentlyreleased a long-awaited exposure draft proposing changes to ASC 815, the rules thatgovern hedge accounting. The release was met with enthusiasm frommany hedge accounting experts.

“This is the best thing that has happened to corporate hedgingin decades,” says Helen Kane, founder and president of hedgeaccounting software and consulting firm Hedge Trackers.

As expected, the proposed changes would enable a company to usespecial hedge accounting for component hedging of both financialand non-financial risks. This means that a corporate commodityhedger, for example, could use special hedge accounting for aderivative that mitigates only a portion of the overall risk thatthe commodity poses to the company. Under current rules, specialhedge accounting is allowed only if the financial instrumentsuccessfully protects against the entire risk the commodity posesto the organization.

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