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The Financial Accounting Standards Board (FASB) recently released a long-awaited exposure draft proposing changes to ASC 815, the rules that govern hedge accounting. The release was met with enthusiasm from many hedge accounting experts.

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

As expected, the proposed changes would enable a company to use special hedge accounting for component hedging of both financial and non-financial risks. This means that a corporate commodity hedger, for example, could use special hedge accounting for a derivative that mitigates only a portion of the overall risk that the commodity poses to the company. Under current rules, special hedge accounting is allowed only if the financial instrument successfully protects against the entire risk the commodity poses to the organization.

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