The new ASC 815

The Financial Accounting Standards Board (FASB) made a number of changes to the types of hedging allowed under the new guidelines. The amendment greenlights the use of the Security Industry and Financial Markets Association (SIFMA) Municipal Swap Rate and contractually specified rates in hedges against interest rate changes.

Benefits of urgent adoption

Although, as reported by Accounting Today, public companies that use hedging must come into compliance by January 2019 (private companies have until January 2020), they can begin adopting the new practices now. Companies that previously steered clear of this strategy because the compliance standards were too complex or labor-intensive for their organizations may benefit from revisiting this risk management approach before the deadline.

There are several potential benefits for doing so, including expanding foreign exchange hedge programs to interest rate volatility and commodities. Meanwhile, companies that struggled under the weight of the old rules, or that received investor pushback on hedge accounting in the past, can take advantage of the new standards and further develop their hedging activities.