7.1 Overview
As discussed in Section 1.2, in August 2017, the
FASB issued ASU 2017-12, which amended
the hedge accounting recognition and presentation requirements in ASC 815. The Board’s
objectives in issuing the ASU were to (1) improve the transparency and understandability
of information conveyed to financial statement users about an entity’s risk management
activities by better aligning the entity’s financial reporting for hedging relationships
with those risk management activities and (2) reduce the complexity of hedge accounting
and simplify its application by preparers.
ASU 2017-12 is now effective for all entities. Because the ASU significantly altered the
hedge accounting model by making it easier for an entity to achieve hedge accounting and
making that accounting better reflect the entity’s risk management activities, it is
important for entities to be aware of the key aspects of the hedge accounting standard
that changed upon its adoption.