9.5 Presentation and Disclosure
If assets in a closed portfolio are presented within more than one
line item on the balance sheet, ASU 2022-01 requires an entity to use a systematic
and rational method to allocate the portfolio-level basis adjustment to the
associated line items. However, the ASU also clarifies that the entity should not
allocate those adjustments on a more disaggregated basis for any disclosures not
otherwise required by ASC 815. Rather, an entity should disclose the total amount of
the basis adjustments as a reconciling amount in any affected disclosures. ASU
2022-01 updates the current guidance, which states that the allocation of basis
adjustments may be required by other areas of GAAP.
As noted in Section 9.4, in the event of a
breach of a layer or layers, an entity must recognize any related reversal of basis
adjustments associated with that breach in interest income. In addition, ASC
815-10-50-5C requires an entity to disclose:
- The amount of the hedge basis adjustment recognized in current-period interest income because of the breach
- The circumstances that led to the breach.
In a manner consistent with the disclosure requirements for last-of-layer hedges (see
Section 6.6.2.1.3), the ASU amends ASC
815-10-50-4EEE to require entities to provide additional disclosures about how the
basis adjustments related to hedging relationships designated under the portfolio
layer method affect each line item on the balance sheet. Entities must separately
disclose the following information for each line item in which assets are included
in a qualifying portfolio layer method hedge:
- The amortized cost basis of the closed portfolio(s) of financial assets or the beneficial interest(s)
- The amount that represents the hedged item(s) (that is, the hedged layer or layers)
- The basis adjustment associated with the hedged item(s) (that is, the hedged layer or layers).