Preface
We are pleased to present the 2024 edition of Hedge Accounting.
This Roadmap provides an overview of the FASB’s authoritative guidance on hedge
accounting in ASC 8151 as well as our insights into and interpretations of how to apply that guidance in
practice.
Entities are exposed to operational risks, and they can mitigate some of those risks by
entering into separate contracts that may meet the definition of a derivative
instrument. For such circumstances, ASC 815 allows entities to use a specialized hedge
accounting for qualified hedging relationships. If hedge accounting is not applied,
changes in the fair values of derivative instruments are recognized in earnings in each
reporting period, which may or may not match the period in which the risks that are
being hedged affect earnings. Therefore, the objective of hedge accounting is to match
the timing of income statement recognition of the effects of the hedging instrument with
the timing of the recognition of the hedged risk.
Hedge accounting is a complex aspect of GAAP that is largely governed by
“rules-based” guidance developed over many years in response to constituents’ requests
for interpretive guidance. This Roadmap is intended to help entities navigate that
accounting and financial reporting guidance, reduce complexity, and arrive at
appropriate accounting conclusions. For a summary of substantive changes made to this
publication since the 2023 version, see Appendix D.
This Roadmap provides guidance on the application of hedge accounting to a qualified
hedging relationship. For a comprehensive discussion of the identification,
classification, measurement, and presentation and disclosure of derivative instruments,
including embedded derivatives, see Deloitte’s Roadmap Derivatives.
Be sure to check out On the Radar (also available as a stand-alone publication), which
briefly summarizes emerging issues and trends related to the
accounting and financial reporting topics addressed in the
Roadmap.
We hope you find this Roadmap a useful resource, and we welcome your suggestions for future improvements.
If you need assistance with applying the guidance or have other questions about this
topic, we encourage you to consult our technical specialists and other professional
advisers.
Footnotes
1
For a list of abbreviations used in this publication, see
Appendix C. For
the full titles of standards, topics, and regulations used in this publication,
see Appendix B.