At the FASB’s meeting yesterday about its project to make targeted improvements to hedge accounting, the FASB (1) made tentative decisions about a number of issues identified by staff outreach and (2) authorized its staff to draft a proposed Accounting Standards Update (ASU) for the project. The Board tentatively decided to:
- Allow entities to apply the critical-terms-match (CTM) method to a cash flow hedge of a group of forecastedtransactions when all of those transactions occur within 31 days of the maturity of the hedging derivative and all otherCTM criteria are satisfied.
- Amend a criterion for application of the shortcut method to allow partial-term fair value hedges to qualify for theshortcut method.
- Eliminate use of the retrospective method as a transition alternative.
- Mandate that when an entity determines that it is probable that a hedged forecasted transaction will not occur, theentity will record the amounts reclassified out of accumulated other comprehensive income for that hedgingrelationship in earnings on the same income statement line that would have been affected by the forecastedtransaction.