Tentative Board Decisions

Tentative Board decisions are provided for those interested in following the Board's deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.

1. An entity would be permitted to designate the hedged risk as the variability in cash flows attributable to changes in a contractually specified component in a cash flow hedge of a forecasted purchase or sale of a nonfinancial asset.
2. An entity would be required to present all effects of a hedging instrument included in the assessment of effectiveness in the same income statement line item as the earnings effect of the hedged item for all hedging relationships. For fair value and cash flow hedges, an entity would be required to present amounts excluded from the assessment of effectiveness in the same income statement line item in which the earnings effect of the hedged item is or will be presented.
3. Fair value hedges of interest rate risk:
   1. An entity may measure the hedged item in a partial-term fair value hedge of interest rate risk by assuming the hedged item has a term that reflects only the designated cash flows being hedged.
   2. For prepayable financial instruments, an entity may consider only how changes in the benchmark interest rate affect a decision to settle a debt instrument before its scheduled maturity in calculating the change in the fair value of the hedged item attributable to interest rate risk.
   3. An entity is permitted to measure the change in the fair value of the hedged item either on the basis of the benchmark rate component of the contractual coupon cash flows determined at hedge inception or on the full contractual coupon cash flows as required by current GAAP. (The Board plans to redeliberate one aspect of this proposed amendment, the "market yield test." See Issues for Redeliberation below.)
4. The concept and definition of the term benchmark interest rate and a list of eligible benchmark rates in the United States would be retained.
5. The Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate would be added to the list of eligible benchmark interest rates in the United States.
6. For cash flow hedges of interest rate risk of a variable-rate financial instrument, an entity could designate as the hedged risk the variability in cash flows attributable to the contractually specified interest rate.
7. A public business entity would be given more time to perform the initial prospective quantitative assessment of hedge effectiveness. A public business entity could perform that assessment at any time after hedge designation, but would be required to perform that assessment no later than the quarterly effectiveness testing date, using data applicable as of the date of hedge inception.
8. For purposes of assessing whether the qualifying criteria for the critical terms match method are met for a group of forecasted transactions, an entity may assume that the hedging derivative matures at the same time as the forecasted transactions if both the derivative maturity and the forecasted transactions occur within the same 31-day period.
9. If an entity that applies the shortcut method determines that use of that method was not or no longer is appropriate, the entity would be permitted to apply a long-haul method for assessing hedge effectiveness as long as the hedge is highly effective and the entity documents at hedge inception which long-haul method it would use.
10. An entity would be required to disclose information regarding cumulative basis adjustments for fair value hedges and provide the revised tabular disclosure for fair value and cash flow hedges.
11. In instances in which an initial quantitative effectiveness assessment is required, an entity would be allowed to perform subsequent qualitative assessments of hedge effectiveness.

12. The Board rescinded the proposed amendment that would have required an entity to present the change in the fair value of a hedging instrument for a hedged forecasted transaction that is probable of not occurring in the income statement line item in which the hedged forecasted transaction would have been presented had it occurred. This decision would retain current GAAP and not prescribe presentation guidance for missed forecasts.
13. The Board rescinded the proposed disclosure that would have required qualitative disclosures of quantitative hedge accounting goals.

14. The Board will consider whether to retain or eliminate the proposed market yield test. This test would require the use of total coupon cash flows in calculating the change in the fair value of the hedged item attributable to interest rate risk in instances in which the benchmark rate is greater than the market yield of the hedged item at hedge inception.
15. The Board will consider whether to retain or amend the recognition model for amounts excluded from the assessment of hedge effectiveness.
16. The Board will consider whether to retain or eliminate the proposed prohibition on returning to qualitative testing. Under the proposed amendments, an entity would be prohibited from returning to performing qualitative assessments of hedge effectiveness in a period after it begins performing quantitative hedge effectiveness assessment because of a change in facts and circumstances.
17. The Board will consider alternatives that would amend the timing of the preparation of hedge documentation for private companies.
18. The Board will decide whether a cross-currency basis spread in a cross-currency swap may be considered to be an amount that may be excluded from the assessment of hedge effectiveness.

19. The Board decided that the staff should perform further research to determine whether to include in redeliberations potential amendments to the fair value portfolio hedging model of interest rate risk related to prepayable assets.

20. The Board decided not to add the concept that a rate can be "expected to become widely used" to the current definition of the term benchmark interest rate. Therefore, the Board would not further amend the definition of a benchmark interest rate beyond the amendments already made in the proposed Update.
21. The Board decided not to deliberate the issue raised in DIG H17, Hedging Functional-Currency-Equivalent Proceeds to Be Received from a Forecasted Foreign-Currency-Denominated Debt Issuance.
22. The Board decided that in a cash flow hedge of a hedged forecasted transaction if the hedged risk component changes from the risk originally designated (for example, from LIBOR to Prime) and the hedged forecasted transaction remains probable of occurring, an entity would not need to dedesignate the hedging relationship if the derivative remains highly effective at offsetting the cash flows associated with the hedged item. A change in the hedged risk also would not affect an entity's conclusion of whether the forecasted transaction remains probable of occurring. This decision would apply to hedges of both financial instruments and nonfinancial items.