FASB Hints at Future Hedge Accounting Overhaul

A recent FASB discussion about hedge accounting rules has raised speculation that the board might consider macro hedging, a fundamentally different hedge accounting model that would overhaul how banks, mortgage real estate investment trusts (REIT), and other financial services companies account for these complex transactions. In an August educational session, members of the board said they will eventually have to address macro hedging, as it appears to be inching toward that direction in its recent efforts. The issue was raised during discussions about the “last-of-layer model,” a new hedge accounting technique introduced under Accounting Standards Update (ASU) 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which was issued in 2017. Those rules took effect this year for public companies. The board discussed potential approaches for hedging multiple layers using the last-of-layer technique. “To me [under] phase two at some point we’ve got to decide ‘do you want to do macro hedging,’ rather than incremental projects over time that kind of get us toward macro hedging,” FASB member Gary Buesser said during the meeting.

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Proposal Would Incorporate Audit Reporting Changes to Specialized Financial Statements

On August 28, the AICPA’s Auditing Standards Board (ASB) issued a proposal that would incorporate recent auditor reporting changes to audits of certain types of financial statements, such as those prepared according to a financial reporting framework that does not use GAAP. The proposal is part of the ASB’s effort to converge its standards with those issued by the International Auditing and Assurance Standards Board (IAASB). “As we continue to enhance the transparency of auditor reporting, we have extended the provisions of SAS No. 134 as they relate to providing insight into the basis for the auditor’s opinion,” AICPA Chief Auditor Robert Dohrer said in a statement. “Disclosure of the responsibilities of both entity management and auditors in these unique reporting circumstances is also important.” Comments are due by October 28.


California State Treasurer Appointed to GASB’s Main Advisory Board

Fiona Ma, California’s State Treasurer, has been appointed to the Governmental Accounting Standards Advisory Council (GASAC), the Financial Accounting Foundation (FAF) announced on August 28. Ma was nominated to the GASAC by the National Association of State Treasurers, the FAF said. Her initial term on the GASAC will conclude on December 31, 2020. Prior to her 2018 election as California State Treasurer, she served as chair of the California State Board of Equalization for four years. From 2006 to 2012, she was a member of the California General Assembly, attaining the role of speaker pro tempore. Before that, she was a member of the San Francisco Board of Supervisors, where she served for four years. “Fiona Ma brings to the GASAC a distinguished track record of leadership and expertise not only in government financial reporting, but also as a former legislator in state and local government,” FAF Chairman Charles Noski said in a statement. “We look forward to her contributions to GASAC discussions as part of the group’s mission to provide input to the GASB.”