FASB Approves Portfolio Method for Hedge Accounting

Thoughtware Article Published: Apr 12, 2022
Changing Piling Up

On March 28, 2022, FASB issued Accounting Standards Update (ASU) 2022-01, Fair Value Hedging—Portfolio Layer Method. In 2017, FASB issued ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities, which created a new last-of-layer hedging method to make it easier to hedge prepayable financial instruments. Stakeholder feedback indicated that while a single layer was useful, hedge accounting could better reflect risk management activities if the scope was expanded to allow multiple layers of a single closed portfolio to be hedged. This article provides details on ASU 2022-01, which reflects this expansion.

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