On November 19, ISDA submitted a request to the Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board (FASB) to clarify whether FASB Accounting Standards Codification (ASC) 815 does not prohibit using the spot method to assess hedge effectiveness for net investment hedges, even when the hedge is not “perfectly effective”.
The request is driven by practical issues faced by companies hedging foreign operations, especially when the available derivative does not exactly match the currency exposure, such as using a hedging instrument denominated in CNH to hedge Chinese renminbi.
In the letter, ISDA proposes amending ASC 815 to allow the spot method and recognition of excluded components in earnings if the hedge is highly effective. ISDA also suggests updating language to focus on the “value of the included component” rather than “fair value”, aiming to resolve ambiguity and make accounting treatment clearer for multinational companies.
Documents (1) for ISDA Submits Agenda Request to FASB EITF on ASC 815
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