Derivatives and hedge accounting

Derivatives, whether freestanding or embedded in other instruments, may be used to manage exposure to certain risks or for speculative purposes. Explore PwC's latest thinking on derivatives and hedging.

Quick update on what is changing

  • The FASB's new guidance in ASU 2017-12 more closely aligns hedge accounting with companies' risk management strategies, simplifies the application of hedge accounting, and increases transparency as to the scope and results of hedging programs.
  • The changes significantly affect what qualifies for hedge accounting, how hedge effectiveness is assessed, and how the hedging results are presented and disclosed in the financial statements.
  • The amendments can be early-adopted in any interim or annual period before the January 1, 2019 effective date for calendar-year-end public business entities (one year later for all other entities).
  • The FASB is addressing implementation issues related to ASU 2017-12 and considering other hedging issues. The technical and research agendas have the following projects related to hedging:
    • Codification improvements,

    • Last-of-layer method,

    • Inclusion of the Secured Overnight Financing Rate (SOFR) as a benchmark interest rate,

    • Other issues pertaining to the replacement of LIBOR with SOFR, and

    • Further alignment of hedge accounting with risk management activities.
  • Companies should continue to monitor future standard setting in these areas.

Derivatives and hedging accounting guide

The FASB’s new guidance on hedging is effective this year. In this episode, PwC partners Heather Horn and Brian Staniszewski discuss five things you need to know when implementing the new hedging standard.

PwC's hedging video series

Are you up-to-date on the accounting impacts of the FASB's new hedge accounting guidance? Watch our latest videos for recent insights from PwC professionals on hedge accounting updates including changes to hedging benchmark interest rates, excluded components, and more.  

Watch the videos

Contact us

Heather Horn

US Strategic Thought Leader, National Professional Services Group, PwC US

David Schmid

International Accounting Leader, National Professional Services Group, PwC US

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