Financial instruments and hedging

Explore PwC's latest thinking on financial instruments and hedging.

Hedging - are you early adopting the FASB's new guidance?

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New hedge accounting guidance is aimed at aligning accounting with risk management strategies and simplifying application. Learn more in our 4 minute video.

Available for sale debt securities and the new credit loss model

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Is a discounted cash flow required for available for sale securities under the new financial instruments credit loss standard? Hear the discussion.

Read the latest developments on accounting for financial instruments

  • In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
  • The FASB's new guidance 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.
  • The mandatory effective date for calendar year-end public business entities (PBEs) is January 1, 2019. All others have an additional year to adopt.

- For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies will be required to use the new current expected credit loss (CECL) approach that will generally result in earlier recognition of allowances for losses.

- For available-for-sale debt securities with unrealized losses, credit losses will be recognized as allowances rather than reductions in the amortized cost of the securities.

  • The guidance is effective as follows:

- Q1 2020 for calendar year-end public business entities that are SEC filers

- Q1 2021 for calendar year-end public business entities that are not SEC filers

- 2021 for calendar year-end nonpublic entities

Early application of the guidance is permitted in 2019 for calendar year-end entities.

  • The FASB's guidance on recognition and measurement requires entities to measure equity investments at fair value that are not accounted for under the equity method and do not result in consolidation. Changes in fair value are recognized in income unless the investments qualify for the practicability exception.
  • The guidance was effective in Q1 2018 for calendar year-end public entities. Calendar year-end nonpublic entities have an additional year. Certain provisions can be early adopted.

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