Exposure Draft

Summary

Comment Deadline

Proposed Accounting Standards Update—Derivatives and Hedging (Topic 815): Hedge Accounting Improvements

Similar Risk Assessment for Cash Flow Hedges:

The amendments expand the hedged risks permitted to be aggregated in a group of individual forecasted transactions, thereby enabling entities to apply hedge accounting to broader portfolios of forecasted transactions.

Hedging Forecasted Interest Payments on Choose Your-Rate Debt Instruments:

The contractual terms of the debt agreement would determine the alternative interest rate indexes and interest rate tenors that an entity may select during the hedging relationship without needing to discontinue hedge accounting.

Cash Flow Hedges of Nonfinancial Forecasted Transactions:

The amendments expand hedge accounting for forecasted purchases and sales of nonfinancial assets.

Net Written Options as Hedging Instruments:

The amendments would permit compound derivatives composed of a written option and a non-option derivative to qualify for designation as a hedging instrument in a cash flow hedge by adjusting the eligibility criteria for when a net written option may be designated as a hedging instrument.

Foreign-Currency-Denominated Debt Instrument as Hedging Instrument and Hedged Item (Dual Hedge):

The amendments would eliminate the recognition and presentation mismatch related to a dual hedge strategy and require that an entity exclude the debt instrument’s fair value hedge basis adjustment from the net investment hedge effectiveness assessment. As a result, an entity would immediately recognize in earnings the gains and losses from the remeasurement of the debt instrument’s fair value hedge basis adjustment at the spot exchange rate.

11/25/24

Proposed Accounting Standards Update—Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer

The amendments would revise the definition of the term performance condition for share-based consideration payable to a customer. The revised definition would incorporate conditions (including vesting conditions) that are based on the volume, monetary amount, or timing of a customer’s purchases of goods or services from the grantor. The revised definition also would incorporate performance targets based on the volume of purchases made by other parties that purchase the grantor’s goods or services from the grantor’s customers.

The amendments would eliminate the policy election permitting a grantor to account for forfeitures as they occur. Therefore, the grantor would be required to estimate the number of forfeitures expected to occur when measuring share-based consideration payable to a customer that has a service condition.

The amendments would clarify that share-based consideration encompasses the same instruments as share-based payment arrangements, but the grantee does not need to be a supplier of goods or services to the grantor.

The amendments would clarify that a grantor should not constrain estimates of variable consideration in accordance with Topic 606, and that a Topic 718 approach should be taken for share-based consideration payable to a customer.

11/14/24

Proposed Accounting Standards Update— Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for a Share-Based Payment from a Customer in a Revenue Contract

The amendments would require that an entity exclude the debt instrument’s fair value hedge basis adjustment from the net investment hedge effectiveness assessment. As a result, an entity would immediately recognize in earnings the gains and losses from the remeasurement of the debt instrument’s fair value hedge basis adjustment at the spot exchange rate.

The amendments would change the predominant characteristics assessment to require that an entity assess which underlying is expected to have the largest expected effect on changes in the fair value of the contract (or embedded feature).

10/21/24