Topic 815 Derivatives and Hedging

Learning Objectives

• To examine the background and scope of Topic 815.
• To discuss the latest information regarding derivatives and hedges.
• To know the specific items targeted by each amendment in Topic 815.
• To explore the applicable new accounting treatment for each amendment.
• To discuss the effect of the amendments.
• To analyze the unique disclosure and presentation requirements of Topic 815.

Course Description

Sometimes it is a challenge to keep up with the amendments in accounting standards issued by FASB. Speaker Mike Morley in this CPE webinar will quickly bring you up to date on the applicable amendments introduced by FASB in Topic 815: Derivatives and Hedging.

Topic 815 expands the current last-of-layer method that permits only one hedged layer to allow multiple hedged layers of a single closed portfolio. To reflect that expansion, the last-of-layer method is renamed the portfolio layer method. It expands the scope of the portfolio layer method to include non-prepayable financial assets.

Topic 815 specifies that eligible hedging instruments in a single-layer hedge may include spot-starting or forward-starting constant-notional swaps, or spot or forward-starting amortizing-notional swaps and that the number of hedged layers (that is, single or multiple) corresponds with the number of hedges designated. It provides additional guidance on the accounting for and disclosure of hedge basis adjustments that apply to the portfolio layer method whether a single hedged layer or multiple hedged layers are designated.

Finally, it specifies how hedge basis adjustments should be considered when determining credit losses for the assets included in the closed portfolio.

Following are the major topics covered in this CPE Accounting Course:

• Basic concepts, scope, and applicability of accounting for derivatives and hedging.
• Planning the approach: accounting policies and decision criteria.
• Sizing up the impacts of implementation: questions you need to ask.
• Specific rules and provisions for derivatives and hedging.
• Recognition criteria.
• Disclosure and presentation requirements.
• Notes to financial statements.

Overview

• Derivatives and hedging

  4 mins
• Multiple hedged layers of a single closed portfolio

  17 mins
• Impact of hedging

  29 mins
• Disclosure of qualitative information by underlying risk and hedge basis adjustment disclosures

  39 mins
• Concurrent hedge documentation

  52 mins
• Changes in fair value of hedge item

  62 mins
• Breaches of the closed portfolio

  76 mins