Financial Reporting and Regulatory Update

The quarterly Financial Reporting and Regulatory Update is prepared by the Financial Education & Research Foundation (FERF) in collaboration with Crowe LLP, highlighting pronouncements from the U.S. SEC, FASB, PCAOB, and other regulators and standard-setters. Each update includes ASU Effective Date Checklists for Public and Non-Public Business Entities.

Third Quarter 2017

Understand the New Rules for Hedge Accounting

A Q&A With Chris Moore of Crowe Horwath LLP

Chris Moore

On Aug. 28, 2017, the FASB issued Accounting Standards Update (ASU) No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for
Hedging Activities.”

The update, under development for several years, offers simplification, opens the doors to new approaches, and may entice companies that have previously been
reluctant to hedge to consider the strategy.

In a Q&A discussion, FERF spoke with Crowe partner Chris Moore about the new ASU, its changes to hedge accounting, and the implications for risk management
and financial reporting.

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Financial Reporting & Regulatory Update, Third Quarter 2017

During the third quarter of the 2017 calendar year, the Financial Accounting Standards Board (FASB) issued three standards for an overhaul of hedge accounting, simplification of financial instruments with down round features, and codification of the SEC’s adoption date deferral (mentioned in the next paragraph) as well as five proposals related to not- for-profit entities, reorganizing existing consolidation guidance, land easements, and clarifications to the recognition and measurement and lease accounting standards.

The focus for the Securities and Exchange Commission (SEC) during the quarter was on cyber matters, simplifying the capital formation process and implementing the new major accounting standards, including a deferral of the adoption of revenue recognition and lease accounting for certain public business entities (PBEs).

This quarter, we have added checklists to summarize FASB Accounting Standards Updates (ASUs) that are effective in 2017 and after and to indicate whether early adoption is available. For the majority of ASUs, the FASB has staggered the effective dates for PBEs and non- PBEs, and we have compiled checklists for both entity types – Checklist A for PBEs and Checklist B for non- PBEs. The checklists present effective dates for Dec. 31 year-end entities. For those who wish to find effective dates for other fiscal year-ends, the FASB has a listing of effective dates, arranged by ASU number, on its website.