The FASB is working on ditching the rule that require companies to prove that hedges are for risk mitigation rather than just a speculative play for pure gains. Still no word on whether a company’s “future” is an acceptable commodity to hedge. Is this the beginning of a new era in corporate liquid asset management? From CFO.com:
Under the fair-value approach being developed, FASB would shed the requirement that derivatives buyers assess the hedge and test its effectiveness, while continuing to require companies to mark their hedges to market. The rest of the formula would work the same as it does now: for fair-value hedges, the derivative and hedged item would be measured at fair value and the changes in value recognized in earnings. For cash-flow hedges, the derivative would be measured at fair-value, with the effective portion of the gain or loss reported in other comprehensive income and the ineffective portion reported in earnings.
Hedge Accounting: a Matchless Future? [CFO.com]