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A guide to accounting for derivatives and hedge accounting

ARTICLE | December 13, 2024

Authored by RSM US LLP


Derivative instruments and hedge accounting and the related accounting guidance and financial reporting considerations are complex. Our publication, A guide to accounting for derivatives and hedge accounting, is intended to provide an overview of the accounting for, financial statement presentation and disclosure of derivative instruments and hedge accounting. Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 815, Derivatives and Hedging, provides the authoritative guidance for the areas covered by this guide. The December 2024 edition provides a comprehensive view of derivative instruments and hedge accounting as it represents the combination of our two prior stand-alone guides: A guide to accounting for derivatives and A guide to hedge accounting with all the guidance and insights now available in one comprehensive guide.

More specifically, the new comprehensive guide includes the following:

  • Chapter 1: Overview, which provides a high-level overview of derivative instruments and hedge accounting under the guidance of ASC 815
  • Chapter 2: Introduction to derivative instruments and the related accounting
  • Chapter 3: Scope of ASC 815 and determining what constitutes a derivative instrument
  • Chapter 4: Embedded derivatives
  • Chapter 5: Overview of hedge accounting and the requirements to apply it
  • Chapter 6: Commodities hedging
  • Chapter 7: Hedges related to interest rate risk
  • Chapter 8: Foreign currency hedges
  • Chapter 9: Fair value hedge accounting
  • Chapter 10: Cash flow hedge accounting
  • Chapter 11: Presentation and disclosure

In addition to the December 2024 edition of this guide being the combination of the prior A guide to accounting for derivatives and A guide to hedge accounting guides, this edition has been updated to incorporate guidance from the following Accounting Standards Updates (ASUs) issued by the FASB:

  • ASU 2023-05, Business Combinations – Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement
  • ASU 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative
  • ASU 2024-02, Codification Improvements – Amendments to Remove References to the Concepts Statements

The December 2024 edition has also been updated to (i) reflect the current status of the FASB’s standard setting activity in relation to its technical agenda and research projects impacting the guidance on derivative instruments and hedge accounting and (ii) remove most references to reference rate reform (ASC 848) due to the sunsetting of the guidance as of December 31, 2024.

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    • Source: RSM US LLP.
    Reprinted with permission from RSM US LLP.
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