Comments on hedging proposal

On July 7, Grant Thornton submitted a comment letter in response to the FASB’s proposal to (1) permit additional fair value hedge accounting strategies involving portfolios of financial assets, thereby building upon a methodology introduced in ASU 2017-12, and (2) specify the accounting for basis adjustments arising from applying such strategies.

Although we support the Board’s proposal, we ask the Board to consider two areas for further clarification:

• Whether a necessary condition of applying the portfolio layer method is electing to calculate the change in the hedged item’s fair value attributable to changes in the benchmark interest rate based on the benchmark rate component of the contractual coupon cash flows of the hedged item in accordance with ASC 815-25-35-13.
• Whether the multiple layer guidance as currently proposed effectively permits the “flexibility of partial dedesignations” in the event of a breach.

Click here to read the letter in full.