America’s Credit Unions Backs FASB Changes To Hedge Accounting Rules
By CU Today Staff —
WASHINGTON--Proposed updated accounting standards would better reflect how credit unions and other financial institutions manage risks, and America’s Credit Unions wrote the Financial Accounting Standards Board (FASB) Monday in support of three changes.
Each of the “issues addressed would remove a restriction in the current hedge accounting model that prevents accounting outcomes from reflecting how depository institutions manage interest rate and foreign currency risk,” ACU said.
Federally insured credit unions with more than $500 million in assets are required to prepare financial statements in accordance with generally accepted accounting principles, and many credit unions use interest rate derivatives as part of managing their balance sheets. Currently, credit unions using derivatives to reduce a specific economic exposure may still be unable to apply hedge accounting, ultimately discouraging the use of derivatives for risk management, ACU explained.
“The proposed amendments would allow more of these strategies to qualify for hedge accounting, so that reported results would correspond more closely to the economics of the underlying activity,” the letter reads.
Originally reported by CU Today.