{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/815/25/#40-derecognition","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"815","topic_title":"Derivatives and Hedging","subtopic":"815-25","subtopic_title":"Fair Value Hedges","section":{"number":"40","label":"40 Derecognition","anchor":"40-derecognition","is_sec":false,"groups":[{"block":null,"heading":"Discontinuing Hedge Accounting","paragraphs":[{"citation":"815-25-40-1","para":"40-1","html":"
An entity shall discontinue prospectively the accounting specified in paragraphs
815-25-35-1 through 35-6
for an existing hedge if any one of the following occurs:
  1. a
    Any criterion in Section 815-20-25 is no longer met.
  2. b
    The derivative instrument expires or is sold, terminated, or exercised.
  3. c
    The entity removes the designation of the fair value hedge.
","snippet":"An entity shall discontinue prospectively the accounting specified in paragraphs 815-25-35-1 through 35-6 for an existing hedge if any one of the following occurs:\n(a) Any criterion in Section 815-20-25 is no longer met.…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6d44d86b5a5a6924e567f207a05724de8b0695e779f84f26786fe52b6d1cbe3d","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-1A","para":"40-1A","html":"
For the purposes of applying the guidance in paragraph 815-25-40-1, a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not, in and of itself, be considered a termination of the derivative instrument.
","snippet":"For the purposes of applying the guidance in paragraph 815-25-40-1, a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would not…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1aad8b93aa97ab13c6fdee8f4882e602124af8a90d1db6fbe5712df397ad5d7f","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-2","para":"40-2","html":"
In the circumstances discussed in paragraph 815-25-40-1, the entity may elect to designate prospectively a new hedging relationship with a different hedging instrument or, in the circumstances described in (a) and (c) in paragraph 815-25-40-1, a different hedged item or a hedged transaction if the hedging relationship meets the criteria specified in Section 815-20-25 for a fair value hedge or a cash flow hedge.
","snippet":"In the circumstances discussed in paragraph 815-25-40-1, the entity may elect to designate prospectively a new hedging relationship with a different hedging instrument or, in the circumstances described in (a) and (c) in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7b5c07bc2e7f0256598323101b39e338696bd7c518f7af3c99ccde33f4140c77","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-3","para":"40-3","html":"
In general, if a periodic assessment indicates noncompliance with the effectiveness criterion in paragraphs
815-20-25-75 through 25-80
, an entity shall not recognize the adjustment of the carrying amount of the hedged item described in paragraphs
815-25-35-1 through 35-6
after the last date on which compliance with the effectiveness criterion was established.
","snippet":"In general, if a periodic assessment indicates noncompliance with the effectiveness criterion in paragraphs 815-20-25-75 through 25-80, an entity shall not recognize the adjustment of the carrying amount of the hedged it…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:87b931e067043eb05dc3eb9e914aabda63061afce6c780882799dbd1043196e3","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-4","para":"40-4","html":"
However, if the event or change in circumstances that caused the hedging relationship to fail the effectiveness criterion can be identified, the entity shall recognize in earnings the changes in the hedged item's fair value attributable to the risk being hedged that occurred before that event or change in circumstances.
","snippet":"However, if the event or change in circumstances that caused the hedging relationship to fail the effectiveness criterion can be identified, the entity shall recognize in earnings the changes in the hedged item's fair va…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8ee99a045d6921c60d97ef973648fdbf8584bb3ca141067d985d230238cc6881","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-5","para":"40-5","html":"
If a fair value hedge of a firm commitment is discontinued because the hedged item no longer meets the definition of a firm commitment, the entity shall do both of the following:
  1. a
    Derecognize any asset or liability previously recognized pursuant to paragraph 815-25-35-1(b) (because of an adjustment to the carrying amount for the firm commitment)
  2. b
    Recognize a corresponding loss or gain currently in earnings.
","snippet":"If a fair value hedge of a firm commitment is discontinued because the hedged item no longer meets the definition of a firm commitment, the entity shall do both of the following:\n(a) Derecognize any asset or liability pr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bee96a72be765dbee1183c2206dd94e9761f6aed6ab87d704880979355cf95f1","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-6","para":"40-6","html":"
A pattern of discontinuing hedge accounting and derecognizing firm commitments would call into question the firmness of future hedged firm commitments and the entity's accounting for future hedges of firm commitments.
","snippet":"A pattern of discontinuing hedge accounting and derecognizing firm commitments would call into question the firmness of future hedged firm commitments and the entity's accounting for future hedges of firm commitments.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6543118c66ebafa506665fb3b53d0753c093bd57fb4a3d289c2d541c126b2662","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-7","para":"40-7","html":"
When applying the guidance in paragraph 815-20-25-83A, any amounts remaining in accumulated other comprehensive income associated with amounts excluded from the assessment of effectiveness shall be recorded in earnings in the current period if the hedged item is derecognized. For all other discontinued fair value hedges, any amounts associated with the excluded component remaining in accumulated other comprehensive income shall be recorded in earnings in the same manner as other components of the carrying amount of the hedged asset or liability in accordance with paragraphs 815-25-35-8 through 35-9A.
","snippet":"When applying the guidance in paragraph 815-20-25-83A, any amounts remaining in accumulated other comprehensive income associated with amounts excluded from the assessment of effectiveness shall be recorded in earnings i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:12600a9049bb58271be0f8b883cc7e488b2dc22fa90c95d827c4e90fef66d913","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-7A","para":"40-7A","html":"
An entity may elect to discontinue (or partially discontinue) hedge accounting prospectively for all or a portion of the hedged layer for one or more hedging relationships associated with the closed portfolio at any time if a breach has not occurred in accordance with paragraph 815-25-40-8(b) and a breach is not anticipated in accordance with paragraph 815-25-40-8(a). If multiple hedged layers are associated with the closed portfolio, the entity may voluntarily elect to dedesignate (or partially dedesignate) any hedges associated with that closed portfolio.
","snippet":"An entity may elect to discontinue (or partially discontinue) hedge accounting prospectively for all or a portion of the hedged layer for one or more hedging relationships associated with the closed portfolio at any time…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:418852fc2a200e6043bce6d37508f2400aed5527b84074fac457c4bfce51a57d","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-8","para":"40-8","html":"
For one or more hedging relationships designated under the portfolio layer method in accordance with paragraph 815-20-25-12A, an entity shall discontinue (or partially discontinue) hedge accounting in the following circumstances:
  1. a
    If the entity cannot support on a subsequent testing date that the hedged layer or layers are anticipated to be outstanding for the designated hedge period in accordance with paragraph 815-25-35-7A(that is, a breach is anticipated), it shall discontinue (or partially discontinue) hedge accounting for one or more hedging relationships for the portion of the hedged item that is no longer anticipated to be outstanding for the designated hedge period
  2. b
    If on a subsequent testing date the outstanding amount of the closed portfolio of financial assets or one or more beneficial interests is less than the hedged layer or layers (that is, a breach has occurred), the entity shall discontinue (or partially discontinue) hedge accounting for one or more hedging relationships for the portion of the hedged item that is no longer outstanding.
","snippet":"For one or more hedging relationships designated under the portfolio layer method in accordance with paragraph 815-20-25-12A, an entity shall discontinue (or partially discontinue) hedge accounting in the following circu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cdd9d0d64101d2887fb48b083d16112cb9f61828f254e5e214759048c4ccc830","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-8A","para":"40-8A","html":"
In the event of either an anticipated breach (as described in paragraph 815-25-40-8(a)) or a breach that has occurred (as described in paragraph 815-25-40-8(b)), if multiple hedged layers are associated with a closed portfolio, an entity shall determine which hedge or hedges to discontinue (or partially discontinue) in accordance with an accounting policy election. That accounting policy election shall specify a systematic and rational approach to determining which hedge or hedges to discontinue (or partially discontinue). An entity shall establish its accounting policy no later than when it first anticipates a breach or when a breach has occurred (whichever comes first). After an entity establishes its accounting policy, it shall consistently apply its accounting policy to all portfolio layer method breaches (anticipated and occurred).
","snippet":"In the event of either an anticipated breach (as described in paragraph 815-25-40-8(a)) or a breach that has occurred (as described in paragraph 815-25-40-8(b)), if multiple hedged layers are associated with a closed por…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6f0ad3854bb3c9a622a98d88f57a27f308d3c891e8dd42cd4ca353da2c9345e","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-9","para":"40-9","html":"
If a portfolio layer method hedging relationship is discontinued (or partially discontinued) in a voluntary dedesignation in accordance with paragraph 815-25-40-7A or in anticipation of a breach in accordance with paragraph 815-25-40-8(a), the basis adjustment associated with the dedesignated amount as of the discontinuation date shall be allocated to the remaining individual assets in the closed portfolio that supported the dedesignated hedged layer using a systematic and rational method. An entity shall amortize those amounts over a period that is consistent with the amortization of other discounts or premiums associated with the respective assets in accordance with other Topics (for example, Subtopic 310-20 on receivables-nonrefundable fees and other costs).
","snippet":"If a portfolio layer method hedging relationship is discontinued (or partially discontinued) in a voluntary dedesignation in accordance with paragraph 815-25-40-7A or in anticipation of a breach in accordance with paragr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d4ca19122cc0bae8e091c2e73146945308cd41b31200b9848f939efb4eb3d543","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},{"citation":"815-25-40-9A","para":"40-9A","html":"
For a portfolio layer method hedging relationship that is discontinued because a breach has occurred in accordance with paragraph 815-25-40-8(b), as of the discontinuation date an entity shall:
  1. a
    Determine the portion of the basis adjustment associated with the amount of the hedged layer that exceeds the closed portfolio (that is, the portion of the basis adjustment associated with the breach) using a systematic and rational method and immediately recognize that amount in interest income in accordance with paragraph 815-20-45-1CC
  2. b
    Disclose the information specified in paragraph 815-10-50-5C for the breach.
A closed portfolio may simultaneously have a layer or layers that have been breached and a layer or layers that it anticipates will be breached. In that case, an entity shall apply the guidance in this paragraph for the breach or breaches that have occurred and the guidance in paragraph 815-25-40-9 for the anticipated breach or breaches.
","snippet":"For a portfolio layer method hedging relationship that is discontinued because a breach has occurred in accordance with paragraph 815-25-40-8(b), as of the discontinuation date an entity shall:\n(a) Determine the portion …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:35f68e55d5dd103b56a2fc58abf549eab72018986a80e19049c584a60f25cb3c","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:388cc1516ad267a803082b35d418b7fd3458a4b760b5f0c19bde9f045dd86947","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:acd1ac31c205a8f06894a18c4a630637670ea1f3081ef4894e8251ad4476eed6","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:acd1ac31c205a8f06894a18c4a630637670ea1f3081ef4894e8251ad4476eed6","downloaded_from":"2026-09-10T01:37:23.152Z","last_downloaded_at":"2026-09-10T01:37:23.152Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480270","source_sha256":"879611e88f9b0dec910fad0bbd5df37ffe8fb9dc4ce3c1c8cab329b481808f20"}}