# ASC 815-25-40: Derivatives and Hedging — Fair Value Hedges — 40 Derecognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/815/25/#40-derecognition) 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. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:acd1ac31c205a8f06894a18c4a630637670ea1f3081ef4894e8251ad4476eed6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 815-25-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/815/25/#40-derecognition) SEC content: no #### Discontinuing Hedge Accounting ##### [815-25-40-1](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:6d44d86b5a5a6924e567f207a05724de8b0695e779f84f26786fe52b6d1cbe3d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity shall discontinue prospectively the accounting specified in paragraphs [815-25-35-1 through 35-6](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-1) 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](https://asc.understandingaccounting.org/glossary/d/#derivative-instrument "Paragraphs 815-10-15-83815-10-15-84815-10-15-85815-10-15-86815-10-15-87815-10-15-88815-10-15-89815-10-15-90815-10-15-91815-10-15-92815-10-15-93815-10-15-94815-10-15-95815-10-15-96815-10-15-97815-10-15-98815-10-15-99815-10-15-100815-10-15-101815-10-15-102815-10-15-103815-10-15-104815-10-15-105815-10-15-106815-10-15-107815-10-15-108815-10-15-109815-10-15-110815-10-15-111815-10-15-112815-10-15-113815-10-15-114815-10-15-115815-10-15-116815-10-15-117815-10-15-118815-10-15-119815-10-15-120815-10-15-121815-10-15-122815-10-15-123815-10-15-124815-10-15-125815-10-15-126815-10-15-127815-10-15-128815-10-15-129815-10-15-130815-10-15-131815-10-15-132815-10-15-133815-10-15-134815-10-15-135815-10-15-136815-10-15-137815-10-15-138815-10-15-139 define the term derivative instrument.") expires or is sold, terminated, or exercised. 3. c The entity removes the designation of the [fair value hedge](https://asc.understandingaccounting.org/glossary/f/#fair-value-hedge "A hedge of the exposure to changes in the fair value of a recognized asset or liability, or of an unrecognized firm commitment, that are attributable to a particular risk."). ##### [815-25-40-1A](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-1A) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:1aad8b93aa97ab13c6fdee8f4882e602124af8a90d1db6fbe5712df397ad5d7f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the purposes of applying the guidance in paragraph [815-25-40-1](https://asc.understandingaccounting.org/asc/815/25/#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. ##### [815-25-40-2](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:7b5c07bc2e7f0256598323101b39e338696bd7c518f7af3c99ccde33f4140c77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the circumstances discussed in paragraph [815-25-40-1](https://asc.understandingaccounting.org/asc/815/25/#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](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-1), a different hedged item or a hedged [transaction](https://asc.understandingaccounting.org/glossary/t/#transaction "An external event involving transfer of something of value (future economic benefit) between two (or more) entities. (See FASB Concepts Statement No. 6, Elements of Financial Statements.)(P) December 16, 2024; (N) December 16, 2025105-10-65-9An external event involving transfer of something of value (future economic benefit) between two (or more) entities.") if the hedging relationship meets the criteria specified in Section 815-20-25 for a fair value hedge or a [cash flow hedge](https://asc.understandingaccounting.org/glossary/c/#cash-flow-hedge "A hedge of the exposure to variability in the cash flows of a recognized asset or liability, or of a forecasted transaction, that is attributable to a particular risk."). ##### [815-25-40-3](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:87b931e067043eb05dc3eb9e914aabda63061afce6c780882799dbd1043196e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In general, if a periodic assessment indicates noncompliance with the effectiveness criterion in paragraphs [815-20-25-75 through 25-80](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-75) , 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](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-1) after the last date on which compliance with the effectiveness criterion was established. ##### [815-25-40-4](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:8ee99a045d6921c60d97ef973648fdbf8584bb3ca141067d985d230238cc6881 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") attributable to the risk being hedged that occurred before that event or change in circumstances. ##### [815-25-40-5](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:bee96a72be765dbee1183c2206dd94e9761f6aed6ab87d704880979355cf95f1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a fair value hedge of a [firm commitment](https://asc.understandingaccounting.org/glossary/f/#firm-commitment "An agreement with an unrelated party, binding on both parties and usually legally enforceable, with the following characteristics:The agreement specifies all significant terms, including the quantity to be exchanged, the fixed price, and the timing of the transaction. The fixed price may be expressed as a specified amount of an entity's functional currency or of a foreign currency. It may also be expressed as a specified interest rate or specified effective yield. The binding provisions of an agreement are regarded to include those legal rights and obligations codified in the laws to which such an agreement is subject. A price that varies with the market price of the item that is the subject of the firm commitment cannot qualify as a fixed price. For example, a price that is specified in terms of ounces of gold would not be a fixed price if the market price of the item to be purchased or sold under the firm commitment varied with the price of gold. The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable. In the legal jurisdiction that governs the agreement, the existence of statutory rights to pursue remedies for default equivalent to the damages suffered by the nondefaulting party, in and of itself, represents a sufficiently large disincentive for nonperformance to make performance probable for purposes of applying the definition 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)](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-1) (because of an adjustment to the carrying amount for the firm commitment) 2. b Recognize a corresponding loss or gain currently in earnings. ##### [815-25-40-6](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:6543118c66ebafa506665fb3b53d0753c093bd57fb4a3d289c2d541c126b2662 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [815-25-40-7](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:12600a9049bb58271be0f8b883cc7e488b2dc22fa90c95d827c4e90fef66d913 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When applying the guidance in paragraph [815-20-25-83A](https://asc.understandingaccounting.org/asc/815/20/#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](https://asc.understandingaccounting.org/asc/815/25/#815-25-35-8). ##### [815-25-40-7A](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-7A) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:418852fc2a200e6043bce6d37508f2400aed5527b84074fac457c4bfce51a57d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may elect to discontinue (or partially discontinue) hedge accounting prospectively for all or a portion of the [hedged layer](https://asc.understandingaccounting.org/glossary/h/#hedged-layer "The hedged item designated in a portfolio layer method hedging relationship, representing a stated amount or stated amounts of a closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments that is not expected to be affected by prepayments, defaults, or other factors affecting the timing and amount of cash flows for the designated hedge period.") 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)](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-8) and a breach is not anticipated in accordance with paragraph [815-25-40-8(a)](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-8). 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. ##### [815-25-40-8](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:cdd9d0d64101d2887fb48b083d16112cb9f61828f254e5e214759048c4ccc830 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For one or more hedging relationships designated under the portfolio layer method in accordance with paragraph [815-20-25-12A](https://asc.understandingaccounting.org/asc/815/20/#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](https://asc.understandingaccounting.org/asc/815/25/#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. ##### [815-25-40-8A](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-8A) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:a6f0ad3854bb3c9a622a98d88f57a27f308d3c891e8dd42cd4ca353da2c9345e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the event of either an anticipated breach (as described in paragraph [815-25-40-8(a)](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-8)) or a breach that has occurred (as described in paragraph [815-25-40-8(b)](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-8)), 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). ##### [815-25-40-9](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:d4ca19122cc0bae8e091c2e73146945308cd41b31200b9848f939efb4eb3d543 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a portfolio layer method hedging relationship is discontinued (or partially discontinued) in a voluntary dedesignation in accordance with paragraph [815-25-40-7A](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-7A) or in anticipation of a breach in accordance with paragraph [815-25-40-8(a)](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-8), 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). ##### [815-25-40-9A](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-9A) Pending content: no Source downloaded (UTC): 2026-09-10T01:37:23.152Z to 2026-09-10T01:37:23.152Z Record version: sha256:35f68e55d5dd103b56a2fc58abf549eab72018986a80e19049c584a60f25cb3c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For a portfolio layer method hedging relationship that is discontinued because a breach has occurred in accordance with paragraph [815-25-40-8(b)](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-8), 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](https://asc.understandingaccounting.org/asc/815/20/#815-20-45-1CC) 2. b Disclose the information specified in paragraph [815-10-50-5C](https://asc.understandingaccounting.org/asc/815/10/#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](https://asc.understandingaccounting.org/asc/815/25/#815-25-40-9) for the anticipated breach or breaches.