ASC

ASC 815-954

Health Care Entities

815 Derivatives and Hedging

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In brief

AdvancedDerivatives and hedgingNot-for-profitDisclosurePresentation

ASC 815-954 tells not-for-profit, business-oriented health care entities how to apply derivative and hedge accounting. The core rule is parity with for-profit entities: items that would hit a for-profit's income from continuing operations must hit the NFP health care entity's performance indicator, and items excluded (e.g., amounts in other comprehensive income) must be excluded from the performance indicator. Because these entities need not present a separate equity component, the guidance substitutes tailored disclosures about the accumulated derivative gain or loss excluded from the performance indicator.

Key points (7)
  • The Subtopic applies only to not-for-profit, business-oriented health care entities (815-954-15-2) and, given infrequent foreign currency hedging, focuses on fair value and cash flow hedges (815-954-25-1).
  • Except as provided in paragraph 954-815-50-1, these entities apply all of Topic 815, including cash flow hedge accounting, in the same manner as for-profit entities (815-954-25-2).
  • The performance indicator functions as the analogue of a for-profit entity's income from continuing operations: gains and losses affecting the latter affect the performance indicator, and those excluded from it (such as OCI items) are excluded from the performance indicator (815-954-25-2).
  • Not being required to report a separate component of equity does not preclude comprehensive income reporting for qualifying gains and losses on cash flow and fair value hedges; for a fair value hedge, amounts excluded from the assessment of effectiveness and recognized in earnings under an amortization approach per 815-20-25-83A may be recorded in OCI (815-954-45-1).
  • Accumulated other comprehensive income is inherently carried forward in the entity's net assets and need not be reported separately on the balance sheet (815-954-45-1).
  • Although not subject to Subtopic 220-10, these entities must separately disclose the beginning and ending accumulated derivative gain or loss excluded from the performance indicator, the net change from current-period hedging transactions, and net reclassifications into the performance indicator, similar to 815-30-50-2 (815-954-50-1).
  • Disclosures analogous to 815-30-50-1 through 50-3 and 815-35-50-2 are required, including anticipated reclassifications into the performance indicator; paragraph 815-10-50-4G addresses how other Topic 815 disclosures apply (815-954-50-1; 815-954-50-2).

For students. The key exam point is the mapping: "performance indicator" for an NFP health care entity plays the role of "income from continuing operations" for a for-profit, so hedge accounting mechanics are unchanged. A common misunderstanding is assuming that because these entities escape Subtopic 220-10 and need not show a separate equity component, they can skip OCI-type tracking — in fact 815-954-50-1 still requires roll-forward disclosure of the accumulated derivative gain or loss excluded from the performance indicator.

performance indicatornot-for-profit business-oriented health care entitycash flow hedgefair value hedgeaccumulated derivative gain or lossother comprehensive incomereclassification into performance indicatoramounts excluded from assessment of effectiveness

Machine-generated study aid for ASC 815-954. Check the source paragraphs below.

815-954-00Status

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815-954-00-1
The following table identifies the changes made to this Subtopic.
Paragraph Action Accounting Standards Update Date
Comprehensive Income Added Maintenance Update 2014-20 (PDF) 09/29/2014
Other Comprehensive Income Added Maintenance Update 2014-20 (PDF) 09/29/2014
954-815-25-2 Amended Maintenance Update 2014-20 (PDF) 09/29/2014
954-815-45-1 Amended Accounting Standards Update No. 2017-12 08/28/2017
954-815-50-1 Amended Maintenance Update 2014-20 (PDF) 09/29/2014
954-815-50-1 Amended Accounting Standards Update No. 2011-05 06/16/2011
954-815-50-2 Added Accounting Standards Update No. 2012-04 10/01/2012

815-954-05Overview and Background

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815-954-05-1
This Subtopic provides guidance on accounting for derivative instruments and hedging activities for not-for-profit, business-oriented health care entities.

815-954-15Scope and Scope Exceptions

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Overall Guidance

815-954-15-1
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 954-10-15, with specific entity qualifications noted below.

Entity

815-954-15-2
The guidance in this Subtopic applies only to not-for-profit, business-oriented health care entities.

815-954-25Recognition

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815-954-25-1
Not-for-profit, business-oriented health care entities do not frequently enter into foreign currency hedges. Therefore, this guidance focuses on matters pertaining to fair value and cash flow hedges.
815-954-25-2
Except as provided in paragraph 954-815-50-1, not-for-profit health care entities shall apply the provisions of Topic 815 (including the provisions pertaining to cash flow hedge accounting) in the same manner as for-profit entities. That is, the gain or loss items that affect a for-profit entity's income from continuing operations similarly shall affect the not-for-profit health care entity's performance indicator, and the gain or loss items that are excluded from a for-profit entity's income from continuing operations (such as items reported in other comprehensive income) similarly shall be excluded from the performance indicator by the not-for-profit health care entity.

815-954-45Other Presentation Matters

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815-954-45-1
The absence of a requirement to report a separate component of equity in the balance sheet of a not-for-profit, business-oriented health care entity shall not preclude those entities from using comprehensive income reporting for qualifying gains and losses on cash flow and fair value hedges. For a fair value hedge, amounts may be recorded in other comprehensive income if amounts are excluded from the assessment of effectiveness and are recognized in earnings through an amortization approach in accordance with paragraph 815-20-25-83A. Although accumulated other comprehensive income will inherently be carried forward in a not-for-profit health care entity's net assets, there is no compelling need for it to be reported separately in the balance sheet.

815-954-50Disclosure

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815-954-50-1
Paragraph 815-30-50-2 discusses requirements to report changes in the components of comprehensive income pursuant to paragraphs 220-10-45-14 through 45-14A. Although not-for-profit, business-oriented health care entities are not subject to the requirements of Subtopic 220-10, this Subtopic requires those entities to separately disclose the beginning and ending accumulated derivative gain or loss that has been excluded from the performance indicator (see also paragraphs
954-220-45-5 through 45-8
), the related net change associated with current period hedging transactions, and the net amount of any reclassifications into the performance indicator in a manner similar to that described in paragraph 815-30-50-2. Similarly, this Subtopic requires not-for-profit health care entities to provide disclosures that are analogous to those required by paragraphs
815-30-50-1 through 50-3
and 815-35-50-2 for for-profit entities, including the disclosure of anticipated reclassifications into the performance indicator of gains and losses that have been excluded from that measure and reported in accumulated derivative gain or loss as of the reporting date.
815-954-50-2
Paragraph 815-10-50-4G discusses how certain other disclosures required by Topic 815 should be applied by not-for-profit, business-oriented health care entities.

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