{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/815/","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.","number":"815","title":"Derivatives and Hedging","area":"Broad Transactions","group":null,"subtopics":[{"number":"815-10","topic":"815","title":"Overall","area":"Broad Transactions","paragraphs":490,"summary":"ASC 815-10 is the Overall subtopic of the derivatives and hedging Topic: it defines what a derivative instrument is, sets the scope (including a long list of scope exceptions), and requires that derivatives be recognized as assets or liabilities on the statement of financial position and measured at fair value. A contract is a derivative only if it has (1) one or more underlyings and one or more notional amounts or payment provisions, (2) no or a smaller-than-usual initial net investment, and (3) the ability to be settled net (815-10-15-83). If conditions are met, an entity may elect to designate a derivative as a fair value hedge, cash flow hedge, or hedge of foreign currency exposure (including a net investment in a foreign operation).","concepts":["derivative instrument definition","underlying","notional amount","net settlement","initial net investment","normal purchases and normal sales","scope exceptions","hedge designation"],"categories":["Derivatives and hedging","Financial instruments","Recognition","Fair value"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
AcquirerAmendedAccounting Standards Update No. 2025-0305/12/2025
Acquisition by a Not-for-Profit EntityAddedAccounting Standards Update No. 2010-0701/28/2010
Benchmark Interest RateAddedAccounting Standards Update No. 2017-1208/28/2017
Beneficial InterestsAddedAccounting Standards Update No. 2022-0103/28/2022
BusinessAmendedAccounting Standards Update No. 2017-0101/05/2017
Corporate Joint VentureAddedAccounting Standards Update No. 2023-0508/23/2023
Credit RiskAmendedAccounting Standards Update No. 2017-1208/28/2017
Credit RiskAmendedAccounting Standards Update No. 2010-0802/02/2010
Down Round FeatureAddedAccounting Standards Update No. 2017-1107/13/2017
Embedded Credit DerivativeAddedAccounting Standards Update No. 2010-1103/05/2010
Environmental CreditAddedAccounting Standards Update No. 2026-0205/19/2026
Environmental Credit ObligationAddedAccounting Standards Update No. 2026-0205/19/2026
Equity RestructuringAddedAccounting Standards Update No. 2017-1107/13/2017
ExchangeAddedAccounting Standards Update No. 2026-0205/19/2026
Financial AssetAddedAccounting Standards Update No. 2026-0205/19/2026
Financial InstrumentAmendedAccounting Standards Update No. 2024-0203/29/2024
Financial Statements Are Available to Be IssuedAddedAccounting Standards Update No. 2014-0301/16/2014
Fully Benefit-Responsive Investment ContractAddedAccounting Standards Update No. 2015-12 (Part I)07/31/2015
Hedged LayerAddedAccounting Standards Update No. 2022-0103/28/2022
Income TaxesAddedAccounting Standards Update No. 2026-0205/19/2026
Interest Rate RiskAmendedAccounting Standards Update No. 2017-1208/28/2017
Joint VentureAddedAccounting Standards Update No. 2023-0508/23/2023
Loan CommitmentAmendedAccounting Standards Update No. 2016-1306/16/2016
London Interbank Offered Rate (LIBOR) Swap RateAddedAccounting Standards Update No. 2018-1610/25/2018
London Interbank Offered Rate Swap RateSupersededAccounting Standards Update No. 2018-1610/25/2018
Market Risk BenefitAddedAccounting Standards Update No. 2018-1208/15/2018
Merger of Not-for-Profit EntitiesAddedAccounting Standards Update No. 2010-0701/28/2010
Nonperformance RiskAddedAccounting Standards Update No. 2014-0301/16/2014
Nonreciprocal Transfer (1st def.)AddedAccounting Standards Update No. 2026-0205/19/2026
Other Comprehensive IncomeAddedMaintenance Update 2014-20 (PDF)09/29/2014
Readily Convertible to CashAmendedAccounting Standards Update No. 2024-0203/29/2024
Registration Payment ArrangementAddedAccounting Standards Update No. 2016-1912/14/2016
Spot RateAddedAccounting Standards Update No. 2014-0603/14/2014
Standard Antidilution ProvisionsAddedAccounting Standards Update No. 2017-1107/13/2017
TransactionAmendedAccounting Standards Update No. 2024-0203/29/2024
Unconditional Purchase ObligationAddedMaintenance Update 2014-20 (PDF)09/29/2014
Variable Interest EntitySupersededAccounting Standards Update No. 2025-0305/12/2025
815-10-05-4AmendedAccounting Standards Update No. 2016-0101/05/2016
815-10-05-11AmendedAccounting Standards Update No. 2012-0410/01/2012
815-10-05-13AmendedAccounting Standards Update No. 2012-0410/01/2012
815-10-15-1AmendedAccounting Standards Update No. 2019-0404/25/2019
815-10-15-1AmendedAccounting Standards Update No. 2012-0410/01/2012
815-10-15-10AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-15-13AmendedAccounting Standards Update No. 2018-1208/15/2018
815-10-15-13AmendedAccounting Standards Update No. 2016-2012/21/2016
815-10-15-13AmendedAccounting Standards Update No. 2016-1912/14/2016
815-10-15-17AmendedAccounting Standards Update No. 2012-0410/01/2012
815-10-15-19AmendedAccounting Standards Update No. 2012-0410/01/2012
815-10-15-36AAddedAccounting Standards Update No. 2015-1308/10/2015
815-10-15-45AmendedAccounting Standards Update No. 2015-1308/10/2015
815-10-15-59AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-15-59AmendedAccounting Standards Update No. 2012-0410/01/2012
815-10-15-61SupersededAccounting Standards Update No. 2025-0709/29/2025
815-10-15-63AmendedAccounting Standards Update No. 2016-0202/25/2016
815-10-15-63AmendedAccounting Standards Update No. 2015-1006/12/2015
815-10-15-68AAddedAccounting Standards Update No. 2015-12 (Part I)07/31/2015
815-10-15-74AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-15-74AmendedAccounting Standards Update No. 2023-0508/23/2023
815-10-15-74AmendedAccounting Standards Update No. 2020-0608/05/2020
815-10-15-74AmendedAccounting Standards Update No. 2018-0706/20/2018
815-10-15-74AmendedAccounting Standards Update No. 2010-0701/28/2010
815-10-15-75AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-15-75AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-10-15-75AAddedAccounting Standards Update No. 2017-1107/13/2017
815-10-15-77AmendedAccounting Standards Update No. 2020-0608/05/2020
815-10-15-78AmendedAccounting Standards Update No. 2020-0608/05/2020
815-10-15-79 through 15-81
AmendedAccounting Standards Update No. 2016-0202/25/2016
815-10-15-82AAddedAccounting Standards Update No. 2016-2012/21/2016
815-10-15-82BAddedAccounting Standards Update No. 2026-0205/19/2026
815-10-15-98AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-15-138AmendedAccounting Standards Update No. 2016-0101/05/2016
815-10-15-141AmendedAccounting Standards Update No. 2016-0101/05/2016
815-10-15-141AAddedAccounting Standards Update No. 2020-0101/16/2020
815-10-15-142AmendedAccounting Standards Update No. 2020-0101/16/2020
815-10-15-142AmendedAccounting Standards Update No. 2016-0101/05/2016
815-10-25-5AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-25-5AmendedAccounting Standards Update No. 2016-1912/14/2016
815-10-25-9AAmendedAccounting Standards Update No. 2012-0410/01/2012
815-10-25-9BAmendedAccounting Standards Update No. 2012-0410/01/2012
815-10-25-16AAddedAccounting Standards Update No. 2025-0709/29/2025
815-10-25-16BAddedAccounting Standards Update No. 2025-0709/29/2025
815-10-25-17AmendedAccounting Standards Update No. 2016-0101/05/2016
815-10-25-18AddedAccounting Standards Update No. 2016-0101/05/2016
815-10-30-5AmendedAccounting Standards Update No. 2016-0101/05/2016
815-10-30-6AddedAccounting Standards Update No. 2016-0101/05/2016
815-10-35-1AAmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-10-35-1AAmendedAccounting Standards Update No. 2016-0303/07/2016
815-10-35-1A through 35-1C
AddedAccounting Standards Update No. 2014-0301/16/2014
815-10-35-5AmendedAccounting Standards Update No. 2016-1306/16/2016
815-10-35-5AmendedAccounting Standards Update No. 2016-0101/05/2016
815-10-35-6AmendedAccounting Standards Update No. 2018-0302/28/2018
815-10-35-6AddedAccounting Standards Update No. 2016-0101/05/2016
815-10-40-3AmendedMaintenance Update 2014-07 (PDF)03/17/2014
815-10-45-4SupersededAccounting Standards Update No. 2018-0907/16/2018
815-10-45-5AmendedAccounting Standards Update No. 2018-0907/16/2018
815-10-45-10AmendedAccounting Standards Update No. 2018-0706/20/2018
815-10-50-1AmendedAccounting Standards Update No. 2025-1112/08/2025
815-10-50-1B through 50-4
AmendedAccounting Standards Update No. 2025-1112/08/2025
815-10-50-1BAmendedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-3AmendedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-3AmendedAccounting Standards Update No. 2016-0303/07/2016
815-10-50-3AddedAccounting Standards Update No. 2014-0301/16/2014
815-10-50-4AAmendedAccounting Standards Update No. 2024-0311/04/2024
815-10-50-4AAmendedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-4AAmendedMaintenance Update 2014-20 (PDF)09/29/2014
815-10-50-4B through 50-4EEE
AmendedAccounting Standards Update No. 2025-1112/08/2025
815-10-50-4CAmendedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-4CCAddedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-4CCCAddedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-4D through 50-4E
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-4EEAmendedAccounting Standards Update No. 2019-0404/25/2019
815-10-50-4EE through 50-4EEEEAddedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-4EEEAmendedAccounting Standards Update No. 2022-0103/28/2022
815-10-50-4FAmendedAccounting Standards Update No. 2025-1112/08/2025
815-10-50-4FAmendedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-4GAmendedAccounting Standards Update No. 2025-1112/08/2025
815-10-50-4GAmendedAccounting Standards Update No. 2016-1408/18/2016
815-10-50-4IAmendedMaintenance Update 2016-11 (PDF)06/27/2016
815-10-50-4KAmendedAccounting Standards Update No. 2025-1112/08/2025
815-10-50-4KAmendedAccounting Standards Update No. 2010-1103/05/2010
815-10-50-4LAmendedAccounting Standards Update No. 2025-1112/08/2025
815-10-50-5AAddedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-5BAmendedAccounting Standards Update No. 2022-0103/28/2022
815-10-50-5BAddedAccounting Standards Update No. 2017-1208/28/2017
815-10-50-5CAmendedAccounting Standards Update No. 2025-1112/08/2025
815-10-50-5CAddedAccounting Standards Update No. 2022-0103/28/2022
815-10-50-6AmendedMaintenance Update 2014-20 (PDF)09/29/2014
815-10-50-7AAddedAccounting Standards Update No. 2013-0101/31/2013
815-10-50-8AmendedAccounting Standards Update No. 2025-1112/08/2025
815-10-50-8AAmendedAccounting Standards Update No. 2020-0608/05/2020
815-10-50-8BAddedAccounting Standards Update No. 2020-0608/05/2020
815-10-50-8CAddedAccounting Standards Update No. 2023-0610/09/2023
815-10-55-2AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-55-22AmendedAccounting Standards Update No. 2012-0410/01/2012
815-10-55-43AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-55-43AmendedAccounting Standards Update No. 2018-0706/20/2018
815-10-55-44SupersededAccounting Standards Update No. 2025-0709/29/2025
815-10-55-46 through 55-48
AmendedAccounting Standards Update No. 2018-0706/20/2018
815-10-55-48AAddedAccounting Standards Update No. 2018-0706/20/2018
815-10-55-49 through 55-53
SupersededAccounting Standards Update No. 2018-0706/20/2018
815-10-55-60AmendedAccounting Standards Update No. 2016-0202/25/2016
815-10-55-62AmendedAccounting Standards Update No. 2014-0905/28/2014
815-10-55-136AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-55-137AmendedAccounting Standards Update No. 2025-0709/29/2025
815-10-55-143A through 55-143S
AddedAccounting Standards Update No. 2025-0709/29/2025
815-10-55-144AmendedAccounting Standards Update No. 2014-0603/14/2014
815-10-55-181AmendedAccounting Standards Update No. 2022-0103/28/2022
815-10-55-181AmendedAccounting Standards Update No. 2017-1208/28/2017
815-10-55-182AmendedMaintenance Update 2021-09 (PDF)08/20/2021
815-10-55-182AmendedAccounting Standards Update No. 2017-1208/28/2017
815-10-55-182AmendedMaintenance Update 2016-11 (PDF)06/27/2016
815-10-55-184AmendedMaintenance Update 2016-11 (PDF)06/27/2016
815-10-65-5AddedAccounting Standards Update No. 2010-1103/05/2010
815-10-65-6AmendedAccounting Standards Update No. 2016-0303/07/2016
815-10-65-6AddedAccounting Standards Update No. 2014-0301/16/2014
815-10-65-7AddedAccounting Standards Update No. 2015-1308/10/2015
815-10-65-8AddedAccounting Standards Update No. 2025-0709/29/2025
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nAcquirer | Amended | Accounting Standards Update No. 2025-03 | 05/12/2025 |\nAcquisition …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f05d771e7e4dce19f476385bf63956103e348b85b5ed911216274f01d8da0def","downloaded_from":"2026-09-10T01:34:51.547Z","last_downloaded_at":"2026-09-10T01:34:51.547Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480739","source_sha256":"ff0ca6a5c6952c68738411e1d01b0a4ce4560a224f9c4eff5822fc1111f5aadc"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5b236a550274f05537778a93b5cac974541cb9a64879c73355a5fdac4007c19c","downloaded_from":"2026-09-10T01:34:51.547Z","last_downloaded_at":"2026-09-10T01:34:51.547Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480739","source_sha256":"ff0ca6a5c6952c68738411e1d01b0a4ce4560a224f9c4eff5822fc1111f5aadc"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:194aec6dac7970adf39d5918f5d5fc9644dc7ea1fd580224d0c45e670760372b","downloaded_from":"2026-09-10T01:34:51.547Z","last_downloaded_at":"2026-09-10T01:34:51.547Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480739","source_sha256":"ff0ca6a5c6952c68738411e1d01b0a4ce4560a224f9c4eff5822fc1111f5aadc"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-05-1","para":"05-1","html":"
The Derivatives and Hedging Topic includes the following Subtopics:
  1. a
    Overall
  2. b
    Embedded Derivatives
  3. c
    Hedging—General
  4. d
    Fair Value Hedges
  5. e
    Cash Flow Hedges
  6. f
    Net Investment Hedges
  7. g
    Contracts in Entity's Own Equity
  8. h
    Weather Derivatives.
","snippet":"The Derivatives and Hedging Topic includes the following Subtopics:\n(a) Overall\n(b) Embedded Derivatives\n(c) Hedging—General\n(d) Fair Value Hedges\n(e) Cash Flow Hedges\n(f) Net Investment Hedges\n(g) Contracts in Entity's …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:13164dc24cd43bd0be0703e242c8aa69d652602cffeb78b1698d72c1dec139b5","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-2","para":"05-2","html":"
The first six Subtopics address the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. The last two Subtopics provide guidance on accounting for contracts that have characteristics of derivative instruments but that are not accounted for as derivative instruments under this Subtopic.
","snippet":"The first six Subtopics address the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. The last two Subtopics provide guidance on accounti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b3c78ecab63b5550f09d6b75d14bf169a919a654667b75f28b849dcec2d1af96","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-3","para":"05-3","html":"
The guidance in this Subtopic is presented in the following two Subsections:
  1. a
    General
  2. b
    Certain Contracts on Debt and Equity Securities.
","snippet":"The guidance in this Subtopic is presented in the following two Subsections:\n(a) General\n(b) Certain Contracts on Debt and Equity Securities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30aa2ae03923121dac805e0c1786ef59b8349db94ebd0053702bb5764d1f9a59","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-4","para":"05-4","html":"
This Topic requires that an entity recognize derivative instruments, including certain derivative instruments embedded in other contracts, as assets or liabilities in the statement of financial position and measure them at fair value. If certain conditions are met, an entity may elect, under this Topic, to designate a derivative instrument in any one of the following ways:
  1. a
    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 (referred to as a fair value hedge)
  2. b
    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 (referred to as a cash flow hedge)
  3. c
    A hedge of the foreign currency exposure of any one of the following:
    1. 1
      An unrecognized firm commitment (a foreign currency fair value hedge)
    2. 2
      An available-for-sale debt security (a foreign currency fair value hedge)
    3. 3
      A forecasted transaction (a foreign currency cash flow hedge)
    4. 4
      A net investment in a foreign operation.
","snippet":"This Topic requires that an entity recognize derivative instruments, including certain derivative instruments embedded in other contracts, as assets or liabilities in the statement of financial position and measure them …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb873201e3f9b041c215e339a00541db271f4288fe9151e5aff24db40431942f","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-5","para":"05-5","html":"
An unrecognized firm commitment can be viewed as an executory contract that represents both a right and an obligation. If a previously unrecognized firm commitment that is designated as a hedged item is accounted for in accordance with this Topic, an asset or a liability is recognized and reported in the statement of financial position related to the recognition of the gain or loss on the firm commitment. Consequently, subsequent references to an asset or a liability in this Topic include a firm commitment.
","snippet":"An unrecognized firm commitment can be viewed as an executory contract that represents both a right and an obligation. If a previously unrecognized firm commitment that is designated as a hedged item is accounted for in …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:477fbefc05873f58e4efe0ed53a9a30404fdc447041f07b554ac9072b1b80b89","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-6","para":"05-6","html":"
This Topic generally provides for matching the timing of gain or loss recognition on the hedging instrument with the recognition of either of the following:
  1. a
    The changes in the fair value of the hedged asset or liability that are attributable to the hedged risk
  2. b
    The earnings effect of the hedged forecasted transaction.
","snippet":"This Topic generally provides for matching the timing of gain or loss recognition on the hedging instrument with the recognition of either of the following:\n(a) The changes in the fair value of the hedged asset or liabil…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3bab8265323c1a5be68dc0886f7b51c70669b50e3ac104e004c0c00c3076ebc6","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-7","para":"05-7","html":"
This Subtopic defines derivative instrument, addresses the pervasive scope of this Topic, and specifies the primary accounting for derivative instruments within this Topic's scope.
","snippet":"This Subtopic defines derivative instrument, addresses the pervasive scope of this Topic, and specifies the primary accounting for derivative instruments within this Topic's scope.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b1ba7fae686e267e071a9ff686833686079c229e68a0b2e9143750283dd21bce","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ef7058f6923d0993e88317c8f2cd97ca66848ac7d5e5a82cc11752a80f78063","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"block":null,"heading":"Synthetic Guaranteed Investment Contracts","paragraphs":[{"citation":"815-10-05-8","para":"05-8","html":"
The following is a background discussion of synthetic guaranteed investment contracts, including a comparison with traditional and benefit-response guaranteed investment contracts. Paragraph 815-10-55-63 states that, from the perspective of the issuer of the contract, synthetic guaranteed investment contracts are derivative instruments within the scope of this Subtopic.
","snippet":"The following is a background discussion of synthetic guaranteed investment contracts, including a comparison with traditional and benefit-response guaranteed investment contracts. Paragraph 815-10-55-63 states that, fro…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fbfc2da176e239dc4f84ab1171849f4192776e9583c18ebbcebae67ad910b45d","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-9","para":"05-9","html":"
In a traditional guaranteed investment contract, the issuer of the contract takes deposits from a benefit plan or other institutional customer and purchases investments that are held in its general account. (Equity investments may also be acquired, although they are less common than fixed income investments.) The customer is a creditor of the issuing entity and therefore has credit risk, although generally the guaranteed investment contract issuers have a high credit-quality rating. The issuer is contractually obligated to repay the principal and specified interest guaranteed to the customer. The plan's provisions typically permit the participant to withdraw funds from the fund at book value (also referred to as account or contract value) for specified reasons, such as loans, hardship withdrawals, and transfers to other investment options offered by the plan.
","snippet":"In a traditional guaranteed investment contract, the issuer of the contract takes deposits from a benefit plan or other institutional customer and purchases investments that are held in its general account. (Equity inves…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a908da1b90f5b379ea734ee6810f2597d6170e1815fd644be8bc648a9a18b6c","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-10","para":"05-10","html":"
A benefit-responsive guaranteed investment contract contains provisions that mirror the plan's participant-directed withdrawal or transfer provisions. Therefore, the issuer is at risk that interest rates could increase, reducing the price of the fixed-income investments backing the guaranteed investment contract liability, while those investments may have to be sold at a loss to cover withdrawals.
","snippet":"A benefit-responsive guaranteed investment contract contains provisions that mirror the plan's participant-directed withdrawal or transfer provisions. Therefore, the issuer is at risk that interest rates could increase, …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:de368a3ce24bf7d203c7fd7a4889e18ae947deddb2a2c1e0bdadb5fd422833f1","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-11","para":"05-11","html":"
A synthetic guaranteed investment contract is a contract that simulates the performance of a traditional guaranteed investment contract through the use of financial instruments. As with other types of guaranteed investment contracts, the specific terms and conditions of synthetic guaranteed investment contracts are negotiated on a case-by-case basis. However, those contracts fall into several broad structural categories, as follows:
  1. a
    Buy-and-hold. Typically, a buy-and-hold synthetic contract covers a limited class of assets, usually high-quality bonds expected to be held to maturity. There is no stated rate guarantee; instead, the interest rate is reset periodically as specified in the contract, subject to a specified floor—for example, 3 percent or 0 percent. The term of the contract generally is consistent with the maturity of the underlying assets. Although buy-and-hold contracts are structured to permit participant withdrawals and transfers at book value, generally no withdrawals are expected. The arrangements between the benefit plan or other institutional investor and the wrap provider typically contain provisions outlining operating and investing guidelines for the customer. These guidelines are designed to ensure the availability of other sources of liquidity sufficient to satisfy expected levels of net participant-directed withdrawals and transfers, without the need to access the assets wrapped by the synthetic guaranteed investment contract. While participants can make withdrawals or transfers at book value, in most cases, the customer can terminate the contract at the value of the assets at any time, but it can withdraw at contract value only at maturity or earlier with a specified notification period.
  2. b
    Actively managed. With an actively managed synthetic guaranteed investment contract, the assets often are managed by an outside investment manager, but may be managed by the insurer. Generally, the contract is evergreen—that is, there is no specified maturity date—and there is no stated rate guarantee; instead, the interest rate is reset periodically as specified in the contract, subject to a specified floor, frequently zero percent and typically not less than zero percent. Participant-directed withdrawals and transfers are made at book value, with future interest returns adjusted to recognize the difference between the fair value and book value of the remaining assets covered by the synthetic guaranteed investment contract, but typically not below a zero interest rate. Customer-initiated withdrawal provisions are similar to those for buy-and-hold guaranteed investment contracts.
  3. c
    Fixed-rate, fixed-maturity. This contract is essentially the same as a traditional general account guaranteed investment contract. The synthetic guaranteed investment contract issuer guarantees a fixed rate for a fixed and certain term and assumes the investment risks and rewards of the assets. If the assets earn less than the guaranteed return, the insurance entity absorbs the loss. If the assets earn more than was assumed in pricing, the income recognized by the insurer will be greater than the wrap fee assumed in the pricing. Typically, the insurer also will be the investment manager because of the assumption of investment risk. Note that participant-initiated withdrawals and transfers of fixed-rate, fixed-maturity contracts are permitted at book value but are expected to occur infrequently. Withdrawals initiated by the customer generally are permitted only at the value of the assets and the guarantee is not activated.
","snippet":"A synthetic guaranteed investment contract is a contract that simulates the performance of a traditional guaranteed investment contract through the use of financial instruments. As with other types of guaranteed investme…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:46acd6791f00be47f517af8e78ad3e7372efbf243482783aeba0e07fa43edf58","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-12","para":"05-12","html":"
A key difference between a synthetic guaranteed investment contract and a traditional guaranteed investment contract is that the policyholder (such as a benefit plan or other institutional customer) owns the assets underlying the synthetic guaranteed investment contract. (With a traditional guaranteed investment contract, the policyholder owns only the contract itself that provides the plan with a call on the contract issuer's assets in the event of default.) Those assets may be held in a trust owned by the policyholder and typically consist of government securities, private and public mortgage-backed securities, and other asset-backed securities, and investment grade corporate obligations. To enable the policyholder to realize a specific known value for the assets if it needs to liquidate them, synthetic guaranteed investment contract utilize a wrapper contract that provides market and cash flow risk protection to the policyholder. This wrapper or guarantee may be provided in a variety of structures. In one structure, the issuer provides cash advances to fund the policyholder's cash withdrawal requirements if the invested asset values have decreased.
","snippet":"A key difference between a synthetic guaranteed investment contract and a traditional guaranteed investment contract is that the policyholder (such as a benefit plan or other institutional customer) owns the assets under…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a61b7c4de4a7456a9835125defc3ea5357f38c5bb93966a872ae54a48e889f25","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-13","para":"05-13","html":"
Other structures include:
  1. a
    A swap agreement whereby the synthetic guaranteed investment contract issuer exchanges a fixed return for the value of supporting assets, if needed for benefit payments
  2. b
    An agreement by the issuer to buy assets at book value if a sale is needed to make benefit payments
  3. c
    A payment upon termination of the contract equal to the difference between a hypothetical book value of plan assets and their value. (Provisions of benefit-responsive traditional guaranteed investment contracts and synthetic guaranteed investment contracts generally prohibit the benefit plan and its sponsor from taking any actions that would encourage participant withdrawals and transfers.)
","snippet":"Other structures include:\n(a) A swap agreement whereby the synthetic guaranteed investment contract issuer exchanges a fixed return for the value of supporting assets, if needed for benefit payments\n(b) An agreement by t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:98567bda3c45dc78861515a22e54fd6b3199e20a02d0c539469534da36bdbc9e","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-14","para":"05-14","html":"
Synthetic guaranteed investment contracts can be viewed as the issuer selling a put option to the policyholder. For many synthetic guaranteed investment contracts, the option premium is in the form of a fee charged on the outstanding contract book value. For some forms of synthetic guaranteed investment contracts, the option premium for the put option is not explicitly stated but, instead, is embedded in the determination of the investment return guaranteed to the policyholder.
","snippet":"Synthetic guaranteed investment contracts can be viewed as the issuer selling a put option to the policyholder. For many synthetic guaranteed investment contracts, the option premium is in the form of a fee charged on th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a0878cb533cfd26948e0210a7a4cd5be572f88effee5df88954b8a8db01787d1","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"citation":"815-10-05-15","para":"05-15","html":"
In any of the structures, various methods can be used to limit the synthetic guaranteed investment contract issuer's exposure to net payments under the contract. In the current marketplace, most synthetic guaranteed investment contracts pass many of the asset- and cash-flow-related risks to the policyholder. Structures to limit such risk include the following:
  1. a
    Reset of the crediting rate or maturity date. Cash flow volatility (for example, timing of benefit payments) as well as asset underperformance can be passed through to the policyholder through adjustments to future contract crediting rates and/or contract maturities. Formulas are typically provided in the contract that adjust renewal crediting rates to recognize the difference between the fair value and book value of remaining assets in the segregated portfolio.
  2. b
    Exclusion of impaired securities. Impaired securities may also be excluded directly from book value guarantees.
  3. c
    Investment guidelines. Carefully structured investment policy can limit significantly the cash volatility of assets in the segregated portfolio (for example, limit callable securities, mortgage backed securities, and so forth).
  4. d
    Buffer funds. Cash and cash equivalents are maintained and are accessed first to fund benefit payments and thus limit the potential for synthetic guaranteed investment contract issuer's assets to be accessed to make benefit payments.
  5. e
    Liquidation structure of pension plan. Pro rata or tiered structures dictate the order of accessing various plan assets, including synthetic guaranteed investment contract assets, for benefit payments.
","snippet":"In any of the structures, various methods can be used to limit the synthetic guaranteed investment contract issuer's exposure to net payments under the contract. In the current marketplace, most synthetic guaranteed inve…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b632122ffa4c72edb762eed471ee4eca876bf263c8320acbe35124afe21b7474","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:daa2fe5564c414a78ec07c6b7bc8a6de2f54f9b706ddc8335fd090f9ff93b8ef","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"block":"Certain Contracts on Debt and Equity Securities","heading":null,"paragraphs":[{"citation":"815-10-05-16","para":"05-16","html":"
The Certain Contracts on Debt and Equity Securities Subsections provide guidance on certain contracts on debt and equity securities.
","snippet":"The Certain Contracts on Debt and Equity Securities Subsections provide guidance on certain contracts on debt and equity securities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1e80a0bda05eee69a974a1b2ac1da3f2225f4bd5dba42d1b416371855c51d7e6","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f10c4a69dd7bfec0791660fec00a2cf253f4ddf9ec17fbce4baeb950f6c2b6df","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9bf781065e68b5dc6a4b0055a4161f42c0b8a30ce4ab6b22918a905f00928289","downloaded_from":"2026-09-10T01:34:53.845Z","last_downloaded_at":"2026-09-10T01:34:53.845Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480709","source_sha256":"d4ed9f6e042af17db8bf408818bd4a04125954a13cf2c19914977d08afe574c4"}},{"number":"10","label":"10 Objectives","anchor":"10-objectives","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-10-1","para":"10-1","html":"
Four fundamental decisions serve as cornerstones underlying the guidance in this Topic:
  1. a
    Derivative instruments represent rights or obligations that meet the definitions of assets or liabilities and should be reported in financial statements.
  2. b
    Fair value is the most relevant measure for financial instruments and the only relevant measure for derivative instruments. Derivative instruments should be measured at fair value, and adjustments to the carrying amount of hedged items should reflect changes in their fair value (that is, gains or losses) that are attributable to the risk being hedged and that arise while the hedge is in effect.
  3. c
    Only items that are assets or liabilities should be reported as such in financial statements.
  4. d
    Special accounting for items designated as being hedged should be provided only for qualifying items. One aspect of qualification should be an assessment of the expectation of effective offsetting changes in fair values or cash flows during the term of the hedge for the risk being hedged.
","snippet":"Four fundamental decisions serve as cornerstones underlying the guidance in this Topic:\n(a) Derivative instruments represent rights or obligations that meet the definitions of assets or liabilities and should be reported…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:157fc9deb10285c321661bcf8ce6c483ffa4354938738c5a378d7f7d7ff2ce53","downloaded_from":"2026-09-10T01:34:56.221Z","last_downloaded_at":"2026-09-10T01:34:56.221Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480679","source_sha256":"35d2edea7cf295cbcb2138bd5ba14e00522b297c388c7edae544c90fe3293dcb"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:65ad7f63a7aa3a1d1959c46f000da55e52788e5e7bf617c9f413b621175a5a95","downloaded_from":"2026-09-10T01:34:56.221Z","last_downloaded_at":"2026-09-10T01:34:56.221Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480679","source_sha256":"35d2edea7cf295cbcb2138bd5ba14e00522b297c388c7edae544c90fe3293dcb"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cc10d5e064265fdaeee2b71b9bbce7eeee2f7295e9e4733a809cb97e59681d4c","downloaded_from":"2026-09-10T01:34:56.221Z","last_downloaded_at":"2026-09-10T01:34:56.221Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480679","source_sha256":"35d2edea7cf295cbcb2138bd5ba14e00522b297c388c7edae544c90fe3293dcb"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Entities","paragraphs":[{"citation":"815-10-15-1","para":"15-1","html":"
This Subtopic applies to all entities. Some entities, such as not-for-profit entities (NFPs) and defined benefit pension plans, do not report earnings as a separate caption in a statement of financial performance. The application of this Subtopic to those entities is set forth in paragraphs 815-10-35-3, 815-20-15-1, 815-25-35-19, and 815-30-15-3.
","snippet":"This Subtopic applies to all entities. Some entities, such as not-for-profit entities (NFPs) and defined benefit pension plans, do not report earnings as a separate caption in a statement of financial performance. The ap…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3e374449f86d1e1e5fc43c493aff3806da9cbbfdf2e95236518b1d29fddb58cb","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e86889ebff5095b01be4a436114c744e262f54a8c08c87cd337c176c3d81c410","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"block":null,"heading":"Instruments","paragraphs":[{"citation":"815-10-15-2","para":"15-2","html":"
The scope of this Subtopic relates primarily to whether a contract meets the definition of a derivative instrument (see paragraph 815-10-15-83). However, as discussed in this Subsection, some contracts that meet the definition of derivative instrument are not within the scope of this Subtopic, while other contracts that do not meet the definition of derivative instrument are within the scope of this Subtopic. Some of the disclosure requirements in Section 815-10-50 apply to nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66.
","snippet":"The scope of this Subtopic relates primarily to whether a contract meets the definition of a derivative instrument (see paragraph 815-10-15-83). However, as discussed in this Subsection, some contracts that meet the defi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dd897fc733f6e246b359e1c20c78edc935e012b540e81953391055b5b0653c20","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-3","para":"15-3","html":"
If events occur after the inception or acquisition of a contract that cause the contract to meet the definition of a derivative instrument, then that contract shall be accounted for at that later date as a derivative instrument under this Subtopic unless one of the scope exceptions in this Subsection applies.
","snippet":"If events occur after the inception or acquisition of a contract that cause the contract to meet the definition of a derivative instrument, then that contract shall be accounted for at that later date as a derivative ins…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3703e7affd69d1fb0c048e2779318a274cc8aed30284469c0168a49f63e655bc","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-4","para":"15-4","html":"
If a contract meets the definition of both a derivative instrument and a firm commitment under this Subtopic, then an entity shall account for the contract as a derivative instrument unless one of the scope exceptions in this Subsection applies.
","snippet":"If a contract meets the definition of both a derivative instrument and a firm commitment under this Subtopic, then an entity shall account for the contract as a derivative instrument unless one of the scope exceptions in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4959ee477573ccc224a089bfd61e5778b48a1070657d1675095910b7d7a730ea","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-4A","para":"15-4A","html":"
This Section addresses the following unit of accounting questions on scope:
  1. a
    Viewing a contract as freestanding or embedded. Whether a feature should be viewed as freestanding or embedded in determining the scope application of this Subtopic and Subtopic 815-15 is addressed beginning in paragraph 815-10-15-5.
  2. b
    Viewing two or more contracts as a unit in applying the scope of this Subtopic. Whether two or more legally separate transactions should be viewed as a unit in determining the scope application of this Subtopic is addressed beginning in paragraph 815-10-15-8.
","snippet":"This Section addresses the following unit of accounting questions on scope:\n(a) Viewing a contract as freestanding or embedded. Whether a feature should be viewed as freestanding or embedded in determining the scope appl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e704c8f2e7b93f3bb5825b0c0d1e0e91afc2fb5f3e7c7cc530dbfae64d2d96c6","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-4B","para":"15-4B","html":"
Paragraph 815-10-25-5A explains that Section 815-10-25 addresses the following unit of accounting questions with respect to recognition:
  1. a
    Viewing two freestanding derivative instruments as a unit. Whether two or more contracts that are derivative instruments within the scope application of this Subtopic should be viewed as a unit for recognition and other purposes—including for hedge accounting purposes—is addressed beginning in paragraph 815-10-25-6.
  2. b
    Viewing combinations of options as separate options or as a single forward contract. Whether combinations of options that individually are within the scope application of this Subtopic or Subtopic 815-15 should be viewed as separate options or as a single forward is addressed beginning in paragraph 815-10-25-7.
","snippet":"Paragraph 815-10-25-5A explains that Section 815-10-25 addresses the following unit of accounting questions with respect to recognition:\n(a) Viewing two freestanding derivative instruments as a unit. Whether two or more …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a74d8fc79fc59da694fadaa4d0ba840adc81d10c9d18a3d4c337a459e4b4fc28","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-5","para":"15-5","html":"
The notion of an embedded derivative, as discussed in paragraph 815-15-25-1, does not contemplate features that may be sold or traded separately from the contract in which those rights and obligations are embedded. Assuming they meet this Subtopic's definition of a derivative instrument, such features shall be considered attached freestanding derivative instruments rather than embedded derivatives by both the writer and the current holder.
","snippet":"The notion of an embedded derivative, as discussed in paragraph 815-15-25-1, does not contemplate features that may be sold or traded separately from the contract in which those rights and obligations are embedded. Assum…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c51c52e5f580d4f73c3317dd51e3dad49c66c9043a5e6e756a539f9a5861fb6e","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-6","para":"15-6","html":"
A put or call option that is added or attached to a debt instrument by a third party contemporaneously with or after the issuance of the debt instrument shall be separately accounted for as a derivative instrument under this Subtopic by the investor (that is, by the creditor). An option that is added or attached to an existing debt instrument by another party results in the investor having different counterparties for the option and the debt instrument and, thus, the option shall not be considered an embedded derivative. Paragraph 815-15-25-2 states that notion of an embedded derivative in a hybrid instrument refers to provisions incorporated into a single contract, and not to provisions in separate contracts between different counterparties.
","snippet":"A put or call option that is added or attached to a debt instrument by a third party contemporaneously with or after the issuance of the debt instrument shall be separately accounted for as a derivative instrument under …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:233ccce8b14ca7eb6400acb900b29ce29abc655c53bebb76e2fe8fb3f9f75ad6","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-7","para":"15-7","html":"
If a debt instrument includes in its terms at issuance an option feature that is explicitly transferable independent of the debt instrument and thus is potentially exercisable by a party other than either the issuer of the debt instrument (the debtor) or the holder of the debt instrument (the investor), that option shall be considered under this Subtopic as an attached freestanding derivative instrument, rather than an embedded derivative, by both the writer and the holder of the option.
","snippet":"If a debt instrument includes in its terms at issuance an option feature that is explicitly transferable independent of the debt instrument and thus is potentially exercisable by a party other than either the issuer of t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e883bd311264b504f2865f4263868191af46e16fa6db3f17c591682c2c7090eb","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-8","para":"15-8","html":"
In some circumstances, an entity could enter into two or more legally separate transactions that, if combined, would generate a result that is economically similar to entering into a single transaction that would be accounted for as a derivative instrument under this Subtopic. For guidance on circumstances in which two or more contracts that have been determined to be derivative instruments within the scope of this Subtopic must be viewed as a unit, see the guidance beginning in paragraph 815-10-25-6. For guidance on circumstances in which two or more contracts that have been determined to be options within the scope of this Subtopic must be viewed in combination, see the guidance beginning in paragraph 815-10-25-7.
","snippet":"In some circumstances, an entity could enter into two or more legally separate transactions that, if combined, would generate a result that is economically similar to entering into a single transaction that would be acco…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:839e45670bd452c97e7f14d3997ade6b695c8db43f9c306664ef84a1cf7bf46b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-9","para":"15-9","html":"
If two or more separate transactions may have been entered into in an attempt to circumvent the provisions of this Subtopic, the following indicators shall be considered in the aggregate and, if present, shall cause the transactions to be viewed as a unit and not separately:
  1. a
    The transactions were entered into contemporaneously and in contemplation of one another.
  2. b
    The transactions were executed with the same counterparty (or structured through an intermediary).
  3. c
    The transactions relate to the same risk.
  4. d
    There is no apparent economic need or substantive business purpose for structuring the transactions separately that could not also have been accomplished in a single transaction.
","snippet":"If two or more separate transactions may have been entered into in an attempt to circumvent the provisions of this Subtopic, the following indicators shall be considered in the aggregate and, if present, shall cause the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:744e2c94ff98ccde33da17abd160c67fa605d0c4eefb822baeac14dd642fcaad","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-10","para":"15-10","html":"
The guidance in the General Subsections of this Subtopic applies to all derivative instruments, as that term is defined in paragraph 815-10-15-83, unless explicitly excluded by this Subsection (see paragraphs
815-10-15-13 through 15-82
). The General Subsections of this Subtopic also identify incremental guidance that applies specifically to forward commitment dollar rolls.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8
Editor's Note: The content of paragraph 815-10-15-10 will change upon transition, together with a change in the heading noted below.
•> Instruments within Scope
The guidance in the General Subsections of this Subtopic applies to all derivative instruments, as that term is defined in paragraph 815-10-15-83, unless explicitly excluded by this Subsection (see paragraphs
815-10-15-13 through 15-60
and
815-10-15-62 through 15-82
). The General Subsections of this Subtopic also identify incremental guidance that applies specifically to forward commitment dollar rolls.
","snippet":"The guidance in the General Subsections of this Subtopic applies to all derivative instruments, as that term is defined in paragraph 815-10-15-83, unless explicitly excluded by this Subsection (see paragraphs 815-10-15-1…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1402e6f3811ed9bd790c5a936c95959bb7663fa6db75f474ced7b910a16a6836","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-11","para":"15-11","html":"
The holder of an interest in securitized financial assets (other than those identified in paragraphs
815-10-15-72 through 15-73
) shall determine whether the interest is a freestanding derivative instrument or contains an embedded derivative that under Section 815-15-25 would be required to be separated from the host contract and accounted for separately.
","snippet":"The holder of an interest in securitized financial assets (other than those identified in paragraphs 815-10-15-72 through 15-73) shall determine whether the interest is a freestanding derivative instrument or contains an…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8379ee2c2b1b9e3413e82c5975d80d3e463027b13d32a582f70744ba5bbba4e3","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-12","para":"15-12","html":"
A forward commitment dollar roll that does not meet the definition of a derivative instrument is within the scope of the guidance specified for such contracts in this Subtopic (see paragraphs 815-10-25-15, 815-10-30-4, and 815-10-35-4).
","snippet":"A forward commitment dollar roll that does not meet the definition of a derivative instrument is within the scope of the guidance specified for such contracts in this Subtopic (see paragraphs 815-10-25-15, 815-10-30-4, a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4bbc8abdd4b1322a63d5485d4dc0d4deaf070c56da8e149bc81fed64838bce92","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-13","para":"15-13","html":"
Notwithstanding the conditions in paragraphs
815-10-15-83 through 15-139
, the following contracts are not subject to the requirements of this Subtopic if specified criteria are met:
  1. a
    Regular-way security trades
  2. b
    Normal purchases and normal sales
  3. c
    Certain insurance contracts and market risk benefits
  4. d
    Certain financial guarantee contracts
  5. e
    Certain contracts that are not traded on an exchange
  6. f
    Derivative instruments that impede sales accounting
  7. g
    Investments in life insurance
  8. h
    Certain investment contracts
  9. i
    Certain loan commitments
  10. j
    Certain interest-only strips and principal-only strips
  11. k
    Certain contracts involving an entity's own equity
  12. l
    Leases
  13. m
    Residual value guarantees
  14. n
    Registration payment arrangements
  15. o
    Certain fixed-odds wagering contracts.
","snippet":"Notwithstanding the conditions in paragraphs 815-10-15-83 through 15-139, the following contracts are not subject to the requirements of this Subtopic if specified criteria are met:\n(a) Regular-way security trades\n(b) No…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bae8bff781c9ea3ec4546207fab143ffae53fb267b1a5d2f67aa182634d8a85a","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-14","para":"15-14","html":"
The following are the criteria that must be met for each scope exception.
","snippet":"The following are the criteria that must be met for each scope exception.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1de54ac5911e793f7fe53113e195af991ca89fb2120e3ba646340104d7f7ed62","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-15","para":"15-15","html":"
Regular-way security trades are defined as contracts that provide for delivery of a security within the period of time (after the trade date) generally established by regulations or conventions in the marketplace or exchange in which the transaction is being executed. For example, a contract to purchase or sell a publicly traded equity security in the United States customarily requires settlement within three business days. If a contract for purchase of that type of security requires settlement in three business days, the regular-way security trades scope exception applies, but if the contract requires settlement in five days, the regular-way security trades scope exception does not apply unless the reporting entity is required to account for the contract on a trade-date basis.
","snippet":"Regular-way security trades are defined as contracts that provide for delivery of a security within the period of time (after the trade date) generally established by regulations or conventions in the marketplace or exch…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1eef08e4544b4227b112296bb31f1b16aa032b21f7c58b66d9ca206b61532b7a","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-16","para":"15-16","html":"
Except as provided in (a) in the following paragraph, a contract for an existing security does not qualify for the regular-way security trades scope exception if either of the following is true:
  1. a
    It requires or permits net settlement (as discussed in paragraphs
    815-10-15-100 through 15-109
    ).
  2. b
    A market mechanism exists to facilitate net settlement of that contract (as discussed in paragraphs
    815-10-15-110 through 15-118
    ).
","snippet":"Except as provided in (a) in the following paragraph, a contract for an existing security does not qualify for the regular-way security trades scope exception if either of the following is true:\n(a) It requires or permit…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bd04b290f1a2c441cf1f43fdcc3026d0c305ab14d8c9e136d2ebffd231eb5536","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-17","para":"15-17","html":"
The scope exception for regular-way security trades applies only to a contract that requires delivery of securities that are readily convertible to cash except that the scope exception also shall or may apply in any of the following circumstances:
  1. a
    If an entity is required, or has a continuing policy, to account for a contract to purchase or sell an existing security on a trade-date basis, rather than a settlement-date basis, and thus recognizes the acquisition (or disposition) of the security at the inception of the contract, then the entity shall apply the regular-way security trades scope exception to that contract.
  2. b
    If an entity is required, or has a continuing policy, to account for a contract for the purchase or sale of when-issued securities or other securities that do not yet exist on a trade-date basis, rather than a settlement-date basis, and thus recognizes the acquisition or disposition of the securities at the inception of the contract, that entity shall apply the regular-way security trades scope exception to those contracts.
  3. c
    Contracts for the purchase or sale of when-issued securities or other securities that do not yet exist, except for those contracts accounted for on a trade-date basis, are excluded from the requirements of this Subtopic as a regular-way security trade only if all of the following are true:
    1. 1
       There is no other way to purchase or sell that security.
    2. 2
      Delivery of that security and settlement will occur within the shortest period possible for that type of security.
    3. 3
      It is probable at inception and throughout the term of the individual contract that the contract will not settle net and will result in physical delivery of a security when it is issued. (The entity shall document the basis for concluding that it is probable that the contract will not settle net and will result in physical delivery.)
Example 9 (see paragraph 815-10-55-118) illustrates the application of item (c) in this paragraph.
","snippet":"The scope exception for regular-way security trades applies only to a contract that requires delivery of securities that are readily convertible to cash except that the scope exception also shall or may apply in any of t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a2d50378b665fd683af1570a2456719abcde0bdbf643ac8880302c2cc652b08","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-18","para":"15-18","html":"
Note that contracts that require delivery of securities that are not readily convertible to cash (and thus do not permit net settlement) are not subject to the requirements of this Subtopic unless there is a market mechanism outside the contract to facilitate net settlement (as described in paragraph 815-10-15-110).
","snippet":"Note that contracts that require delivery of securities that are not readily convertible to cash (and thus do not permit net settlement) are not subject to the requirements of this Subtopic unless there is a market mecha…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ee4495f881dfa00902e9ed8cfbcf25a162827245aea753707772be81f88008c0","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-19","para":"15-19","html":"
A contract for the purchase or sale of when-issued securities or other securities that do not yet exist is eligible to qualify for the regular-way security trades scope exception (as discussed in paragraph 815-10-15-17) even though either of the following is true:
  1. a
    That contract permits net settlement (as discussed in paragraphs
    815-10-15-100 through 15-109
    ).
  2. b
    A market mechanism exists to facilitate net settlement of that contract (as discussed in paragraphs
    815-10-15-110 through 15-118
    ).
See Example 9 (paragraph 815-10-55-118).
","snippet":"A contract for the purchase or sale of when-issued securities or other securities that do not yet exist is eligible to qualify for the regular-way security trades scope exception (as discussed in paragraph 815-10-15-17) …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:24b449a611d9c6ecb162b6471fb62430c1a471548719c5e4c79d26462a8deb8c","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-20","para":"15-20","html":"
Net settlement (as described in paragraphs 815-10-15-100 and 815-10-15-110) of contracts in a group of contracts similarly designated as regular-way security trades would call into question the continued application of the scope exception to such contracts.
","snippet":"Net settlement (as described in paragraphs 815-10-15-100 and 815-10-15-110) of contracts in a group of contracts similarly designated as regular-way security trades would call into question the continued application of t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a55720521b2ab8fae268c904892d8b1f36e0eb7e4ff1de7069df2f0c0c67d917","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-21","para":"15-21","html":"
This Subtopic does not change whether an entity recognizes regular-way security trades on the trade date or the settlement date.
","snippet":"This Subtopic does not change whether an entity recognizes regular-way security trades on the trade date or the settlement date.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7a0d040d384dd7e38cdc52b752362f54894c4677187c0816101082be354af708","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-22","para":"15-22","html":"
Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold by the reporting entity over a reasonable period in the normal course of business.
","snippet":"Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or so…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3dd21bf1b49b64ab254e2fd91661e1a335ede93eda850243acd4210f70e80e8a","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-23","para":"15-23","html":"
The assessment of whether a contract qualifies for the normal purchases and normal sales scope exception (including whether the underlying of a price adjustment within the contract is not clearly and closely related to the asset being sold or purchased) shall be performed only at the inception of the contract.
","snippet":"The assessment of whether a contract qualifies for the normal purchases and normal sales scope exception (including whether the underlying of a price adjustment within the contract is not clearly and closely related to t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:91e320b4595848ad4207fe679d468ff66ccf5ceda0e05f02ed8d2ff1df247263","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-24","para":"15-24","html":"
The normal purchases and normal sales scope exception sometimes will result in different parties to a contract reaching different conclusions about whether the contract is required to be accounted for as a derivative instrument. For example, the contract may be for ordinary sales by one party but not for ordinary purchases by the counterparty.
","snippet":"The normal purchases and normal sales scope exception sometimes will result in different parties to a contract reaching different conclusions about whether the contract is required to be accounted for as a derivative ins…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0fe1a8d4f1bda4e3b0a87e1a84dab8e7860da63c581397ab217151f4f29e6328","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-25","para":"15-25","html":"
Following are discussions of four important elements needed to qualify for the normal purchases and normal sales scope exception:
  1. a
    Normal terms (including normal quantity)
  2. b
    Clearly and closely related underlying
  3. c
    Probable physical settlement
  4. d
    Documentation.
","snippet":"Following are discussions of four important elements needed to qualify for the normal purchases and normal sales scope exception:\n(a) Normal terms (including normal quantity)\n(b) Clearly and closely related underlying\n(c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c24aa299a0246e2f367fbe5f472203294c79b8d18d3027400a414e5f276d9387","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-26","para":"15-26","html":"
Also discussed is guidance that should be considered in determining whether each of the following specific types of contracts qualifies for the normal purchases and normal sales scope exception:
  1. a
    Freestanding option contracts
  2. b
    Forward (non-option-based) contracts
  3. c
    Forward contracts that contain optionality features
  4. d
    Power purchase or sale agreements.
","snippet":"Also discussed is guidance that should be considered in determining whether each of the following specific types of contracts qualifies for the normal purchases and normal sales scope exception:\n(a) Freestanding option c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:87409c74c5a604809d908ec1f2011c585f8b3f0d83f858131ec958444f58ee13","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-27","para":"15-27","html":"
To qualify for the scope exception, a contract's terms must be consistent with the terms of an entity's normal purchases or normal sales, that is, the quantity purchased or sold must be reasonable in relation to the entity's business needs. Determining whether or not the terms are consistent requires judgment.
","snippet":"To qualify for the scope exception, a contract's terms must be consistent with the terms of an entity's normal purchases or normal sales, that is, the quantity purchased or sold must be reasonable in relation to the enti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66d11e12fe3564e05d1a4a19a1782b8914c25762f383e47af35d4f8c93db379a","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-28","para":"15-28","html":"
In making those judgments, an entity should consider all relevant factors, including all of the following:
  1. a
    The quantities provided under the contract and the entity's need for the related assets
  2. b
    The locations to which delivery of the items will be made
  3. c
    The period of time between entering into the contract and delivery
  4. d
    The entity's prior practices with regard to such contracts.
","snippet":"In making those judgments, an entity should consider all relevant factors, including all of the following:\n(a) The quantities provided under the contract and the entity's need for the related assets\n(b) The locations to …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eb3d72ac6e7332ea6568f7ce8760a0f2b594c70cadf8fdb54fda6476121e491c","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-29","para":"15-29","html":"
Further, each of the following types of evidence should help in identifying contracts that qualify as normal purchases or normal sales:
  1. a
    Past trends
  2. b
    Expected future demand
  3. c
    Other contracts for delivery of similar items
  4. d
    An entity's and industry's customs for acquiring and storing the related commodities
  5. e
    An entity's operating locations.
For guidance on normal purchases and normal sales as hedged items, see paragraph 815-20-25-7.
","snippet":"Further, each of the following types of evidence should help in identifying contracts that qualify as normal purchases or normal sales:\n(a) Past trends\n(b) Expected future demand\n(c) Other contracts for delivery of simil…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5189dd3c472b0b2dd37743c87ee58388e0057d58d63a54c0421ca9a67ae52d7b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-30","para":"15-30","html":"
Contracts that have a price based on an underlying that is not clearly and closely related to the asset being sold or purchased (such as a price in a contract for the sale of a grain commodity based in part on changes in the Standard and Poor's index) or that are denominated in a foreign currency that meets none of the criteria in paragraph 815-15-15-10(b) shall not be considered normal purchases and normal sales.
","snippet":"Contracts that have a price based on an underlying that is not clearly and closely related to the asset being sold or purchased (such as a price in a contract for the sale of a grain commodity based in part on changes in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aa9c7b3a4ebf0591a8562d4b99722ee7318f0b56afa2bf0a0ec9a771a3aeca1f","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-31","para":"15-31","html":"
The phrase not clearly and closely related in the preceding paragraph with respect to the normal purchases and normal sales scope exception is used to convey a different meaning than in paragraphs 815-15-25-1(a) and
815-15-25-16 through 25-51
with respect to the relationship between an embedded derivative and the host contract in which it is embedded. The guidance in this discussion of normal purchases and normal sales does not affect the use of the phrase not clearly and closely related in paragraphs other than the preceding paragraph. For purposes of determining whether a contract qualifies for the normal purchases and normal sales scope exception, the application of the phrase not clearly and closely related to the asset being sold or purchased shall involve an analysis of both qualitative and quantitative considerations. The analysis is specific to the contract being considered for the normal purchases and normal sales scope exception and may include identification of the components of the asset being sold or purchased.
","snippet":"The phrase not clearly and closely related in the preceding paragraph with respect to the normal purchases and normal sales scope exception is used to convey a different meaning than in paragraphs 815-15-25-1(a) and 815-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b10a8b7c41c02b0a338b66a6b0e2299d1527fa8719ce5616028e1a50548f7f26","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-32","para":"15-32","html":"
The underlying in a price adjustment incorporated into a contract that otherwise satisfies the requirements for the normal purchases and normal sales scope exception shall be considered to be not clearly and closely related to the asset being sold or purchased in any of the following circumstances:
  1. a
    The underlying is extraneous (that is, irrelevant and not pertinent) to both the changes in the cost and the changes in the fair value of the asset being sold or purchased, including being extraneous to an ingredient or direct factor in the customary or specific production of that asset.
  2. b
    If the underlying is not extraneous as discussed in (a), the magnitude and direction of the impact of the price adjustment are not consistent with the relevancy of the underlying. That is, the magnitude of the price adjustment based on the underlying is significantly disproportionate to the impact of the underlying on the fair value or cost of the asset being purchased or sold (or of an ingredient or direct factor, as appropriate).
  3. c
    The underlying is a currency exchange rate involving a foreign currency that meets none of the criteria in paragraph 815-15-15-10(b) for that reporting entity.
","snippet":"The underlying in a price adjustment incorporated into a contract that otherwise satisfies the requirements for the normal purchases and normal sales scope exception shall be considered to be not clearly and closely rela…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e82218740bd2749abc1b11e33e8b8027afc42e598e6de850a9f2f524a014d72b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-33","para":"15-33","html":"
For example, in the case in which the price adjustment focuses on the changes in the fair value of the asset being purchased or sold, if the terms of the price adjustment are expected, at the inception of the contract, to affect the purchase or sales price in a manner comparable to the outcome that would be obtained if, at each delivery date, the parties were to reprice the contract amount under the then-existing conditions for the asset being delivered on that date, the price adjustment's underlying is considered to be clearly and closely related to the asset being sold or purchased and the price adjustment would not be an impediment to the contract qualifying for the normal purchases and normal sales scope exception.
","snippet":"For example, in the case in which the price adjustment focuses on the changes in the fair value of the asset being purchased or sold, if the terms of the price adjustment are expected, at the inception of the contract, t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dab4ff8567ee3186a7294b73aeeefb52e8212f5fb0374ecc3020514d71243c69","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-34","para":"15-34","html":"
If the underlying in a price adjustment incorporated into a purchase or sales contract is not an impediment to qualifying for the normal purchases and normal sales scope exception because it is considered to be clearly and closely related to the asset being sold or purchased, the contract must meet the other requirements in this Subsection to qualify for the normal purchases and normal sales scope exception.
","snippet":"If the underlying in a price adjustment incorporated into a purchase or sales contract is not an impediment to qualifying for the normal purchases and normal sales scope exception because it is considered to be clearly a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0e85b93a42fb384ec8636cdc98ce58a30a9e8aae5ff953441ec8c211d3ee1ab3","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-35","para":"15-35","html":"
For a contract that meets the net settlement provisions of paragraphs
815-10-15-100 through 15-109
and the market mechanism provisions of paragraphs
815-10-15-110 through 15-118
to qualify for the normal purchases and normal sales scope exception, it must be probable at inception and throughout the term of the individual contract that the contract will not settle net and will result in physical delivery.
","snippet":"For a contract that meets the net settlement provisions of paragraphs 815-10-15-100 through 15-109 and the market mechanism provisions of paragraphs 815-10-15-110 through 15-118 to qualify for the normal purchases and no…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fffc3944317f34107e5a70138d03d609e0f8dcb5794e76d9294b33507f6576e3","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-36","para":"15-36","html":"
The normal purchases and normal sales scope exception only relates to a contract that results in gross delivery of the commodity under that contract. The normal purchases and normal sales scope exception shall not be applied to a contract that requires cash settlements of gains or losses or otherwise settle gains or losses periodically because those settlements are net settlements. Paragraph 815-20-25-22 explains how an entity may designate such a contract as a hedged item in an all-in-one hedge if all related criteria are met.
","snippet":"The normal purchases and normal sales scope exception only relates to a contract that results in gross delivery of the commodity under that contract. The normal purchases and normal sales scope exception shall not be app…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:34e2ec6574ae28d94d2b8d0acca0c93d0a17489ef23da98db42c7e0ce5d4ea68","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-36A","para":"15-36A","html":"
Certain contracts for the purchase or sale of electricity on a forward basis that necessitate transmission through, or delivery to a location within, an electricity grid operated by an independent system operator result in one of the contracting parties incurring charges (or credits) for the transmission of that electricity based in part on locational marginal pricing differences payable to (or receivable from) the independent system operator. For example, this is the case when the delivery location under the contract (for example, a hub location) is not the same location as the point of ultimate consumption of the electricity or the point from which the electricity exits the electricity grid for transmission to a customer load zone. Delivery to the point of ultimate consumption or the exit point is facilitated by the independent system operator of the grid. The purchase or sale contract and the transmission services do not constitute a series of sequential contracts intended to accomplish the ultimate acquisition or sale of a commodity as discussed in paragraph 815-10-15-41, and the use of locational marginal pricing to determine the transmission charge (or credit) does not constitute net settlement, even in situations in which legal title to the associated electricity is conveyed to the independent system operator during transmission.
","snippet":"Certain contracts for the purchase or sale of electricity on a forward basis that necessitate transmission through, or delivery to a location within, an electricity grid operated by an independent system operator result …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:40612c2675ace2540834d8a4f24021d3ea0fe7aeaff137b6b91aa3f5469df144","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-37","para":"15-37","html":"
For contracts that qualify for the normal purchases and normal sales exception under any provision of paragraphs
815-10-15-22 through 15-51
, the entity shall document the designation of the contract as a normal purchase or normal sale, including either of the following:
  1. a
    For contracts that qualify for the normal purchases and normal sales exception under paragraph 815-10-15-41 or
    815-10-15-42 through 15-44
    , the entity shall document the basis for concluding that it is probable that the contract will not settle net and will result in physical delivery.
  2. b
    For contracts that qualify for the normal purchases and normal sales exception under paragraphs
    815-10-15-45 through 15-51
    , the entity shall document the basis for concluding that the agreement meets the criteria in that paragraph,     including the basis for concluding that the agreement is a capacity contract.
","snippet":"For contracts that qualify for the normal purchases and normal sales exception under any provision of paragraphs 815-10-15-22 through 15-51, the entity shall document the designation of the contract as a normal purchase …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b475bee05f8aef6348440804aff270704aae743a86bbcbe68701a953341615fd","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-38","para":"15-38","html":"
The documentation requirements can be applied either to groups of similarly designated contracts or to each individual contract. Failure to comply with the documentation requirements precludes application of the normal purchases and normal sales scope exception to contracts that would otherwise qualify for that scope exception.
","snippet":"The documentation requirements can be applied either to groups of similarly designated contracts or to each individual contract. Failure to comply with the documentation requirements precludes application of the normal p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c335c1c1adf611d313ded70e82b458ebf11020d346df47f2f37d8bacc740c31","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-39","para":"15-39","html":"
The normal purchases and normal sales scope exception could effectively be interpreted as an election in all cases. However, once an entity documents compliance with the requirements of paragraphs
815-10-15-22 through 15-51
, which could be done at the inception of the contract or at a later date, the entity is not permitted at a later date to change its election and treat the contract as a derivative instrument.
","snippet":"The normal purchases and normal sales scope exception could effectively be interpreted as an election in all cases. However, once an entity documents compliance with the requirements of paragraphs 815-10-15-22 through 15…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b94125ab0d88ea6489d5b8790b65083bb296612a96112904b0b8a0c90cc32170","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-40","para":"15-40","html":"
Option contracts that would require delivery of the related asset at an established price under the contract only if exercised are not eligible to qualify for the normal purchases and normal sales scope exception, except as indicated in paragraphs
815-10-15-45 through 15-51
.
","snippet":"Option contracts that would require delivery of the related asset at an established price under the contract only if exercised are not eligible to qualify for the normal purchases and normal sales scope exception, except…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2639821f93a602163cb5af8361fef42384c2a6eafd173e6df094e10bf6f319ec","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-41","para":"15-41","html":"
Forward contracts are eligible to qualify for the normal purchases and normal sales scope exception. However, forward contracts that contain net settlement provisions as described in either paragraphs
815-10-15-100 through 15-109
or
815-10-15-110 through 15-118
are not eligible for the normal purchases and normal sales scope exception unless it is probable at inception and throughout the term of the individual contract that the contract will not settle net and will result in physical delivery. Contracts that are subject to unplanned netting (referred to as a book-out in the electric utility industry) do not qualify for this scope exception except as specified in paragraph 815-10-15-46. Net settlement (as described in paragraphs
815-10-15-100 through 15-109
and
815-10-15-110 through 15-118
) of contracts in a group of contracts similarly designated as normal purchases and normal sales would call into question the classification of all such contracts as normal purchases or normal sales. Contracts that require cash settlements of gains or losses or are otherwise settled net on a periodic basis, including individual contracts that are part of a series of sequential contracts intended to accomplish ultimate acquisition or sale of a commodity, do not qualify for the normal purchases and normal sales scope exception.
","snippet":"Forward contracts are eligible to qualify for the normal purchases and normal sales scope exception. However, forward contracts that contain net settlement provisions as described in either paragraphs 815-10-15-100 throu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:877faa6da0baa9cd8ed6e187eae1eb0a59f628c196b4e44fdb9620eefc2ce1c2","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-42","para":"15-42","html":"
Forward contracts that contain optionality features that do not modify the quantity of the asset to be delivered under the contract are eligible to qualify for the normal purchases and normal sales scope exception. Except for power purchase or sales agreements addressed in paragraphs
815-10-15-45 through 15-51
, if an option component permits modification of the quantity of the assets to be delivered, the contract is not eligible for the normal purchases and normal sales scope exception, unless the option component permits the holder only to purchase or sell additional quantities at the market price at the date of delivery. For forward contracts that contain optionality features to qualify for the normal purchases and normal sales scope exception, the criteria discussed in the preceding paragraph must be met.
","snippet":"Forward contracts that contain optionality features that do not modify the quantity of the asset to be delivered under the contract are eligible to qualify for the normal purchases and normal sales scope exception. Excep…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7d26a51d111643d3cfddf048765bf53219b4de202cedeab42b98941a992cccda","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-43","para":"15-43","html":"
If the optionality feature in the forward contract can modify the quantity of the asset to be delivered under the contract and that option feature has expired or has been completely exercised (even if delivery has not yet occurred), there is no longer any uncertainty as to the quantity to be delivered under the forward contract. Accordingly, following such expiration or exercise, the forward contract would be eligible for designation as a normal purchase or normal sale, provided that the other applicable conditions in this Subsection are met. Example 10 (see paragraph 815-10-55-121) illustrates this guidance.
","snippet":"If the optionality feature in the forward contract can modify the quantity of the asset to be delivered under the contract and that option feature has expired or has been completely exercised (even if delivery has not ye…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f7267cac41a7f03e6b6afb8dbbb8ae3e63476d3fccc1cf29ec53ce29d8e1fd31","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-44","para":"15-44","html":"
The inclusion of a purchased option that would, if exercised, require delivery of the related asset at an established price under the contract within a single contract that meets the definition of a derivative instrument disqualifies the entire contract from being eligible to qualify for the normal purchases and normal sales scope exception in this Subsection except as provided in the following paragraph through paragraph 815-10-15-51 with respect to certain power purchase or sales agreements.
","snippet":"The inclusion of a purchased option that would, if exercised, require delivery of the related asset at an established price under the contract within a single contract that meets the definition of a derivative instrument…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a89eade9550f67aced70bd50781ddffa2044ae47740c48116e40386bd409629f","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-45","para":"15-45","html":"
Notwithstanding the criteria in paragraphs
815-10-15-41 through 15-44
, a power purchase or sales agreement (whether a forward contract, option contract, or a combination of both) that is a capacity contract for the purchase or sale of electricity also qualifies for the normal purchases and normal sales scope exception if all of the following applicable criteria are met:
  1. a
    For both parties to the contract, both of the following criteria are met:
    1. 1
      The terms of the contract require physical delivery of electricity. That is, the contract does not permit net settlement, as described in paragraphs
      815-10-15-100 through 15-109
      .       For an option contract, physical delivery is required if the option contract is exercised. Certain contracts for the purchase or sale of electricity on a forward basis that necessitate transmission through, or delivery to a location within, an electricity grid operated by an independent system operator result in one of the contracting parties incurring charges (or credits) for the transmission of that electricity based in part on locational marginal pricing differences payable to (or receivable from) the independent system operator. For example, this is the case when the delivery location under the contract (for example, a hub location) is not the same location as the point of ultimate consumption of the electricity or the point from which the electricity exits the electricity grid for transmission to a customer load zone. Delivery to the point of ultimate consumption or the exit point is facilitated by the independent system operator of the grid. The use of locational marginal pricing to determine the transmission charge (or credit) does not constitute net settlement, even in situations in which legal title to the associated electricity is conveyed to the independent system operator during transmission.
    2. 2
      The power purchase or sales agreement is a capacity contract. Differentiating between a capacity contract and a traditional option contract (that is, a financial option on electricity) is a matter of judgment that depends on the facts and circumstances. For power purchase or sale agreements that contain option features, the characteristics of an option contract that is a capacity contract and a traditional option contract, which are set forth in paragraph 815-10-55-31 shall be considered in that evaluation; however, other characteristics not listed in that paragraph may also be relevant to that evaluation.
  2. b
    For the seller of electricity: The electricity that would be deliverable under the contract involves quantities that are expected to be sold by the reporting entity in the normal course of business.
  3. c
    For the buyer of electricity, all of the following criteria are met:
    1. 1
      The electricity that would be deliverable under the contract involves quantities that are expected to be used or sold by the reporting entity in the normal course of business.
    2. 2
      The buyer of the electricity under the power purchase or sales agreement is an entity that meets both of the following criteria:
      1. i
        The entity is engaged in selling electricity to retail or wholesale customers.
      2. ii
        The entity is statutorily or otherwise contractually obligated to maintain sufficient capacity to meet electricity needs of its customer base.
    3. 3
      The contracts are entered into to meet the buyer's obligation to maintain a sufficient capacity, including a reasonable reserve margin established by or based on a regulatory commission, local standards, regional reliability councils, or regional transmission organizations.
","snippet":"Notwithstanding the criteria in paragraphs 815-10-15-41 through 15-44, a power purchase or sales agreement (whether a forward contract, option contract, or a combination of both) that is a capacity contract for the purch…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:35a207d88f14a78ff15940d3952fdf4792451aeaa017af5ec5552c7ad376c97c","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-46","para":"15-46","html":"
Power purchase or sales agreements that meet only the applicable criteria in paragraph 815-10-15-45 qualify for the normal purchases and normal sales scope exception even if they are subject to being booked out or are scheduled to be booked out.
","snippet":"Power purchase or sales agreements that meet only the applicable criteria in paragraph 815-10-15-45 qualify for the normal purchases and normal sales scope exception even if they are subject to being booked out or are sc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eefcba5e6ad3e7bd9e2945ee8800ccfe18ca4a348c2dbaed664002cb17aca779","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-47","para":"15-47","html":"
Forward contracts for the purchase or sale of electricity that do not meet those applicable criteria as well as other forward contracts are nevertheless eligible to qualify for the normal purchases and normal sales scope exception by meeting the criteria in this Subsection (other than paragraph 815-10-15-45), unless those contracts are subject to unplanned netting (that is, subject to possibly being booked out).
","snippet":"Forward contracts for the purchase or sale of electricity that do not meet those applicable criteria as well as other forward contracts are nevertheless eligible to qualify for the normal purchases and normal sales scope…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:020efe139045458197594f5ebca93d7d1c43b3f01dd5056d276153194a288e81","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-48","para":"15-48","html":"
Because electricity cannot be readily stored in significant quantities and the entity engaged in selling electricity is obligated to maintain sufficient capacity to meet the electricity needs of its customer base, an option contract for the purchase of electricity that meets the criteria in paragraph 815-10-15-45 qualifies for the normal purchases and normal sales scope exception in that paragraph.
","snippet":"Because electricity cannot be readily stored in significant quantities and the entity engaged in selling electricity is obligated to maintain sufficient capacity to meet the electricity needs of its customer base, an opt…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:34edfe16d92c57cdc31e5e0c2e028f670c7325445a302b2f2349d89da32f6c1e","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-49","para":"15-49","html":"
This guidance does not affect the accounting for requirements contracts that would not be required to be accounted for under the guidance in this Subtopic pursuant to paragraphs
815-10-55-5 through 55-7
.
","snippet":"This guidance does not affect the accounting for requirements contracts that would not be required to be accounted for under the guidance in this Subtopic pursuant to paragraphs 815-10-55-5 through 55-7.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:43cd073592ee89971c61ad650d87ebd53b33a93fa80627bc4b78028fb5fc662b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-50","para":"15-50","html":"
Contracts that qualify for the normal purchases and normal sales scope exception based on this guidance do not require compliance with any additional guidance in paragraphs
815-10-15-22 through 15-44
. However, contracts that have a price based on an underlying that is not clearly and closely related to the electricity being sold or purchased or that are denominated in a foreign currency that meets none of the criteria in paragraph 815-15-15-10(b) shall not be considered normal purchases and normal sales.
","snippet":"Contracts that qualify for the normal purchases and normal sales scope exception based on this guidance do not require compliance with any additional guidance in paragraphs 815-10-15-22 through 15-44. However, contracts …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:81ab0c012b93184a7fb1cdde2fdab6672617ebbc0dd54231ee4cda1509063398","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-51","para":"15-51","html":"
This guidance shall not be applied by analogy to the accounting for other types of contracts not meeting the stated criteria.
","snippet":"This guidance shall not be applied by analogy to the accounting for other types of contracts not meeting the stated criteria.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1bf222224d1325dcca5085216d61a15c485695d33d167319f25401bedf011ac6","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-52","para":"15-52","html":"
A contract is not subject to the requirements of this Subtopic if it entitles the holder to be compensated only if, as a result of an identifiable insurable event (other than a change in price), the holder incurs a liability or there is an adverse change in the value of a specific asset or liability for which the holder is at risk. Only those contracts for which payment of a claim is triggered only by a bona fide insurable exposure (that is, contracts comprising either solely insurance or both an insurance component and a derivative instrument) may qualify for this scope exception. To qualify, the contract must provide for a legitimate transfer of risk, not simply constitute a deposit or form of self-insurance.
","snippet":"A contract is not subject to the requirements of this Subtopic if it entitles the holder to be compensated only if, as a result of an identifiable insurable event (other than a change in price), the holder incurs a liabi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f084dcdbd4cd1bcb2668f551d8856ccf818b6f7d2c11102f397cbb214fa85a76","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-53","para":"15-53","html":"
The following types of contracts written by insurance entities or held by the insureds are not subject to the requirements of this Subtopic for the reasons given:
  1. a
    Traditional life insurance contracts. The payment of death benefits is the result of an identifiable insurable event (death of the insured) instead of changes in a variable.
  2. b
    Traditional property and casualty contracts. The payment of benefits is the result of an identifiable insurable event (for example, theft or fire) instead of changes in a variable.
","snippet":"The following types of contracts written by insurance entities or held by the insureds are not subject to the requirements of this Subtopic for the reasons given:\n(a) Traditional life insurance contracts. The payment of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:470cda3ddb711d1e977c6c33cb226afeee3ee1a2e38d32c1b7948fcbfd39ba82","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-54","para":"15-54","html":"
In addition, some contracts with insurance or other entities combine derivative instruments with other insurance products or nonderivative contracts, for example, indexed annuity contracts, variable life insurance contracts, and property and casualty contracts that combine traditional coverages with foreign currency options. Contracts that consist of both derivative portions and nonderivative portions are addressed in paragraph 815-15-25-1. However, insurance entities enter into other types of contracts that may be subject to the provisions of this Subtopic.
","snippet":"In addition, some contracts with insurance or other entities combine derivative instruments with other insurance products or nonderivative contracts, for example, indexed annuity contracts, variable life insurance contra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b7e9201f3df80c47f311755716c131b8df4ffa4417ee97f9c6a25d71f198d46b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-55","para":"15-55","html":"
A property and casualty contract that provides for the payment of benefits or claims as a result of both an identifiable insurable event and changes in a variable would in its entirety not be subject to the requirements of this Subtopic (and thus not contain an embedded derivative that is required to be separately accounted for as a derivative instrument) provided all of the following conditions are met:
  1. a
    Benefits or claims are paid only if an identifiable insurable event occurs (for example, theft or fire).
  2. b
    The amount of the payment is limited to the amount of the policyholder's incurred insured loss.
  3. c
    The contract does not involve essentially assured amounts of cash flows (regardless of the timing of those cash flows) based on insurable events highly probable of occurrence because the insured would nearly always receive the benefits (or suffer the detriment) of changes in the variable.
","snippet":"A property and casualty contract that provides for the payment of benefits or claims as a result of both an identifiable insurable event and changes in a variable would in its entirety not be subject to the requirements …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b5191c72dc23b2b5c5aa05d9e9eb8b3d9c054b6f32c6ca60417fd95954091b44","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-56","para":"15-56","html":"
If there is an actuarially determined minimum amount of expected claim payments that are the result of insurable events that are highly probable of occurring under the contract, that portion of the contract does not qualify for the insurance scope exception if both of the following conditions are met:
  1. a
    Those minimum payment cash flows are indexed to or altered by changes in a variable.
  2. b
    Those minimum payment amounts are expected to be paid each policy year (or on another predictable basis).
","snippet":"If there is an actuarially determined minimum amount of expected claim payments that are the result of insurable events that are highly probable of occurring under the contract, that portion of the contract does not qual…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:02ac66a59eb80627c78e46cc654bdb3b5f71f300a0bb0c2b0da8ae8bc9cd351b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-57","para":"15-57","html":"
If an insurance contract has an actuarially determined minimum amount of expected claim payments that are highly probable of occurring, then effectively the amount of those claims is the contract's minimum notional amount in determining the embedded derivative under Section 815-15-25.
","snippet":"If an insurance contract has an actuarially determined minimum amount of expected claim payments that are highly probable of occurring, then effectively the amount of those claims is the contract's minimum notional amoun…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4e87b9674f60ffb97392463807c1b83700a6f593ec689d26230a7d221f9b8492","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-58","para":"15-58","html":"
Financial guarantee contracts are not subject to this Subtopic only if they meet all of the following conditions:
  1. a
    They provide for payments to be made solely to reimburse the guaranteed party for failure of the debtor to satisfy its required payment obligations under a nonderivative contract, either:
    1. 1
      At prespecified payment dates
    2. 2
      At accelerated payment dates as a result of either the occurrence of an event of default (as defined in the financial obligation covered by the guarantee contract) or notice of acceleration being made to the debtor by the creditor.
  2. b
    Payment under the financial guarantee contract is made only if the debtor's obligation to make payments as a result of conditions as described in (a) is past due.
  3. c
    The guaranteed party is, as a precondition in the contract (or in the back-to-back arrangement, if applicable) for receiving payment of any claim under the guarantee, exposed to the risk of nonpayment both at inception of the financial guarantee contract and throughout its term either through direct legal ownership of the guaranteed obligation or through a back-to-back arrangement with another party that is required by the back-to-back arrangement to maintain direct ownership of the guaranteed obligation.
In contrast, financial guarantee contracts are subject to this Subtopic if they do not meet all three criteria, for example, if they provide for payments to be made in response to changes in another underlying such as a decrease in a specified debtor's creditworthiness.
","snippet":"Financial guarantee contracts are not subject to this Subtopic only if they meet all of the following conditions:\n(a) They provide for payments to be made solely to reimburse the guaranteed party for failure of the debto…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:508a7b3cee4cb18acc8684c47153cccc1fd36560e5296906e4f8dd9b7354013c","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-59","para":"15-59","html":"
Contracts that are not exchange-traded are not subject to the requirements of this Subtopic if the underlying on which the settlement is based is any one of the following:
  1. a
    A climatic or geological variable or other physical variable. Climatic, geological, and other physical variables include things like the number of inches of rainfall or snow in a particular area and the severity of an earthquake as measured by the Richter scale. (See Example 13 [paragraph 815-10-55-135].)
  2. b
    The price or value of a nonfinancial asset of one of the parties to the contract provided that the asset is not readily convertible to cash. This scope exception applies only if both of the following are true:
    1. 1
      The nonfinancial assets are unique.
    2. 2
      The nonfinancial asset related to the underlying is owned by the party that would not benefit under the contract from an increase in the fair value of the nonfinancial asset. (If the contract is a call option, the scope exception applies only if that nonfinancial asset is owned by the party that would not benefit under the contract from an increase in the fair value of the nonfinancial asset above the option's strike price.)
  3. c
    The fair value of a nonfinancial liability of one of the parties to the contract provided that the liability does not require delivery of an asset that is readily convertible to cash.
  4. d
    Specified volumes of sales or service revenues of one of the parties to the contract. (This scope exception applies to contracts with settlements based on the volume of items sold or services rendered, for example, royalty agreements. This scope exception does not apply to contracts based on changes in sales or revenues due to changes in market prices.)
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Contracts that are not exchange-traded are not subject to the requirements of this Subtopic if the underlying on which the settlement is based is any one of the following:
  1. a
    A climatic or geological variable or other physical variable. Climatic, geological, and other physical variables include things like the number of inches of rainfall or snow in a particular area and the severity of an earthquake as measured by the Richter scale. (See Example 13 [paragraph 815-10-55-135].)
  2. b
    The price or value of a nonfinancial asset of one of the parties to the contract provided that the asset is not readily convertible to cash. This scope exception applies only if both of the following are true:
    1. 1
      The nonfinancial assets are unique.
    2. 2
      The nonfinancial asset related to the underlying is owned by the party that would not benefit under the contract from an increase in the fair value of the nonfinancial asset. (If the contract is a call option, the scope exception applies only if that nonfinancial asset is owned by the party that would not benefit under the contract from an increase in the fair value of the nonfinancial asset above the option's strike price.)
  3. c
    The fair value of a nonfinancial liability of one of the parties to the contract provided that the liability does not require delivery of an asset that is readily convertible to cash.
  4. d
    Specified volumes of sales or service revenues of one of the parties to the contract. (This scope exception applies to contracts with settlements based on the volume of items sold or services rendered, for example, royalty agreements. This scope exception does not apply to contracts based on changes in sales or revenues due to changes in market prices.)
  5. e
    An underlying that is based on operations or activities specific to one of the parties to the contract. This scope exception applies to underlyings based on the financial operating results (or components of those results) of one of the parties to the contract. This scope exception also applies to underlyings based on the occurrence or nonoccurrence of an event specific to the operations or activities of one of the parties to the contract (such as obtaining regulatory approval, achieving a product development milestone, or achieving a greenhouse gas emissions reduction target). When evaluating whether operations or activities are specific to one of the parties to the contract, an entity does not need to consider whether the outcome is within its control. This scope exception does not apply to any of the following:
    1. 1
      Underlyings that are based on a market rate, market price, or market index (including those in paragraph 815-10-15-88(a) through (f)). (See Example 14A—Case F [paragraph 815-10-55-143K] and Case I [paragraphs
      815-10-55-143P through 55-143Q
      ] that illustrate the application of this exclusion to the scope exception.)
    2. 2
      Underlyings that are based on the price or performance (including default) of a financial asset or financial liability of one of the parties to the contract. For example, the scope exception does not apply to underlyings based on (i) a rate of return or a default rate on a pool of loans held by one of the parties to the contract or (ii) the occurrence or nonoccurrence of an event of default or other credit event by a borrower (or reference entity) on a loan held by one of the parties to the contract. (See Example 14A—Case J [paragraphs
      815-10-55-143R through 55-143S
      ] that illustrates the application of this exclusion to the scope exception.)
    3. 3
      Contracts involving an entity’s own equity that are subject to paragraph 815-10-15-74(a) and Subtopic 815-40.
    4. 4
      Call options and put options on debt instruments that are subject to paragraphs
      815-15-25-41 through 25-43
      .
    Solely for purposes of applying the scope exception in (e), the term party to the contract includes the parent, subsidiaries, or other entities consolidated by the parent for both consolidated financial statements and the standalone financial statements of individual entities within the consolidated group.
","snippet":"Contracts that are not exchange-traded are not subject to the requirements of this Subtopic if the underlying on which the settlement is based is any one of the following:\n(a) A climatic or geological variable or other p…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9abc42c92ac7e4370659db57a0c5c2d545ac46cd0bcca5e601b85aa8ee05e46f","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-60","para":"15-60","html":"
If a contract has more than one underlying and some, but not all, of them qualify for one of the scope exceptions in paragraph 815-10-15-59, the application of this Subtopic to that contract depends on its predominant characteristics. That is, the contract is subject to the requirements of this Subtopic if all of its underlyings, considered in combination, behave in a manner that is highly correlated with the behavior of any of the component variables that do not qualify for a scope exception.
","snippet":"If a contract has more than one underlying and some, but not all, of them qualify for one of the scope exceptions in paragraph 815-10-15-59, the application of this Subtopic to that contract depends on its predominant ch…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f546ad5111058da3bd97030cbfd4cf8d573f678d81248085328fa740442489f0","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-61","para":"15-61","html":"
A contract based on any variable that is not specifically excluded by paragraph 815-10-15-59 is subject to the requirements of this Subtopic if it has the other two characteristics (initial net investment and net settlement) identified in this Subsection.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Paragraph superseded by Accounting Standards Update 2025-07.
","snippet":"A contract based on any variable that is not specifically excluded by paragraph 815-10-15-59 is subject to the requirements of this Subtopic if it has the other two characteristics (initial net investment and net settlem…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7f07b4f7f19f25f11601d144c9affcdc8342bd2774e979fb011a7368101cfff1","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-62","para":"15-62","html":"
Example 14 (see paragraph 815-10-55-142) illustrates the application of paragraph 815-10-15-59(b).
","snippet":"Example 14 (see paragraph 815-10-55-142) illustrates the application of paragraph 815-10-15-59(b).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7021a93b80c6470154fe62893fb3e655a133817f1d8c8b82b268fdc0427702a9","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-63","para":"15-63","html":"
A derivative instrument (whether freestanding or embedded in another contract) whose existence serves as an impediment to recognizing a related contract as a sale by one party or a purchase by the counterparty is not subject to this Subtopic. An example is the existence of a call option enabling a transferor to repurchase transferred assets that is an impediment to sales accounting under Topic 860. Such a call option on transferred financial assets that are not readily obtainable would prevent accounting for that transfer as a sale. The consequence is that to recognize the call option would be to count the same thing twice. The holder of the option already recognizes in its financial statements the assets that it has the option to purchase.
","snippet":"A derivative instrument (whether freestanding or embedded in another contract) whose existence serves as an impediment to recognizing a related contract as a sale by one party or a purchase by the counterparty is not sub…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7fcb4d9839a77948b183c427c0aaa8dc92330adc2a595df9af3a802e06ee5d64","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-64","para":"15-64","html":"
A derivative instrument held by a transferor that relates to assets transferred in a transaction accounted for as a financing under Topic 860, but which does not itself serve as an impediment to sale accounting, is not subject to the requirements of this Subtopic if recognizing both the derivative instrument and either the transferred asset or the liability arising from the transfer would result in counting the same thing twice in the transferor's balance sheet. However, if recognizing both the derivative instrument and either the transferred asset or the liability arising from the transfer would not result in counting the same thing twice in the transferor's balance sheet, the derivative instrument shall be accounted for in accordance with this Subtopic. For related implementation guidance, see paragraph 815-10-55-41.
","snippet":"A derivative instrument held by a transferor that relates to assets transferred in a transaction accounted for as a financing under Topic 860, but which does not itself serve as an impediment to sale accounting, is not s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6679e3168fc3535bd03ed5089fd6f3b9be61d35279a0436f95851517f8540c86","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-65","para":"15-65","html":"
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","snippet":"Paragraph not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aeeccaa972298582226ba432305b03ba7c722f99952502b60f0bb0df5370eb87","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-67","para":"15-67","html":"
A policyholder's investment in a life insurance contract that is accounted for under Subtopic 325-30 is not subject to this Subtopic. This scope exclusion does not affect the accounting by the issuer of the life insurance contract.
","snippet":"A policyholder's investment in a life insurance contract that is accounted for under Subtopic 325-30 is not subject to this Subtopic. This scope exclusion does not affect the accounting by the issuer of the life insuranc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:60f4adbe8110a5db79520f4d3f7c1b886a0f9079b9013df64c5e83e9666b4e09","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-68","para":"15-68","html":"
A contract that is accounted for under either paragraph 960-325-35-1 or 960-325-35-3 is not subject to this Subtopic. This scope exception applies only to the party that accounts for the contract under Topic 960.
","snippet":"A contract that is accounted for under either paragraph 960-325-35-1 or 960-325-35-3 is not subject to this Subtopic. This scope exception applies only to the party that accounts for the contract under Topic 960.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9c3f03e2c9ad9c0a4a1755a3c36c4e4d7d2c026b9dd31245a1532f3680b673c","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-68A","para":"15-68A","html":"
The wrapper of a synthetic guaranteed investment contract that meets the definition of a fully benefit-responsive investment contract that is held by an employee benefit plan is excluded from the scope of this Subtopic.
","snippet":"The wrapper of a synthetic guaranteed investment contract that meets the definition of a fully benefit-responsive investment contract that is held by an employee benefit plan is excluded from the scope of this Subtopic.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:668eb2aa48de60fe208952dc50bb8a778feadd8c3808c6d3f53d803c5f49c796","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-69","para":"15-69","html":"
For the holder of a commitment to originate a loan (that is, the potential borrower), that commitment is not subject to the requirements of this Subtopic. For issuers of commitments to originate mortgage loans that will be held for investment purposes, as discussed in paragraphs
948-310-25-3 through 25-4
, those commitments are not subject to this Subtopic. In addition, for issuers of loan commitments to originate other types of loans (that is, other than mortgage loans), those commitments are not subject to the requirements of this Subtopic.
","snippet":"For the holder of a commitment to originate a loan (that is, the potential borrower), that commitment is not subject to the requirements of this Subtopic. For issuers of commitments to originate mortgage loans that will …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1f55f3b7f4fda67b99a80bb7633d890d9f7445ea672224f809dfd598006f3110","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-70","para":"15-70","html":"
The preceding paragraph does not affect the accounting for commitments to purchase or sell mortgage loans or other types of loans at a future date. Those types of loan commitments must be evaluated under the definition of a derivative instrument to determine whether this Subtopic applies.
","snippet":"The preceding paragraph does not affect the accounting for commitments to purchase or sell mortgage loans or other types of loans at a future date. Those types of loan commitments must be evaluated under the definition o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a3cf2af200ef05ca4be904e0eee31485ef86c1e6a11e809df4295c039b7a94cf","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-71","para":"15-71","html":"
Notwithstanding the characteristics discussed in paragraph 815-10-15-83, loan commitments that relate to the origination of mortgage loans that will be held for sale, as discussed in paragraph 948-310-25-3, shall be accounted for as derivative instruments by the issuer of the loan commitment (that is, the potential lender).
","snippet":"Notwithstanding the characteristics discussed in paragraph 815-10-15-83, loan commitments that relate to the origination of mortgage loans that will be held for sale, as discussed in paragraph 948-310-25-3, shall be acco…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f896bb7a48c94c9744a1669a50b74cbcbc9afe064d632f3fecbe25cf16ff9eb0","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-72","para":"15-72","html":"
An interest-only strip or principal-only strip is not subject to the requirements of this Subtopic provided the strip has both of the following characteristics:
  1. a
    It represents the right to receive only a specified proportion of the contractual interest cash flows of a specific debt instrument or a specified proportion of the contractual principal cash flows of that debt instrument.
  2. b
    It does not incorporate any terms not present in the original debt instrument.
","snippet":"An interest-only strip or principal-only strip is not subject to the requirements of this Subtopic provided the strip has both of the following characteristics:\n(a) It represents the right to receive only a specified pro…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a55116209f840fc96b5648fc1b80e72e4d21b5dd5638f4b8644d7e3d1a539ae","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-73","para":"15-73","html":"
An allocation of a portion of the interest or principal cash flows of a specific debt instrument as reasonable compensation for stripping the instrument or to provide adequate compensation to a servicer (as defined in Topic 860) would meet the intended narrow nature of the scope exception provided in this paragraph. However, an allocation of a portion of the interest or principal cash flows of a specific debt instrument to provide for a guarantee of payments, for servicing in excess of adequate compensation, or for any other purpose would not meet the intended narrow nature of the scope exception.
","snippet":"An allocation of a portion of the interest or principal cash flows of a specific debt instrument as reasonable compensation for stripping the instrument or to provide adequate compensation to a servicer (as defined in To…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7a37d90953ceb24de654a1f62dc98cfb23ba39e93cf2ef110057764355569bc0","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-74","para":"15-74","html":"
Notwithstanding the conditions of paragraphs
815-10-15-13 through 15-139
, the reporting entity shall not consider the following contracts to be derivative instruments for purposes of this Subtopic:
  1. a
    Contracts issued or held by that reporting entity that are both:
    1. 1
      Indexed to its own stock (see Section 815-40-15)
    2. 2
      Classified in stockholders' equity in its statement of financial position (see Section 815-40-25).
  2. b
    Contracts issued by the entity that are subject to Topic 718. If any such contract ceases to be subject to Topic 718 in accordance with paragraphs
    718-10-35-9 through 35-14
    , the terms of that contract shall then be analyzed to determine whether the contract is subject to this Subtopic.     An award that ceases to be subject to Topic 718 in accordance with those paragraphs shall be analyzed to determine whether it is subject to this Subtopic.
  3. c
    Any of the following contracts:
    1. 1
      A contract between an acquirer and a seller to enter into a business combination
    2. 2
      A contract to enter into an acquisition by a not-for-profit entity
    3. 3
      A contract between one or more NFPs to enter into a merger of not-for-profit entities
    4. 4
      In a joint venture’s separate financial statements, a contract between a joint venture and its venturers related to the formation of the joint venture accounted for in accordance with Subtopic 805-60.
  4. d
    Forward contracts that require settlement by the reporting entity's delivery of cash in exchange for the acquisition of a fixed number of its equity shares (forward purchase contracts for the reporting entity's shares that require physical settlement) that are accounted for under paragraphs
    480-10-30-3 through 30-5
    , 480-10-35-3, and 480-10-45-3.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Notwithstanding the conditions of paragraphs
815-10-15-13 through 15-60
and
815-10-15-62 through 15-139
, the reporting entity shall not consider the following contracts to be derivative instruments for purposes of this Subtopic:
  1. a
    Contracts issued or held by that reporting entity that are both:
    1. 1
      Indexed to its own stock (see Section 815-40-15)
    2. 2
      Classified in stockholders' equity in its statement of financial position (see Section 815-40-25).
  2. b
    Contracts issued by the entity that are subject to Topic 718. If any such contract ceases to be subject to Topic 718 in accordance with paragraphs
    718-10-35-9 through 35-14
    , the terms of that contract shall then be analyzed to determine whether the contract is subject to this Subtopic.     An award that ceases to be subject to Topic 718 in accordance with those paragraphs shall be analyzed to determine whether it is subject to this Subtopic.
  3. c
    Any of the following contracts:
    1. 1
      A contract between an acquirer and a seller to enter into a business combination
    2. 2
      A contract to enter into an acquisition by a not-for-profit entity
    3. 3
      A contract between one or more NFPs to enter into a merger of not-for-profit entities
    4. 4
      In a joint venture’s separate financial statements, a contract between a joint venture and its venturers related to the formation of the joint venture accounted for in accordance with Subtopic 805-60.
  4. d
    Forward contracts that require settlement by the reporting entity's delivery of cash in exchange for the acquisition of a fixed number of its equity shares (forward purchase contracts for the reporting entity's shares that require physical settlement) that are accounted for under paragraphs
    480-10-30-3 through 30-5
    , 480-10-35-3, and 480-10-45-3.
","snippet":"Notwithstanding the conditions of paragraphs 815-10-15-13 through 15-139, the reporting entity shall not consider the following contracts to be derivative instruments for purposes of this Subtopic:\n(a) Contracts issued o…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:27573c7e704ba439eb0ca467801189d236e639ed085839309bc9d63963b65fb5","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-75","para":"15-75","html":"
The scope exceptions in paragraph 815-10-15-74 do not apply to either of the following:
  1. a
    The counterparty in those contracts. For example, the scope exception in (b) in the preceding paragraph related to share-based compensation arrangements does not apply to equity instruments (including stock options) received by nonemployees as compensation for goods and services.
  2. b
    A contract that an entity either can or must settle by issuing its own equity instruments but that is indexed in part or in full to something other than its own stock. That contract can be a derivative instrument for the issuer under paragraphs
    815-10-15-13 through 15-139
    , in which case it would be accounted for as a liability or an asset in accordance with the requirements of this Subtopic.     For example, a forward contract that is indexed to both an entity's own stock and currency exchange rates does not qualify for the exception in (a) in the preceding paragraph with respect to that entity's accounting because the forward contract is indexed in part to something other than that entity's own stock (namely, currency exchange rates).
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The scope exceptions in paragraph 815-10-15-74 do not apply to either of the following:
  1. a
    The counterparty in those contracts. For example, the scope exception in (b) in paragraph 815-10-15-74related to share-based compensation arrangements does not apply to equity instruments (including stock options) received by nonemployees as compensation for goods and services.
  2. b
    A contract that an entity either can or must settle by issuing its own equity instruments but that is indexed in part or in full to something other than its own stock. That contract can be a derivative instrument for the issuer under paragraphs
    815-10-15-13 through 15-60
    and
    815-10-15-62 through 15-139
    , in which case it would be accounted for as a liability or an asset in accordance with the requirements of this Subtopic.     For example, a forward contract that is indexed to both an entity's own stock and currency exchange rates does not qualify for the exception in (a) in paragraph 815-10-15-74with respect to that entity's accounting because the forward contract is indexed in part to something other than that entity's own stock (namely, currency exchange rates).
","snippet":"The scope exceptions in paragraph 815-10-15-74 do not apply to either of the following:\n(a) The counterparty in those contracts. For example, the scope exception in (b) in the preceding paragraph related to share-based c…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2987b621ee7090cf3882291d2f712741ede381df76e785e231560ea41f65702d","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-75A","para":"15-75A","html":"
For purposes of evaluating whether a financial instrument meets the scope exception in paragraph 815-10-15-74(a)(1), a down round feature shall be excluded from the consideration of whether the instrument is indexed to the entity's own stock.
","snippet":"For purposes of evaluating whether a financial instrument meets the scope exception in paragraph 815-10-15-74(a)(1), a down round feature shall be excluded from the consideration of whether the instrument is indexed to t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f60514830c3eecd7d3bab8bcaa7202ebb89a4efef739f8ca916e14b565ddf49","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-76","para":"15-76","html":"
Temporary equity is considered stockholders' equity for purposes of the scope exception in paragraph 815-10-15-74(a) even if it is required to be displayed outside of the permanent equity section.
","snippet":"Temporary equity is considered stockholders' equity for purposes of the scope exception in paragraph 815-10-15-74(a) even if it is required to be displayed outside of the permanent equity section.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2b46762938b8487e91295593826719fb957f1e91e1a8f4ba778148adafc71cb0","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-77","para":"15-77","html":"
For guidance on determining whether a freestanding financial instrument or embedded feature is not precluded from qualifying for the first part of the scope exception in paragraph 815-10-15-74(a), see the guidance beginning in paragraph 815-40-15-5.For guidance on determining whether a freestanding financial instrument or embedded feature qualifies for the second part of the scope exception in paragraph 815-10-15-74(a), see the guidance beginning in paragraph 815-40-25-1.
","snippet":"For guidance on determining whether a freestanding financial instrument or embedded feature is not precluded from qualifying for the first part of the scope exception in paragraph 815-10-15-74(a), see the guidance beginn…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:63916fc6861c3085ebacf6e13b2f93d7d5960bb64ba37bb51ce07dafb9eaaba5","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-78","para":"15-78","html":"
Paragraph 815-40-25-39 explains that, for purposes of evaluating under this Subtopic whether an embedded derivative indexed to an entity's own stock would be classified in stockholders' equity if freestanding, the additional considerations necessary for equity classifications beginning in paragraph 815-40-25-7 do not apply if the hybrid contract is a convertible debt instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash (at the discretion of the issuer).
","snippet":"Paragraph 815-40-25-39 explains that, for purposes of evaluating under this Subtopic whether an embedded derivative indexed to an entity's own stock would be classified in stockholders' equity if freestanding, the additi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c204d0f9fbe76b85ceef6730b78c55362fbc413e6227f3e09ebfb45a4ef60bb","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-79","para":"15-79","html":"
Leases that are within the scope of Topic 842 are not derivative instruments subject to this Subtopic, although a derivative instrument embedded in a lease may be subject to the requirements of paragraph 815-15-25-1.
","snippet":"Leases that are within the scope of Topic 842 are not derivative instruments subject to this Subtopic, although a derivative instrument embedded in a lease may be subject to the requirements of paragraph 815-15-25-1.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fa21e9c35652fa298365e9d7b13142573ea71d59c1b807e5ab9581d1eb442354","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-80","para":"15-80","html":"
Residual value guarantees that are subject to the requirements of Topic 842 on leases are not subject to the requirements of this Subtopic.
","snippet":"Residual value guarantees that are subject to the requirements of Topic 842 on leases are not subject to the requirements of this Subtopic.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c33cd399525911ae8e679e7a3839c97f88e92a4a63964394ee7fff63f51d3dc0","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-81","para":"15-81","html":"
A third-party residual value guarantor shall consider the guidance in this Subtopic for all residual value guarantees that it provides to determine whether they are derivative instruments and whether they qualify for any of the scope exceptions in this Subtopic. The guarantees described in paragraph 842-10-15-43 for which the exceptions of paragraphs 460-10-15-7(b) and 460-10-25-1(a) do not apply are subject to the initial recognition, initial measurement, and disclosure requirements of Topic 460.
","snippet":"A third-party residual value guarantor shall consider the guidance in this Subtopic for all residual value guarantees that it provides to determine whether they are derivative instruments and whether they qualify for any…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3f8ffaecad30603f67e20ce0f667bbac0536903552c6610cacfa5c0c72141987","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-82","para":"15-82","html":"
Registration payment arrangements within the scope of Subtopic 825-20 are not subject to the requirements of this Subtopic. The exception in this paragraph applies to both the issuer that accounts for the arrangement pursuant to that Subtopic and the counterparty.
","snippet":"Registration payment arrangements within the scope of Subtopic 825-20 are not subject to the requirements of this Subtopic. The exception in this paragraph applies to both the issuer that accounts for the arrangement pur…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:105cea8bcf96e0abfca68623c4e7fb5d923cdd16b013bb2468b41a606fc72eac","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-82A","para":"15-82A","html":"
Fixed-odds wagering contracts for an entity operating as a casino and for the casino operations of other entities are within the scope of Topic 606 on revenue from contracts with customers. See paragraph 924-815-15-1.
","snippet":"Fixed-odds wagering contracts for an entity operating as a casino and for the casino operations of other entities are within the scope of Topic 606 on revenue from contracts with customers. See paragraph 924-815-15-1.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:300a0d0ad5da68e65f4d4924cd06b163832a8b97dc3e0cfe20b2e299789f60c9","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-82B","para":"15-82B","html":"
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
818-10-65-1Environmental credits and environmental credit obligations shall be accounted for in accordance with Topic 818 and are not subject to this Subtopic.
","snippet":"Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:818-10-65-1Environmental credits and environmental credit obligations shall be accounted for in accordance with Topic 818 and are not subjec…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b1374d5ba5ef4f2a39a20a68d5f0907e50713a72e6ac183f056ad62742ee96fa","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:410fbd0b152caf0b8402a8d9f6a8abc6f93d61b26e84050b4c3d34d9bd66717c","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"block":null,"heading":"Definition of Derivative Instrument","paragraphs":[{"citation":"815-10-15-83","para":"15-83","html":"
A derivative instrument is a financial instrument or other contract with all of the following characteristics:
  1. a
    Underlying, notional amount, payment provision. The contract has both of the following terms, which determine the amount of the settlement or settlements, and, in some cases, whether or not a settlement is required:
    1. 1
      One or more underlyings
    2. 2
      One or more notional amounts or payment provisions or both.
  2. b
    Initial net investment. The contract requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors.
  3. c
    Net settlement. The contract can be settled net by any of the following means:
    1. 1
      Its terms implicitly or explicitly require or permit net settlement.
    2. 2
      It can readily be settled net by a means outside the contract.
    3. 3
      It provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement.
","snippet":"A derivative instrument is a financial instrument or other contract with all of the following characteristics:\n(a) Underlying, notional amount, payment provision. The contract has both of the following terms, which deter…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:390d682b2f57d895cf7c555b457354fd86593db5ac0c8c8640cde55a0f5389c9","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-84","para":"15-84","html":"
In this Topic, both of the following are collectively referred to as derivative instruments:
  1. a
    A derivative instrument included within the scope of this Subtopic by this Subsection
  2. b
    An embedded derivative that has been separated from a host contract as required by paragraph 815-15-25-1.
","snippet":"In this Topic, both of the following are collectively referred to as derivative instruments:\n(a) A derivative instrument included within the scope of this Subtopic by this Subsection\n(b) An embedded derivative that has b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:923f63a259be42dd94f30b92e4dbb30d03465600fe68d1f98f05a7d649b55e2d","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-85","para":"15-85","html":"
The terms underlying, notional amount, payment provision, and settlement are intended to include the plural forms in the remainder of this Topic. Including both the singular and plural forms is more accurate but much more awkward and impairs the readability.
","snippet":"The terms underlying, notional amount, payment provision, and settlement are intended to include the plural forms in the remainder of this Topic. Including both the singular and plural forms is more accurate but much mor…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e4b4126ce0b4ce93789c05ef4617c316634dd3040b0dce2efdf368991f053599","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-86","para":"15-86","html":"
Following is further discussion of each of the three characteristics of a derivative instrument:
  1. a
    Underlying, notional amount, payment provision
  2. b
    Initial net investment
  3. c
    Net settlement.
","snippet":"Following is further discussion of each of the three characteristics of a derivative instrument:\n(a) Underlying, notional amount, payment provision\n(b) Initial net investment\n(c) Net settlement.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cc1d1f81e4031ec39f424777dde7e2553d477d1d530fee2aa8257a683f7f170a","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-87","para":"15-87","html":"
Following is further discussion of the features that relate to the settlement amount(s) of a derivative instrument:
  1. a
    Underlying
  2. b
    Notional amount
  3. c
    Payment provision.
","snippet":"Following is further discussion of the features that relate to the settlement amount(s) of a derivative instrument:\n(a) Underlying\n(b) Notional amount\n(c) Payment provision.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:46e1d4403021e359ff6c195190eee7e662e537ce2e5af94706260e205e134d2f","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-88","para":"15-88","html":"
An underlying is a variable that, along with either a notional amount or a payment provision, determines the settlement of a derivative instrument. An underlying usually is one or a combination of the following:
  1. a
    A security price or security price index
  2. b
    A commodity price or commodity price index
  3. c
    An interest rate or interest rate index
  4. d
    A credit rating or credit index
  5. e
    An exchange rate or exchange rate index
  6. f
    An insurance index or catastrophe loss index
  7. g
    A climatic or geological condition (such as temperature, earthquake severity, or rainfall), another physical variable, or a related index
  8. h
    The occurrence or nonoccurrence of a specified event (such as a scheduled payment under a contract).
","snippet":"An underlying is a variable that, along with either a notional amount or a payment provision, determines the settlement of a derivative instrument. An underlying usually is one or a combination of the following:\n(a) A se…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a569a68105ad61c19ce6cf2047f7e2d2d1d1903bae7790c98c67f9b4d770cd74","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-89","para":"15-89","html":"
However, an underlying may be any variable whose changes are observable or otherwise objectively verifiable. An underlying may be a price or rate of an asset or liability but is not the asset or liability itself.
","snippet":"However, an underlying may be any variable whose changes are observable or otherwise objectively verifiable. An underlying may be a price or rate of an asset or liability but is not the asset or liability itself.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2d8dae73b366565920c02214bdfdc898c9a96f31d8e21dbc3ad1a82681afc2f0","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-90","para":"15-90","html":"
Reference to either a notional amount or a payment provision is needed in relation to an underlying to compute the contract's periodic settlements and resulting changes in fair value.
","snippet":"Reference to either a notional amount or a payment provision is needed in relation to an underlying to compute the contract's periodic settlements and resulting changes in fair value.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1f921a960f1fe43a0801013cd77fd8217a51a75107c614e6566ba95b5c40f8fc","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-91","para":"15-91","html":"
Example 3 (see paragraph 815-10-55-77) illustrates the determination of an underlying if a commodity contract includes a fixed element and a variable element.
","snippet":"Example 3 (see paragraph 815-10-55-77) illustrates the determination of an underlying if a commodity contract includes a fixed element and a variable element.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9356662636011cd29725e0993ff4775a9a415d686433d34baeb19dc6a2e95a4","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-92","para":"15-92","html":"
A notional amount is a number of currency units, shares, bushels, pounds, or other units specified in the contract. Other names are used, for example, the notional amount is called a face amount in some contracts. The settlement of a derivative instrument with a notional amount is determined by interaction of that notional amount with the underlying. The interaction may be simple multiplication, or it may involve a formula with leverage factors or other constants. As defined in the glossary, the effective notional amount is the stated notional amount adjusted for any leverage factor. If a requirements contract contains explicit provisions that support the calculation of a determinable amount reflecting the buyer's needs, then that contract has a notional amount. See paragraphs
815-10-55-5 through 55-7
for related implementation guidance. For implementation guidance on identifying a commodity contract's notional amount, see paragraph 815-10-55-5.
","snippet":"A notional amount is a number of currency units, shares, bushels, pounds, or other units specified in the contract. Other names are used, for example, the notional amount is called a face amount in some contracts. The se…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f0e304cd0750ccd92cd3514a3fecd9760bb58034ea4e1e43579bf03cf7004736","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-93","para":"15-93","html":"
As defined in the glossary, a payment provision specifies a fixed or determinable settlement to be made if the underlying behaves in a specified manner. For example, a derivative instrument might require a specified payment if a referenced interest rate increases by 300 basis points.
","snippet":"As defined in the glossary, a payment provision specifies a fixed or determinable settlement to be made if the underlying behaves in a specified manner. For example, a derivative instrument might require a specified paym…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:77e816936ab2b7e8eb85e204cb2b778b8a2bd2d46aa3b35a1494b4a1ce808a0a","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-94","para":"15-94","html":"
Many derivative instruments require no initial net investment. Some require an initial net investment as compensation for one or both of the following:
  1. a
    Time value (for example, a premium on an option)
  2. b
    Terms that are more or less favorable than market conditions (for example, a premium on a forward purchase contract with a price less than the current forward price).
Others require a mutual exchange of currencies or other assets at inception, in which case the net investment is the difference in the fair values of the assets exchanged.
","snippet":"Many derivative instruments require no initial net investment. Some require an initial net investment as compensation for one or both of the following:\n(a) Time value (for example, a premium on an option)\n(b) Terms that …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cf4860134df836e920e024bb7201b99976b26559f7ed3e85b8f5d62077c5801b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-95","para":"15-95","html":"
A derivative instrument does not require an initial net investment in the contract that is equal to the notional amount (or the notional amount plus a premium or minus a discount) or that is determined by applying the notional amount to the underlying. For example:
  1. a
    A commodity futures contract generally requires no net investment, while purchasing the same commodity requires an initial net investment equal to its market price. However, both contracts reflect changes in the price of the commodity in the same way (that is, similar gains or losses will be incurred).
  2. b
    A swap or forward contract generally does not require an initial net investment unless the terms favor one party over the other.
  3. c
    An option generally requires that one party make an initial net investment (a premium) because that party has the rights under the contract and the other party has the obligations.
","snippet":"A derivative instrument does not require an initial net investment in the contract that is equal to the notional amount (or the notional amount plus a premium or minus a discount) or that is determined by applying the no…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3080e23db4942a0a3ca25ac85bc2a578935938916cd2620c844f66b95c0f30ad","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-96","para":"15-96","html":"
If the initial net investment in the contract (after adjustment for the time value of money) is less, by more than a nominal amount, than the initial net investment that would be commensurate with the amount that would be exchanged either to acquire the asset related to the underlying or to incur the obligation related to the underlying, the characteristic in paragraph 815-10-15-83(b) is met. The amount of that asset acquired or liability incurred should be comparable to the effective notional amount of the contract. This does not imply that a slightly off-market contract cannot be a derivative instrument in its entirety. That determination is a matter of facts and circumstances and shall be evaluated on a case-by-case basis. Example 16, Case C (see paragraph 815-10-55-166) illustrates the guidance in this paragraph.
","snippet":"If the initial net investment in the contract (after adjustment for the time value of money) is less, by more than a nominal amount, than the initial net investment that would be commensurate with the amount that would b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8f827cd9dc6fa18d2ef5754735ca7b5d7edf27ab82c8333aec33c74269ec0d77","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-97","para":"15-97","html":"
A contract that requires an initial net investment in the contract that is in excess of the amount determined by applying the effective notional amount to the underlying is not a derivative instrument in its entirety. Example 16, Case A (see paragraph 815-10-55-150) illustrates such a contract.
","snippet":"A contract that requires an initial net investment in the contract that is in excess of the amount determined by applying the effective notional amount to the underlying is not a derivative instrument in its entirety. Ex…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9a1ad5a462e36bb39ab5fc77e24c444836ce39f9f50d90b426ae5457d0875fd8","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-98","para":"15-98","html":"
The phrase initial net investment is stated from the perspective of only one party to the contract, but it determines the application of this Subtopic for both parties. Even though a contract may be a derivative instrument as described in paragraphs
815-10-15-13 through 15-139
for both parties, the scope exceptions in paragraphs
815-10-15-74 through 15-75
apply only to the issuer of the contract and will result in different reporting by the two parties. The normal purchases and sales scope exception (beginning in paragraph 815-10-15-22) also may apply to one of the parties but not the other.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The phrase initial net investment is stated from the perspective of only one party to the contract, but it determines the application of this Subtopic for both parties. Even though a contract may be a derivative instrument as described in paragraphs
815-10-15-13 through 15-60
and
815-10-15-62 through 15-139
for both parties, the scope exceptions in paragraphs
815-10-15-74 through 15-75
apply only to the issuer of the contract and will result in different reporting by the two parties. The normal purchases and sales scope exception (beginning in paragraph 815-10-15-22) also may apply to one of the parties but not the other.
","snippet":"The phrase initial net investment is stated from the perspective of only one party to the contract, but it determines the application of this Subtopic for both parties. Even though a contract may be a derivative instrume…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ad413bb6255c196b2d3ed7faacc9e763660d02c183ffaa9652c18764cd74834a","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-99","para":"15-99","html":"
A contract fits the description in paragraph 815-10-15-83(c) if its settlement provisions meet criteria for any of the following:
  1. a
    Net settlement under contract terms
  2. b
    Net settlement through a market mechanism
  3. c
    Net settlement by delivery of derivative instrument or asset readily convertible to cash.
","snippet":"A contract fits the description in paragraph 815-10-15-83(c) if its settlement provisions meet criteria for any of the following:\n(a) Net settlement under contract terms\n(b) Net settlement through a market mechanism\n(c) …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1c1fdd409a882764548de4da8c9db48f69151bfe71295bcc75a760560a216376","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-100","para":"15-100","html":"
In this form of net settlement, neither party is required to deliver an asset that is associated with the underlying and that has a principal amount, stated amount, face value, number of shares, or other denomination that is equal to the notional amount (or the notional amount plus a premium or minus a discount). (For example, most interest rate swaps do not require that either party deliver interest-bearing assets with a principal amount equal to the notional amount of the contract.) Net settlement may be made in cash or by delivery of any other asset (such as the right to receive future payments—see the discussion beginning in paragraph 815-10-15-104), whether or not that asset is readily convertible to cash.
","snippet":"In this form of net settlement, neither party is required to deliver an asset that is associated with the underlying and that has a principal amount, stated amount, face value, number of shares, or other denomination tha…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e627febb02b698614869b1d598f583e02276e3c1923534758d95bca0deda53ff","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-101","para":"15-101","html":"
Further considerations in the application of this form of net settlement are addressed as follows:
  1. a
    Net share settlement
  2. b
    Net settlement in the event of nonperformance or default
  3. c
    Structured settlement as net settlement
  4. d
    Net settlement of a debt instrument through exercise of an embedded put option or call option.
","snippet":"Further considerations in the application of this form of net settlement are addressed as follows:\n(a) Net share settlement\n(b) Net settlement in the event of nonperformance or default\n(c) Structured settlement as net se…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f683a26bb771440bdfd966cb8ea21c6948e97b94e2628d150971d6f2b76570fc","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-102","para":"15-102","html":"
The net settlement criterion as described in paragraph 815-10-15-83(c) and related paragraphs in this Subsection is met if a contract provides for net share settlement at the election of either party. Therefore, if either counterparty could net share settle a contract, then it would be considered to have the net settlement characteristic of a derivative instrument regardless of whether the net shares received were readily convertible to cash as described in paragraph 815-10-15-119 or were restricted for more than 31 days as discussed beginning in paragraph 815-10-15-130. While this conclusion applies to both investors and issuers of contracts, issuers of those net share settled contracts shall consider whether such contracts qualify for the scope exception in paragraph 815-10-15-74(a). See Example 5 (paragraph 815-10-55-90).
","snippet":"The net settlement criterion as described in paragraph 815-10-15-83(c) and related paragraphs in this Subsection is met if a contract provides for net share settlement at the election of either party. Therefore, if eithe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:287119e246be1cd515eaf27a2a0c7518c6cb43b162e8bedbc95dae92f8ab297b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-103","para":"15-103","html":"
Penalties for nonperformance may give a contract the characteristic of net settlement. For example:
  1. a
    A penalty for nonperformance in a purchase order is a net settlement provision if the amount of the penalty is based on changes in the price of the items that are the subject of the contract.
  2. b
    A fixed penalty for nonperformance is not a net settlement provision.
  3. c
    A contract that contains a variable penalty for nonperformance based on changes in the price of the items that are the subject of the contract does not contain a net settlement provision as discussed beginning in paragraph 815-10-15-100 if it also contains an incremental penalty of a fixed amount (or fixed amount per unit) that would be expected to be significant enough at all dates during the remaining term of the contract to make the possibility of nonperformance remote. If a contract includes such a provision, it effectively requires performance, that is, requires the party to deliver an asset that is associated with the underlying. The assessment of the fixed incremental penalty shall be performed only at the contract's inception. The magnitude of the fixed incremental penalty shall be assessed on a standalone basis as a disincentive for nonperformance, not in relation to the overall penalty.
  4. d
    An asymmetrical default provision does not give a commodity forward contract the characteristic described as net settlement beginning in paragraph 815-10-15-100. For related implementation guidance, see the discussion beginning in paragraph 815-10-55-10.
","snippet":"Penalties for nonperformance may give a contract the characteristic of net settlement. For example:\n(a) A penalty for nonperformance in a purchase order is a net settlement provision if the amount of the penalty is based…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0d00fb5710c72599cc8d5b4a9036e3ad10a68667d90f4c82027424b1f0f8004b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-104","para":"15-104","html":"
Upon settlement of a contract, in lieu of immediate net cash settlement of the gain or loss under the contract, the holder may receive a financial instrument involving terms that would provide for the gain or loss under the contract to be received or paid over a specified time period. A contract that provides for such a structured payout of the gain (or loss) resulting from that contract meets the characteristic of net settlement in paragraphs
815-10-15-100 through 15-109
if the fair value of the cash flows to be received (or paid) by the holder under the structured payout are approximately equal to the amount that would have been received (or paid) if the contract had provided for an immediate payout related to settlement of the gain (or loss) under the contract. The fact that a contract accomplishes settlement by requiring the party in a loss position under the contract to make cash payments over a specified timeframe to the party in a gain position (in lieu of immediate cash settlement of the gain) does not preclude the contract from meeting the characteristic of net settlement in those paragraphs.
","snippet":"Upon settlement of a contract, in lieu of immediate net cash settlement of the gain or loss under the contract, the holder may receive a financial instrument involving terms that would provide for the gain or loss under …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dc2e52c38885c5ba075d563fc86e1e1f66a5c98e3c731c71c0cb208f68bb8037","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-105","para":"15-105","html":"
A contract that requires additional investing or borrowing to obtain the benefits of the contract's gain only over time as a traditional adjustment of the yield on the amount invested or the interest element on the amount borrowed does not meet the characteristic of net settlement.
","snippet":"A contract that requires additional investing or borrowing to obtain the benefits of the contract's gain only over time as a traditional adjustment of the yield on the amount invested or the interest element on the amoun…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8cd6955fc1d7877df1df853bcb1a89039be4711f285f86f9bb428e02dc593dd5","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-106","para":"15-106","html":"
Contracts that require one party to the contract to invest funds in or borrow funds from the other party so that the party in a gain position under the contract can obtain the value of that gain over time as a nontraditional adjustment of the yield on the amount invested or the interest element on the amount borrowed may meet the characteristic of net settlement. See related implementation guidance beginning in paragraph 815-10-55-19.
","snippet":"Contracts that require one party to the contract to invest funds in or borrow funds from the other party so that the party in a gain position under the contract can obtain the value of that gain over time as a nontraditi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0b9cd08a8d0b88e2d5962326dac155a2644f8db396ec8b2873c88a8aec530185","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-107","para":"15-107","html":"
The potential settlement of the debtor's obligation to the creditor that would occur upon exercise of a put option or call option embedded in a debt instrument meets the net settlement criterion as discussed beginning in paragraph 815-10-15-100 because neither party is required to deliver an asset that is associated with the underlying. Specifically:
  1. a
    The debtor does not receive an asset when it settles the debt obligation in conjunction with exercise of the put option or call option.
  2. b
    The creditor does not receive an asset associated with the underlying.
","snippet":"The potential settlement of the debtor's obligation to the creditor that would occur upon exercise of a put option or call option embedded in a debt instrument meets the net settlement criterion as discussed beginning in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cd96dd31e1507fb924351e3ca33c0ae65f8b785ae38a4c5257e6837754e3d2c3","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-108","para":"15-108","html":"
The guidance in the preceding paragraph shall be applied under both of the following circumstances:
  1. a
    When applying paragraph 815-15-25-1(c) to a put option or call option (including a prepayment option) embedded in a debt instrument
  2. b
    When analyzing the net settlement criterion (see guidance beginning in paragraph 815-10-15-100) for a freestanding call option held by the debtor on its own debt instrument and for a freestanding put option issued by the debtor on its own debt instrument.
","snippet":"The guidance in the preceding paragraph shall be applied under both of the following circumstances:\n(a) When applying paragraph 815-15-25-1(c) to a put option or call option (including a prepayment option) embedded in a …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b7c8a4a1d69030de1e38ea3be97931e17ee84d70c3518e2e14b5a81be470e8e0","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-109","para":"15-109","html":"
The guidance in paragraph 815-10-15-107 shall not be applied under either of the following circumstances:
  1. a
    To put or call options that are added to a debt instrument by a third party contemporaneously with or after the issuance of a debt instrument. (In that circumstance, see paragraph 815-10-15-6.)
  2. b
    By analogy to an embedded put or call option in a hybrid instrument that does not contain a debt host contract.
","snippet":"The guidance in paragraph 815-10-15-107 shall not be applied under either of the following circumstances:\n(a) To put or call options that are added to a debt instrument by a third party contemporaneously with or after th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3caab2d471b7132e5d61900af549a3560af07c5a9d2dcbda8f6eedb94b3c4e1e","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-109A","para":"15-109A","html":"
Further considerations are addressed as follows:
  1. a
    Primary characteristics of market mechanism
  2. b
    Indicators of primary characteristics of market mechanism
  3. c
    Effects of an assignment clause on market mechanism
  4. d
    Ongoing evaluation of market mechanism.
","snippet":"Further considerations are addressed as follows:\n(a) Primary characteristics of market mechanism\n(b) Indicators of primary characteristics of market mechanism\n(c) Effects of an assignment clause on market mechanism\n(d) O…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4d74c54ff1733c1ebe47bf227bedb253fc1f36d7aa307e0be96f4b8a31fcb382","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-110","para":"15-110","html":"
In this form of net settlement, one of the parties is required to deliver an asset of the type described in paragraph 815-10-15-100, but there is an established market mechanism that facilitates net settlement outside the contract. (For example, an exchange that offers a ready opportunity to sell the contract or to enter into an offsetting contract.) Market mechanisms may have different forms. Many derivative instruments are actively traded and can be closed or settled before the contract's expiration or maturity by net settlement in active markets.
","snippet":"In this form of net settlement, one of the parties is required to deliver an asset of the type described in paragraph 815-10-15-100, but there is an established market mechanism that facilitates net settlement outside th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:edd219eda83570d3ee23b0ba77667211f82d129ccf62594d2ba2088517c265fc","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-111","para":"15-111","html":"
The term market mechanism is to be interpreted broadly and includes any institutional arrangement or other agreement having the requisite characteristics. Regardless of its form, an established market mechanism must have all of the following primary characteristics:
  1. a
    It is a means to settle a contract that enables one party to readily liquidate its net position under the contract. A market mechanism is a means to realize the net gain or loss under a particular contract through a net payment. Net settlement may occur in cash or any other asset. A method of settling a contract that results only in a gross exchange or delivery of an asset for cash (or other payment in kind) does not satisfy the requirement that the mechanism facilitate net settlement.
  2. b
    It results in one party to the contract becoming fully relieved of its rights and obligations under the contract. A market mechanism enables one party to the contract to surrender all future rights or avoid all future performance obligations under the contract. Contracts that do not permit assignment of the contract from the original issuer to another party do not meet the characteristic of net settlement through a market mechanism. The ability to enter into an offsetting contract, in and of itself, does not constitute a market mechanism because the rights and obligations from the original contract survive. The fact that an entity has offset its rights and obligations under an original contract with a new contract does not by itself indicate that its rights and obligations under the original contract have been relieved. This applies to contracts regardless of whether either of the following conditions exists:
    1. 1
      The asset associated with the underlying is financial or nonfinancial.
    2. 2
      The offsetting contract is entered into with the same counterparty as the original contract or a different counterparty (unless an offsetting contract with the same counterparty relieves the entity of its rights and obligations under the original contract, in which case the arrangement does constitute a market mechanism). (Example 6 [see paragraph 815-10-55-91] illustrates this guidance.)
  3. c
    Liquidation of the net position does not require significant transaction costs. For purposes of assessing whether a market mechanism exists, an entity shall consider transaction costs to be significant if they are 10 percent or more of the fair value of the contract. Whether assets deliverable under a group of futures contracts exceeds the amount of assets that could rapidly be absorbed by the market without significantly affecting the price is not relevant to this characteristic. The lack of a liquid market for a group of contracts does not affect the determination of whether there is a market mechanism that facilitates net settlement because the test focuses on a singular contract. An exchange offers a ready opportunity to sell each contract, thereby providing relief of the rights and obligations under each contract. The possible reduction in price due to selling a large futures position is not considered to be a transaction cost.
  4. d
    Liquidation of the net position under the contract occurs without significant negotiation and due diligence and occurs within a time frame that is customary for settlement of the type of contract. A market mechanism facilitates easy and expedient settlement of the contract. As discussed under the primary characteristic in (a), those qualities of a market mechanism do not preclude net settlement in assets other than cash.
","snippet":"The term market mechanism is to be interpreted broadly and includes any institutional arrangement or other agreement having the requisite characteristics. Regardless of its form, an established market mechanism must have…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:55d580a36a2fc4123decfeed654a79c3d90edefb54f61b7ad77b853805740343","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-112","para":"15-112","html":"
Paragraph not used.
","snippet":"Paragraph not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0945ded0168676e06a357804cd689cafd384ab50a6df178f6cd4a7e05912cb47","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-113","para":"15-113","html":"
Entities shall consider the indicators in the following paragraph for each of the primary characteristics in determining whether a method of settling a contract qualifies as an established market mechanism. All of the indicators need not be present for an entity to conclude that a market mechanism exists for a particular contract.
","snippet":"Entities shall consider the indicators in the following paragraph for each of the primary characteristics in determining whether a method of settling a contract qualifies as an established market mechanism. All of the in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e9b6d60e9515ca234823f93cab7a9b1d2f1014d026fd054afb429d3c0281bdb4","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-114","para":"15-114","html":"
The following are indicators that the primary characteristic in paragraph 815-10-15-111(a) is met:
  1. a
    Access to potential counterparties is available regardless of the seller's size or market position.
  2. b
    Risks assumed by a market maker as a result of acquiring a contract can be transferred by a means other than by repackaging the original contract into a different form.
","snippet":"The following are indicators that the primary characteristic in paragraph 815-10-15-111(a) is met:\n(a) Access to potential counterparties is available regardless of the seller's size or market position.\n(b) Risks assumed…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:73d28e79259a7da45574c2943d919a9febe7191af97cf521fff233a9ff765e1b","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-115","para":"15-115","html":"
The following are indicators that the primary characteristic in paragraph 815-10-15-111(b) is met:
  1. a
    There are multiple market participants willing and able to enter into a transaction at market prices to assume the seller's rights and obligations under a contract.
  2. b
    There is sufficient liquidity in the market for the contract, as indicated by the transaction volume as well as a relatively narrow observable bid-ask spread.
","snippet":"The following are indicators that the primary characteristic in paragraph 815-10-15-111(b) is met:\n(a) There are multiple market participants willing and able to enter into a transaction at market prices to assume the se…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:82bcea38da2fb91c49c77c19cab56d6b8cdcb426813c00150fae0c1cbbef55ec","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-116","para":"15-116","html":"
The following are indicators that primary characteristic in paragraph 815-10-15-111(d) is met:
  1. a
    Binding prices for the contract are readily obtainable.
  2. b
    Transfers of the instrument involve standardized documentation (rather than contracts with entity-specific modifications) and standardized settlement procedures.
  3. c
    Individual contract sales do not require significant negotiation and unique structuring.
  4. d
    The closing period is not extensive because of the need to permit legal consultation and document review.
","snippet":"The following are indicators that primary characteristic in paragraph 815-10-15-111(d) is met:\n(a) Binding prices for the contract are readily obtainable.\n(b) Transfers of the instrument involve standardized documentatio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:35a70da92668b8d9a945100ff07147d7a43fd124423fd8ede8ccf56d1293a7c1","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-117","para":"15-117","html":"
As noted in the primary characteristic in paragraph 815-10-15-111(b), an assessment of the substance of any assignment clause is required to determine whether that assignment clause precludes a party from being relieved of all rights and obligations under the contract. Although permission to assign a contract shall not be unreasonably withheld by the counterparty in accordance with the terms of a contract, an assignment feature cannot be viewed simply as a formality because it may be invoked at any time to prevent the nonassigning party from being exposed to unacceptable credit or performance risk. Accordingly, the existence of an assignment clause may or may not permit a party from being relieved of its rights and obligations under the contract. If it is remote that the counterparty will withhold permission to assign the contract, the mere existence of the clause shall not preclude the contract from possessing the net settlement characteristic described in paragraph 815-10-15-110 as a market mechanism. Such a determination requires assessing whether a sufficient number of acceptable potential assignees exist in the marketplace such that assignment of the contract would not result in imposing unacceptable credit risk or performance risk on the nonassigning party. Consideration shall be given to past counterparty and industry practices regarding whether permission to be relieved of all rights and obligations under similar contracts has previously been withheld. However, if it is reasonably possible or probable that the counterparty will withhold permission to assign the contract, the contract does not possess the net settlement characteristic described in paragraph 815-10-15-110 as a market mechanism.
","snippet":"As noted in the primary characteristic in paragraph 815-10-15-111(b), an assessment of the substance of any assignment clause is required to determine whether that assignment clause precludes a party from being relieved …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:685028d3050c5781ec7179da0d3dcb82760f4e898be12cc162a1feb53e24710a","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-118","para":"15-118","html":"
The evaluation of whether a market mechanism exists shall be performed at inception and on an ongoing basis throughout a contract's life. Example 4, Case A (see paragraph 815-10-55-86) illustrates this guidance.
","snippet":"The evaluation of whether a market mechanism exists shall be performed at inception and on an ongoing basis throughout a contract's life. Example 4, Case A (see paragraph 815-10-55-86) illustrates this guidance.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5f94f1c41e5e509ee14716eb6cd5e04080f28acd2c12b35a5105b7f3c2a17241","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-119","para":"15-119","html":"
In this form of net settlement, one of the parties is required to deliver an asset of the type described in paragraph 815-10-15-100, but that asset is readily convertible to cash or is itself a derivative instrument.
","snippet":"In this form of net settlement, one of the parties is required to deliver an asset of the type described in paragraph 815-10-15-100, but that asset is readily convertible to cash or is itself a derivative instrument.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:44efc21d8645fa486c7eaf4c7f6202bd059e397d39a7a8876ccb9d16f4cdcc9e","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-120","para":"15-120","html":"
An example of a contract with this form of net settlement is a forward contract that requires delivery of an exchange-traded equity security. Even though the number of shares to be delivered is the same as the notional amount of the contract and the price of the shares is the underlying, an exchange-traded security is readily convertible to cash. Another example is a swaption—an option to require delivery of a swap contract, which is a derivative instrument.
","snippet":"An example of a contract with this form of net settlement is a forward contract that requires delivery of an exchange-traded equity security. Even though the number of shares to be delivered is the same as the notional a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bf5b84519bd7e042ce5f8ce3375e7f3151eaaf52453ea462deba1e50035481bf","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-121","para":"15-121","html":"
Examples of assets that are readily convertible to cash include a security or commodity traded in an active market and a unit of foreign currency that is readily convertible into the functional currency of the reporting entity.
","snippet":"Examples of assets that are readily convertible to cash include a security or commodity traded in an active market and a unit of foreign currency that is readily convertible into the functional currency of the reporting …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ae91c59f0ddb930b4ba91d89d3e64bbc777d080fa4bc181ea1fbda57c2136c61","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-122","para":"15-122","html":"
An asset (whether financial or nonfinancial) shall be considered to be readily convertible to cash only if the net amount of cash that would be received from a sale of the asset in an active market is either equal to or not significantly less than the amount an entity would typically have received under a net settlement provision. The net amount that would be received upon sale need not be equal to the amount typically received under a net settlement provision. Parties generally should be indifferent as to whether they exchange cash or the assets associated with the underlying, although the term indifferent is not intended to imply an approximate equivalence between net settlement and proceeds from sale in an active market.
","snippet":"An asset (whether financial or nonfinancial) shall be considered to be readily convertible to cash only if the net amount of cash that would be received from a sale of the asset in an active market is either equal to or …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6c52796ffc53ec5d1198495b6296fadaa0ae5c65761fa3297d579e01ecc76ed2","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-123","para":"15-123","html":"
The form of a financial instrument is important; individual instruments cannot be combined for evaluation purposes to circumvent compliance with the criteria beginning in paragraph 815-10-15-119. Example 8 (see paragraph 815-10-55-111) illustrates this guidance.
","snippet":"The form of a financial instrument is important; individual instruments cannot be combined for evaluation purposes to circumvent compliance with the criteria beginning in paragraph 815-10-15-119. Example 8 (see paragraph…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:abf9794eddd30df1394678ffcbb2a0f0050a91bfb80ab988688da312d5fea0f1","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-124","para":"15-124","html":"
Discussion of additional matters relevant to this form of net settlement is organized as follows:
  1. a
    Effect of conversion costs
  2. b
    Contracts involving multiple deliveries
  3. c
    Asset's suitability as collateral does not equate to asset being readily convertible to cash
  4. d
    Determining whether shares of stock are readily convertible to cash
  5. e
    Ongoing evaluation of readily convertible to cash.
","snippet":"Discussion of additional matters relevant to this form of net settlement is organized as follows:\n(a) Effect of conversion costs\n(b) Contracts involving multiple deliveries\n(c) Asset's suitability as collateral does not …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bc49a37dd3e17ec1c4cf32e3f4140a65ee65646abdfd48467fce06e262a4b19e","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-125","para":"15-125","html":"
If an entity determines that the estimated costs that would be incurred to immediately convert the asset to cash are not significant, then receipt of that asset puts the entity in a position not substantially different from net settlement. Therefore, an entity shall evaluate, in part, the significance of the estimated costs of converting the asset to cash in determining whether those assets are readily convertible to cash.
","snippet":"If an entity determines that the estimated costs that would be incurred to immediately convert the asset to cash are not significant, then receipt of that asset puts the entity in a position not substantially different f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6ed4bea3925b55e6b8b8bb99a1cdc412dc4c9cd132c2e85f7e22f47d1790ee1","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-126","para":"15-126","html":"
For purposes of assessing significance of such costs, an entity shall consider those estimated conversion costs to be significant only if they are 10 percent or more of the gross sales proceeds (based on the spot price at the inception of the contract) that would be received from the sale of those assets in the closest or most economical active market.
","snippet":"For purposes of assessing significance of such costs, an entity shall consider those estimated conversion costs to be significant only if they are 10 percent or more of the gross sales proceeds (based on the spot price a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aa6abb114705d20f2838246f5a71f06433e1171c09b24441006be75bf0343141","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-127","para":"15-127","html":"
The assessment of the significance of those conversion costs shall be performed only at inception of the contract.
","snippet":"The assessment of the significance of those conversion costs shall be performed only at inception of the contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:64352e39c818ee48a5fc43f84a7f1d0ebf8c7c3f6e8495213192bfead907d660","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-128","para":"15-128","html":"
For contracts that involve multiple deliveries of the asset, the phrase in an active market that can rapidly absorb the quantity held by the entity in the definition of readily convertible to cash shall be applied separately to the expected quantity in each delivery.
","snippet":"For contracts that involve multiple deliveries of the asset, the phrase in an active market that can rapidly absorb the quantity held by the entity in the definition of readily convertible to cash shall be applied separa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a74fd8dcda45fc6864ade4d885c1577234ed13733e8d27e21eb23a87001a4118","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-129","para":"15-129","html":"
The ability to use a security that is not publicly traded or an agricultural or mineral product without an active market as collateral in a borrowing does not, in and of itself, mean that the security or the commodity is readily convertible to cash.
","snippet":"The ability to use a security that is not publicly traded or an agricultural or mineral product without an active market as collateral in a borrowing does not, in and of itself, mean that the security or the commodity is…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b0b9a3f7e41dd40895f8a3b5ac08eb09dc4689a6272367338e765740cba0b3d9","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-130","para":"15-130","html":"
A security that is publicly traded but for which the market is not very active is readily convertible to cash if the number of shares or other units of the security to be exchanged is small relative to the daily transaction volume. That same security would not be readily convertible if the number of shares to be exchanged is large relative to the daily transaction volume.
","snippet":"A security that is publicly traded but for which the market is not very active is readily convertible to cash if the number of shares or other units of the security to be exchanged is small relative to the daily transact…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50b1ce25a7d59946c12df84249071fbdf4267daea521cbd09e0cd632a00c6a74","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-131","para":"15-131","html":"
Shares of stock in a publicly traded entity to be received upon the exercise of a stock purchase warrant do not meet the characteristic of being readily convertible to cash if both of the following conditions exist:
  1. a
    The stock purchase warrant is issued by an entity for only its own stock (or stock of its consolidated subsidiaries).
  2. b
     The sale or transfer of the issued shares is restricted (other than in connection with being pledged as collateral) for a period of 32 days or more from the date the stock purchase warrant is exercised.
","snippet":"Shares of stock in a publicly traded entity to be received upon the exercise of a stock purchase warrant do not meet the characteristic of being readily convertible to cash if both of the following conditions exist:\n(a) …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:88c21f3bcc8ad4caa6dbb742e10e8010b6901299e788e79243678b4751294f0f","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-132","para":"15-132","html":"
Restrictions imposed by a stock purchase warrant on the sale or transfer of shares of stock that are received from the exercise of that warrant issued by an entity for other than its own stock (whether those restrictions are for more or less than 32 days) do not affect the determination of whether those shares are readily convertible to cash. The accounting for restricted stock to be received upon exercise of a stock purchase warrant shall not be analogized to any other type of contract.
","snippet":"Restrictions imposed by a stock purchase warrant on the sale or transfer of shares of stock that are received from the exercise of that warrant issued by an entity for other than its own stock (whether those restrictions…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:154414d95a81d112e5dcf6b15757ff69af7e3c7dd1f9492b387a49578179511e","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-133","para":"15-133","html":"
Newly outstanding shares of common stock in a publicly traded company to be received upon exercise of a stock purchase warrant cannot be considered readily convertible to cash if, upon issuance of the shares, the sale or transfer of the shares is restricted (other than in connection with being pledged as collateral) for more than 31 days from the date the stock purchase warrant is exercised (not the date the warrant is issued), unless the holder has the power by contract or otherwise to cause the requirement to be met within 31 days of the date the stock purchase warrant is exercised.
","snippet":"Newly outstanding shares of common stock in a publicly traded company to be received upon exercise of a stock purchase warrant cannot be considered readily convertible to cash if, upon issuance of the shares, the sale or…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a5aca783d7121db6a12aa1fea28bfa0925b9ce6a170cfb91f12cf4bac9c10f7","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-134","para":"15-134","html":"
In contrast, if the sale of an actively traded security is restricted for 31 days or less from the date the stock purchase warrants are exercised, that limitation is not considered sufficiently significant to serve as an impediment to considering the shares to be received upon exercise of those stock purchase warrants as readily convertible to cash.
","snippet":"In contrast, if the sale of an actively traded security is restricted for 31 days or less from the date the stock purchase warrants are exercised, that limitation is not considered sufficiently significant to serve as an…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9270b260323f50b2dcd1cca4ee89b2ddaa9452d08fe4729f7609e3e32926b4f3","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-135","para":"15-135","html":"
The guidance that a restriction for more than 31 days prevents the shares from being considered readily convertible to cash applies only to stock purchase warrants issued by an entity for its own shares of stock, in which case the shares being issued upon exercise are newly outstanding (including issuance of treasury shares) and are restricted with respect to their sale or transfer for a specified period of time beginning on the date the stock purchase warrant is exercised.
","snippet":"The guidance that a restriction for more than 31 days prevents the shares from being considered readily convertible to cash applies only to stock purchase warrants issued by an entity for its own shares of stock, in whic…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7f62259d960063dfb1f818498d161751da0c8a01b4e4e1e693ff2149fb7c3ade","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-136","para":"15-136","html":"
However, even if the sale or transfer of the shares is restricted for 31 days or less after the stock purchase warrant is exercised, an entity still must evaluate both of the following criteria:
  1. a
    Whether an active market can rapidly absorb the quantity of stock to be received upon exercise of the warrant without significantly affecting the price
  2. b
    Whether the other estimated costs to convert the stock to cash are expected to be not significant. (The assessment of the significance of those conversion costs shall be performed only at inception of the contract.)
Thus, the guidance in paragraph 815-10-15-122 shall be applied to those stock purchase warrants with sale or transfer restrictions of 31 days or less on the shares of stock.
","snippet":"However, even if the sale or transfer of the shares is restricted for 31 days or less after the stock purchase warrant is exercised, an entity still must evaluate both of the following criteria:\n(a) Whether an active mar…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:72a6f158fcb3beba33cd34d915b959b680e477ed0d17cdd765c4200da2bb4f05","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-137","para":"15-137","html":"
If the shares of an actively traded common stock to be received upon exercise of the stock purchase warrant can be reasonably expected to qualify for sale within 31 days of their receipt, such as may be the case under SEC Rule 144, Selling Restricted and Control Securities, or similar rules of the SEC, any initial sales restriction is not an impediment to considering those shares as readily convertible to cash, as that phrase is used in paragraph 815-10-15-119. (However, a restriction on the sale or transfer of shares of stock that are received from an entity other than the issuer of that stock through the exercise of another option or the settlement of a forward contract is not an impediment to considering those shares readily convertible to cash, regardless of whether the restriction is for a period that is more or less than 32 days from the date of exercise or settlement.)
","snippet":"If the shares of an actively traded common stock to be received upon exercise of the stock purchase warrant can be reasonably expected to qualify for sale within 31 days of their receipt, such as may be the case under SE…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:515bd60201978ecec198bd4add5bda254b330a625fa09f527cd7059e0f4ea759","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-138","para":"15-138","html":"
Paragraph 815-10-15-141 explains that the guidance in the Certain Contracts on Debt and Equity Securities Subsections applies to those warrants that are not derivative instruments subject to this Topic but that involve the acquisition of securities that will be accounted for under either Topic 320 or Topic 321. However, such warrants are not eligible to be hedging instruments.
","snippet":"Paragraph 815-10-15-141 explains that the guidance in the Certain Contracts on Debt and Equity Securities Subsections applies to those warrants that are not derivative instruments subject to this Topic but that involve t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9bac8c7c6f3faa854314bad9ad073a14edf8662507e232248f1d2283677aa1a5","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-139","para":"15-139","html":"
The evaluation of whether items to be delivered under a contract are readily convertible to cash shall be performed at inception and on an ongoing basis throughout a contract's life (except that, as stated in paragraph 815-10-15-127, the assessment of the significance of those conversion costs shall be performed only at inception of the contract). Example 4, Cases B, C, and D (see paragraphs
815-10-55-87 through 55-89
) illustrate this guidance.
","snippet":"The evaluation of whether items to be delivered under a contract are readily convertible to cash shall be performed at inception and on an ongoing basis throughout a contract's life (except that, as stated in paragraph 8…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d8496f29645ac785c1c1e8fec65aaa5e0d56cbfea2375c4003a1babd2e8ef584","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a76bd85b006978811a473d5e9e13448e7b09951d65a6ff49b5432bbd443e99c","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"block":"Certain Contracts on Debt and Equity Securities","heading":"Overall Guidance","paragraphs":[{"citation":"815-10-15-140","para":"15-140","html":"
The guidance in the Certain Contracts on Debt and Equity Securities Subsections applies to all entities, with specific instrument qualifications noted below.
","snippet":"The guidance in the Certain Contracts on Debt and Equity Securities Subsections applies to all entities, with specific instrument qualifications noted below.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:97375d2b6bfa54f9f1005f77e374f36f2f73441530730b199f8143292b70cfbe","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c99a9de8323f020aeb226c21660ee6338565ef1d132ca2cee187017277dcb97","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"block":"Certain Contracts on Debt and Equity Securities","heading":"Instruments","paragraphs":[{"citation":"815-10-15-141","para":"15-141","html":"
The guidance in the Certain Contracts on Debt and Equity Securities Subsections applies only to those forward contracts and purchased options having all of the following characteristics:
  1. a
    The contract is entered into to purchase securities that will be accounted for under either Topic 320 or Topic 321.
  2. b
    The contract's terms require physical settlement of the contract by delivery of the securities.
  3. c
    The contract is not a derivative instrument otherwise subject to this Subtopic.
  4. d
    The contract, if a purchased option, has no intrinsic value at acquisition.
","snippet":"The guidance in the Certain Contracts on Debt and Equity Securities Subsections applies only to those forward contracts and purchased options having all of the following characteristics:\n(a) The contract is entered into …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e4502ae69c56f0e3a7514709b9398d6d662f5d5d12c80c506596c9b779a142f1","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-141A","para":"15-141A","html":"
For the purposes of applying paragraph 815-10-15-141(a) for forward contracts and purchased options, an entity shall not consider whether, upon the settlement of the forward contract or the exercise of the purchased option, individually or with existing investments, the underlying securities would be accounted for under either of the following:
  1. a
    The equity method in accordance with Topic 323
  2. b
    The fair value option in accordance with Topic 825 if those securities otherwise would have been accounted for under Topic 323.
","snippet":"For the purposes of applying paragraph 815-10-15-141(a) for forward contracts and purchased options, an entity shall not consider whether, upon the settlement of the forward contract or the exercise of the purchased opti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:228ad0763151036868f8e2515222b4ea3476efc4660085092defb6b5ead0b44a","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"citation":"815-10-15-142","para":"15-142","html":"
The guidance in the Certain Contracts on Debt and Equity Securities Subsections does not apply to contracts involving securities not within the scope of either Topic 320 or Topic 321, after considering the guidance in paragraph 815-10-15-141A.
","snippet":"The guidance in the Certain Contracts on Debt and Equity Securities Subsections does not apply to contracts involving securities not within the scope of either Topic 320 or Topic 321, after considering the guidance in pa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:54524a62b570a6217a9a3164c2273e80409d5ae21f2f72b4c2457453a74ecf8f","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6d6a8c0d5d2a15017c5cb82380c86220ba16d0908c6b376325369b8f2efd3e3","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1072165722282a3f13108dec7150d2f76cccfa2f8d3774b3d2d1e13dd7f5eac8","downloaded_from":"2026-09-10T01:35:00.242Z","last_downloaded_at":"2026-09-10T01:35:00.242Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480647","source_sha256":"7101bf87b55238c5e4726fee1cfcd84485c7db0fbb0118f0d56cc35e53701223"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-25-1","para":"25-1","html":"
An entity shall recognize all of its derivative instruments in its statement of financial position as either assets or liabilities depending on the rights or obligations under the contracts.
","snippet":"An entity shall recognize all of its derivative instruments in its statement of financial position as either assets or liabilities depending on the rights or obligations under the contracts.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e311547c6cef103fe99aea2619de4dbc8c086e93554dab916051d789cbcceaf2","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-2","para":"25-2","html":"
If a contract that did not meet the definition of a derivative instrument at acquisition by the entity meets the definition of a derivative instrument after acquisition by the entity, the contract shall be recognized immediately as either an asset or liability with the offsetting entry recorded in earnings.
","snippet":"If a contract that did not meet the definition of a derivative instrument at acquisition by the entity meets the definition of a derivative instrument after acquisition by the entity, the contract shall be recognized imm…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:961e9f192de57a9390306ca385896ee9de905f3ce96a81a7b5e712fbcca25511","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-3","para":"25-3","html":"
If a contract ceases to be a derivative instrument pursuant to this Subtopic and an asset or liability had been recorded for that contract, the carrying amount of that contract becomes its cost basis and the entity shall apply other generally accepted accounting principles (GAAP) that are applicable to that contract prospectively from the date that the contract ceased to be a derivative instrument. If the derivative instrument had been designated in a cash flow hedging relationship and a gain or loss is recorded in accumulated other comprehensive income, then the guidance in Sections 815-30-35 and 815-30-40 shall be applied accordingly.
","snippet":"If a contract ceases to be a derivative instrument pursuant to this Subtopic and an asset or liability had been recorded for that contract, the carrying amount of that contract becomes its cost basis and the entity shall…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3a990cf2897915664bcafc21e106ba98024b40a8817650e771371542040216f1","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-4","para":"25-4","html":"
Synthetic instrument accounting is prohibited.
","snippet":"Synthetic instrument accounting is prohibited.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e879967e56c014983606f68f20de86a2ea6b3605dd37a2d9e014d0636c26d681","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-5","para":"25-5","html":"
The remainder of this Section addresses the following matters:
  1. a
    Unit of accounting for recognition purposes
  2. b
    Subparagraph not used.
  3. c
    Forward commitment dollar rolls
  4. d
    Derivative financial instruments subject to a registration payment arrangement.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
606-10-65-3The remainder of this Section addresses the following matters:
  1. a
    Unit of accounting for recognition purposes
  2. b
    Subparagraph not used.
  3. c
    Forward commitment dollar rolls
  4. d
    Derivative financial instruments subject to a registration payment arrangement
  5. e
    Share-based noncash consideration from a customer for the transfer of goods or services under Topic 606
  6. f
    Share-based noncash consideration from a counterparty for the transfer of nonfinancial assets or in substance nonfinancial assets under Subtopic 610-20.
","snippet":"The remainder of this Section addresses the following matters:\n(a) Unit of accounting for recognition purposes\n(b) Subparagraph not used.\n(c) Forward commitment dollar rolls\n(d) Derivative financial instruments subject t…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6432e984d375facacc5d19c9c1439f3968798c9990dcf79350406a89920d8f53","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3cd4d7ac3ec6f523ee8534c3834299c753f0b84c9f7e7550c0ad265d8722066c","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"block":null,"heading":"Unit of Accounting for Recognition Purposes","paragraphs":[{"citation":"815-10-25-5A","para":"25-5A","html":"
This Section addresses the following unit of accounting questions with respect to recognition:
  1. a
    Viewing two freestanding derivative instruments as a unit. Whether two or more contracts that are derivative instruments within the scope application of this Subtopic should be viewed as a unit for recognition and other purposes—including for hedge accounting purposes—is addressed beginning in paragraph 815-10-25-6.
  2. b
    Viewing combinations of options as separate options or as a single forward contract. Whether combinations of options that individually are within the scope application of this Subtopic or Subtopic 815-15 should be viewed as separate options or as a single forward is addressed beginning in paragraph 815-10-25-7.
","snippet":"This Section addresses the following unit of accounting questions with respect to recognition:\n(a) Viewing two freestanding derivative instruments as a unit. Whether two or more contracts that are derivative instruments …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ff537d0e68213dea9d610bd579bfc7aab917f37dedefed937850bf57d1c7477c","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-5B","para":"25-5B","html":"
Paragraph 815-10-15-4A explains that Section 815-10-15 addresses the following unit of accounting questions on scope:
  1. a
    Viewing a contract as freestanding or embedded. Whether a feature should be viewed as freestanding or embedded in determining the scope application of this Subtopic and Subtopic 815-15 is addressed beginning in paragraph 815-10-15-5.
  2. b
    Viewing two or more contracts as a unit in applying the scope of this Subtopic. Whether two or more legally separate transactions should be viewed as a unit in determining the scope application of this Subtopic is addressed beginning in paragraph 815-10-15-8.
","snippet":"Paragraph 815-10-15-4A explains that Section 815-10-15 addresses the following unit of accounting questions on scope:\n(a) Viewing a contract as freestanding or embedded. Whether a feature should be viewed as freestanding…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d49cab9af071e4c1312d9ac6993c6b37bea11ec59621a994946021be9c54231e","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-6","para":"25-6","html":"
This Subtopic generally does not provide for the combination of separate financial instruments to be evaluated as a unit, unless, pursuant to paragraph 815-20-25-45, two or more derivative instruments in combination are jointly designated as a hedging instrument. If separate derivative instruments have all of the following characteristics, judgment shall be applied to determine whether the separate derivative instruments have been entered into in lieu of a structured transaction in an effort to circumvent GAAP:
  1. a
    They are entered into contemporaneously and in contemplation of one another. (See Example 18 [paragraph 815-10-55-171] for an illustration.)
  2. b
    They are entered into with the same counterparty.
  3. c
    They relate to the same risk.
  4. d
    There is no substantive business purpose for structuring the transactions separately.
If such a determination is made, the derivative instruments shall be viewed as a unit.
","snippet":"This Subtopic generally does not provide for the combination of separate financial instruments to be evaluated as a unit, unless, pursuant to paragraph 815-20-25-45, two or more derivative instruments in combination are …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d8f81b36a81f42edf703d93a83aa9997916a5a1265c71e9fd67110af488dd240","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-7","para":"25-7","html":"
This guidance addresses a combination of two options—one that is a purchased call (put) option and another that is a written put (call) option—having all of the following characteristics:
  1. a
    They have the same strike price, notional amount, and exercise date.
  2. b
    They have the same underlying.
  3. c
    Neither is required to be exercised.
","snippet":"This guidance addresses a combination of two options—one that is a purchased call (put) option and another that is a written put (call) option—having all of the following characteristics:\n(a) They have the same strike pr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ceb2760183788475d2ab6d76c09e50665bddf06d7498ba1152ac4917bbeaa90c","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-8","para":"25-8","html":"
The guidance addresses such options in two contexts:
  1. a
    Combinations of two freestanding options or a freestanding and embedded option
  2. b
    Combinations of two embedded options.
","snippet":"The guidance addresses such options in two contexts:\n(a) Combinations of two freestanding options or a freestanding and embedded option\n(b) Combinations of two embedded options.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e5fd8cf0d8d2c2773c8ad4690eeba0b4fb6c301b1dd9c4071565b7cb63148b00","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-9","para":"25-9","html":"
Derivative instruments that are transferable are, by their nature, separate and distinct contracts. Accordingly, a separate freestanding purchased call (put) option and written put (call) option with all of the characteristics in paragraph 815-10-25-7 convey rights and obligations that are distinct whether involving the same or different counterparties and do not warrant bundling as a single forward contract for accounting purposes under this Subtopic by any party to the contracts. (The separate purchased option and written option can be viewed in combination and jointly designated as the hedging instrument pursuant to paragraph 815-20-25-45.)
","snippet":"Derivative instruments that are transferable are, by their nature, separate and distinct contracts. Accordingly, a separate freestanding purchased call (put) option and written put (call) option with all of the character…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bc6f53061db591b22c9f8f9cbd93e6df73463518b09ba236251f13b80b4b1ebc","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-9A","para":"25-9A","html":"
A combination of a freestanding purchased call (put) option and a freestanding or embedded (nontransferable) written put (call) option shall be considered for accounting purposes as separate option contracts, rather than a single forward contract, by both parties to the contracts even though all of the following conditions are met:
  1. a
    The options have the same terms.
  2. b
    The options have the same underlying.
  3. c
    The options are entered into contemporaneously with the same counterparty at inception.
","snippet":"A combination of a freestanding purchased call (put) option and a freestanding or embedded (nontransferable) written put (call) option shall be considered for accounting purposes as separate option contracts, rather than…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:147aa53ca62df5053e38da1a30e3de328aa8231ab0fe93a589c0e7e4fc94c3a8","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-9B","para":"25-9B","html":"
Both a combination of a freestanding purchased call (put) option and a freestanding or embedded (nontransferable) written put (call) option and a combination of a freestanding written call (put) option and an embedded (nontransferable) purchased put (call) option shall be considered for accounting purposes as separate option contracts, rather than a single forward contract, by both parties to the contracts even though all of the following conditions are met:
  1. a
    The options have the same terms.
  2. b
    The options have the same underlying.
  3. c
    The options are entered into contemporaneously with different counterparties at inception.
","snippet":"Both a combination of a freestanding purchased call (put) option and a freestanding or embedded (nontransferable) written put (call) option and a combination of a freestanding written call (put) option and an embedded (n…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0d2a09430378896607e0e77d38bb2d29b6ecdeae51e92003b6212446a36a2174","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-10","para":"25-10","html":"
A combination of an embedded (nontransferable) purchased call (put) option and an embedded (nontransferable) written put (call) option in a single hybrid instrument with all of the characteristics in paragraph 815-10-25-7and that are entered into contemporaneously with the same counterparty shall be considered as a single forward contract for purposes of applying the provisions of this Subtopic. The notion of the same counterparty encompasses contracts entered into directly with a single counterparty and contracts entered into with a single party that are structured through an intermediary. (Note that a share of stock being puttable by the holder and callable by the issuer under the same terms does not render the stock mandatorily redeemable under the provisions of Topic 480.) Topic 480 requires that mandatorily redeemable financial instruments be classified as liabilities.
","snippet":"A combination of an embedded (nontransferable) purchased call (put) option and an embedded (nontransferable) written put (call) option in a single hybrid instrument with all of the characteristics in paragraph 815-10-25-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d4f627dce1c531dd3bcb7a424e8a646ad883d355fc46504b91c0d7a64a5dff3f","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-11","para":"25-11","html":"
The embedded options are in substance an embedded forward contract because they meet both of the following conditions:
  1. a
    They convey rights (to the holder) and obligations (to the writer) that are equivalent from an economic and risk perspective to an embedded forward contract.
  2. b
    They cannot be separated from the hybrid instrument in which they are embedded.
","snippet":"The embedded options are in substance an embedded forward contract because they meet both of the following conditions:\n(a) They convey rights (to the holder) and obligations (to the writer) that are equivalent from an ec…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a834d1618de19941d4923df41e35ab3b3f413090702c6af53a76125c3b44eae3","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-12","para":"25-12","html":"
Even though neither party is required to exercise its purchased option, the result of the overall structure is a hybrid instrument that will likely be redeemed at a point earlier than its stated maturity. That result is expected by both the hybrid instrument's issuer and investor regardless of whether the embedded feature that triggers the redemption is in the form of two separate options or a single forward contract.
","snippet":"Even though neither party is required to exercise its purchased option, the result of the overall structure is a hybrid instrument that will likely be redeemed at a point earlier than its stated maturity. That result is …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1228abac273aa897d7b61a5147fc14bd6d48de97ff8f515f60cefeac5fe4a251","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-13","para":"25-13","html":"
However, if either party is required to exercise its purchased option before the stated maturity date of the hybrid instrument, the hybrid instrument shall not be viewed for accounting purposes as containing one or more embedded derivatives. In substance, the debtor (issuer) and creditor (investor) have agreed to terms that accelerate the stated maturity of the hybrid instrument and the exercise date of the option is essentially the hybrid instrument's actual maturity date. As a result, it is inappropriate to characterize the hybrid instrument as containing either of the following:
  1. a
    Two embedded option contracts that are exercisable only on the actual maturity date
  2. b
    An embedded forward contract that is a combination of an embedded purchased call (put) and a written put (call) with the same terms.
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Forward commitment dollar rolls that are not otherwise subject to this Subtopic's provisions shall be recognized as either assets or liabilities depending on the rights or obligations under the contracts.
","snippet":"Forward commitment dollar rolls that are not otherwise subject to this Subtopic's provisions shall be recognized as either assets or liabilities depending on the rights or obligations under the contracts.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:10dfda883df47eabd0b93397f0c4796854bbe4143e7060e84342f75730a80b8a","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0b20292a77bc9308c6758800a0ef97aaf7d40384e665f6f539fd317284f41477","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"block":null,"heading":"Derivative Financial Instruments Subject to a Registration Payment Arrangement","paragraphs":[{"citation":"815-10-25-16","para":"25-16","html":"
Paragraphs 825-20-25-2 and 825-20-30-2 require that a financial instrument subject to a registration payment arrangement be recognized and measured in accordance with other applicable GAAP (for example, this Subtopic) without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement. That is, those paragraphs require that an entity recognize and measure a registration payment arrangement as a separate unit of account from the financial instrument(s) subject to that arrangement.
","snippet":"Paragraphs 825-20-25-2 and 825-20-30-2 require that a financial instrument subject to a registration payment arrangement be recognized and measured in accordance with other applicable GAAP (for example, this Subtopic) wi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e16dc09d3ca0cd20e4267dfa0a1b6b44bbb99b9f814fe00d3b6afd8d73f54cae","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ead395bffdd3af5fa109e676ae1c9f0598c43edfef32d809497c2b30a8fa365e","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"block":null,"heading":"Share-Based Noncash Consideration from a Customer for the Transfer of Goods or Services under Topic 606","paragraphs":[{"citation":"815-10-25-16A","para":"25-16A","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
606-10-65-3An entity shall not apply the guidance in this Topic to share-based noncash consideration from a customer for the transfer of goods or services unless and until the entity’s right to receive or retain the share-based noncash consideration is unconditional under Topic 606 in accordance with paragraph 606-10-15-3A.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:606-10-65-3An entity shall not apply the guidance in this Topic to share-based noncash consideration from a customer for the transfer of goo…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:252a76b44c2704644dfaf8978e428f2c588ccddac981664c1c198b213b6b76ea","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0be1f22ae43b39515f9a9c421d1720d04732882f5d771dc22d7488674f2aab2b","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"block":null,"heading":"Share-Based Noncash Consideration from a Counterparty for the Transfer of Nonfinancial Assets or In Substance Nonfinancial Assets under Subtopic 610-20","paragraphs":[{"citation":"815-10-25-16B","para":"25-16B","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
606-10-65-3An entity shall not apply the guidance in this Topic to share-based noncash consideration from a counterparty for the transfer of nonfinancial assets or in substance nonfinancial assets unless and until the entity’s right to receive or retain the share-based noncash consideration is unconditional under Subtopic 610-20 in accordance with paragraph 610-20-15-3A.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:606-10-65-3An entity shall not apply the guidance in this Topic to share-based noncash consideration from a counterparty for the transfer of…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:851325f3f4d935a3e506f941d5fba0228458f79fe56e558f809ef259aab810e3","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:100d501b2f1fb5a59e710a026f7e4fc84e10471ff64267390701795dbdb75959","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"block":"Certain Contracts on Debt and Equity Securities","heading":null,"paragraphs":[{"citation":"815-10-25-17","para":"25-17","html":"
Forward contracts and purchased options on debt securities within the scope of this Subsection (see the Certain Contracts on Debt and Equity Securities Subsection of Section 815-10-15) shall, at inception, be designated as held to maturity, available for sale, or trading in a manner consistent with the accounting prescribed by Topic 320 for debt securities. Such forward and option contracts are not eligible to be hedging instruments.
","snippet":"Forward contracts and purchased options on debt securities within the scope of this Subsection (see the Certain Contracts on Debt and Equity Securities Subsection of Section 815-10-15) shall, at inception, be designated …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4423d760ea8a2dc7fb6b6616c6774c46307bd78309ae1f70b0747d32ec8d0ec7","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"citation":"815-10-25-18","para":"25-18","html":"
Forward contracts and purchased options on equity securities within the scope of this Subsection (see the Certain Contracts on Debt and Equity Securities Subsection of Section 815-10-15) shall, at inception, be recognized in a manner consistent with the accounting prescribed by Topic 321 for equity securities. Such forward and option contracts are not eligible to be hedging instruments.
","snippet":"Forward contracts and purchased options on equity securities within the scope of this Subsection (see the Certain Contracts on Debt and Equity Securities Subsection of Section 815-10-15) shall, at inception, be recognize…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:db4931c03a1a5e5f401c879bef7dbc8dab78b0d9dae1d13e3e93d58c39c51627","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f9e4918d4c7e8cb658fe4669d35fac8b8411617c859f9c8ef9d3012fe4b6e875","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:18ca49cb5ebe46e61a98c66aac9a3731d4717c68af608baf55aae571ad1a8eb0","downloaded_from":"2026-09-10T01:35:04.738Z","last_downloaded_at":"2026-09-10T01:35:04.738Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480588","source_sha256":"414af06e2fe8178716721e5f3da931ff763d61d63817f1cbca45a20dfad6a771"}},{"number":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-30-1","para":"30-1","html":"
All derivative instruments shall be measured initially at fair value.
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A contract recognized under paragraph 815-10-25-2 because it meets the definition of a derivative instrument after acquisition by an entity shall be measured initially at its then-current fair value.
","snippet":"A contract recognized under paragraph 815-10-25-2 because it meets the definition of a derivative instrument after acquisition by an entity shall be measured initially at its then-current fair value.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f8248b279b880665d6355cc209263953801f44997a304b8a7588e4dea1269241","downloaded_from":"2026-09-10T01:35:07.016Z","last_downloaded_at":"2026-09-10T01:35:07.016Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480557","source_sha256":"a1ae7c154151089fe3338a327f2fd134fc557bc94df30cbe2afeabd3a27d50ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4ff86e04e10dc1d195e3153c75a9e05c8cf921a15baeb3db347716e3b9eff076","downloaded_from":"2026-09-10T01:35:07.016Z","last_downloaded_at":"2026-09-10T01:35:07.016Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480557","source_sha256":"a1ae7c154151089fe3338a327f2fd134fc557bc94df30cbe2afeabd3a27d50ad"}},{"block":null,"heading":"Forward Commitment Dollar Rolls","paragraphs":[{"citation":"815-10-30-4","para":"30-4","html":"
A forward commitment dollar roll that is not subject otherwise to this Subtopic's provisions shall be measured initially at fair value.
","snippet":"A forward commitment dollar roll that is not subject otherwise to this Subtopic's provisions shall be measured initially at fair value.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f408dc86aa61d4516a40caaccc0173e5eb49d63543a75aff11593b023108c6ad","downloaded_from":"2026-09-10T01:35:07.016Z","last_downloaded_at":"2026-09-10T01:35:07.016Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480557","source_sha256":"a1ae7c154151089fe3338a327f2fd134fc557bc94df30cbe2afeabd3a27d50ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b2539c7db0db26724e291394489bebbc2693de7dd5325940ff91e4fdf5d09988","downloaded_from":"2026-09-10T01:35:07.016Z","last_downloaded_at":"2026-09-10T01:35:07.016Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480557","source_sha256":"a1ae7c154151089fe3338a327f2fd134fc557bc94df30cbe2afeabd3a27d50ad"}},{"block":"Certain Contracts on Debt and Equity Securities","heading":null,"paragraphs":[{"citation":"815-10-30-5","para":"30-5","html":"
Forward contracts and purchased options on debt securities within the scope of this Subsection designated as held to maturity, available for sale, or trading shall be measured initially in a manner consistent with the accounting prescribed by Topic 320 for that category of securities.
","snippet":"Forward contracts and purchased options on debt securities within the scope of this Subsection designated as held to maturity, available for sale, or trading shall be measured initially in a manner consistent with the ac…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6ec467a5aa773e38f903f195281fcfd721a23f51b9353ccf66c40cc837ed7950","downloaded_from":"2026-09-10T01:35:07.016Z","last_downloaded_at":"2026-09-10T01:35:07.016Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480557","source_sha256":"a1ae7c154151089fe3338a327f2fd134fc557bc94df30cbe2afeabd3a27d50ad"}},{"citation":"815-10-30-6","para":"30-6","html":"
Forward contracts and purchased options on equity securities within the scope of this Subsection shall be measured initially in a manner consistent with the accounting prescribed by Topic 321.
","snippet":"Forward contracts and purchased options on equity securities within the scope of this Subsection shall be measured initially in a manner consistent with the accounting prescribed by Topic 321.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4dae2283399065e9e5dff246c321ac615f1be8a3d7714770b90c17c99dc63894","downloaded_from":"2026-09-10T01:35:07.016Z","last_downloaded_at":"2026-09-10T01:35:07.016Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480557","source_sha256":"a1ae7c154151089fe3338a327f2fd134fc557bc94df30cbe2afeabd3a27d50ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ad590aa73a4d489367df92fcdfb3d68f6b3e9a526883381566810524c3940cdd","downloaded_from":"2026-09-10T01:35:07.016Z","last_downloaded_at":"2026-09-10T01:35:07.016Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480557","source_sha256":"a1ae7c154151089fe3338a327f2fd134fc557bc94df30cbe2afeabd3a27d50ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d0889d37a8dfbf52c9a599e36684ac83b2b561ceb6a768bde5fd181b89be772b","downloaded_from":"2026-09-10T01:35:07.016Z","last_downloaded_at":"2026-09-10T01:35:07.016Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480557","source_sha256":"a1ae7c154151089fe3338a327f2fd134fc557bc94df30cbe2afeabd3a27d50ad"}},{"number":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-35-1","para":"35-1","html":"
All derivative instruments shall be measured subsequently at fair value.
","snippet":"All derivative instruments shall be measured subsequently at fair value.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a21915074cfedae11dc559b05150df512639e5c28fd13cc8341e6bc72863da3","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}},{"citation":"815-10-35-1A","para":"35-1A","html":"
As a practical expedient, a receive-variable, pay-fixed interest rate swap for which the simplified hedge accounting approach (see paragraphs
815-20-25-133 through 25-138
for scope) is applied may be measured subsequently at settlement value instead of fair value.
","snippet":"As a practical expedient, a receive-variable, pay-fixed interest rate swap for which the simplified hedge accounting approach (see paragraphs 815-20-25-133 through 25-138 for scope) is applied may be measured subsequentl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:230e3504a9ec6978314ba38befc5bd1369f076d29652648efdca26004496e2cc","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}},{"citation":"815-10-35-1B","para":"35-1B","html":"
The primary difference between settlement value and fair value is that nonperformance risk is not considered in determining settlement value. One approach for estimating the receive-variable, pay-fixed interest rate swap's settlement value is to perform a present value calculation of the swap's remaining estimated cash flows using a valuation technique that is not adjusted for nonperformance risk.
","snippet":"The primary difference between settlement value and fair value is that nonperformance risk is not considered in determining settlement value. One approach for estimating the receive-variable, pay-fixed interest rate swap…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:05a5d6232407f02516962def5f06235be36d8822af3a7bacfff6ee137ceb94f7","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}},{"citation":"815-10-35-1C","para":"35-1C","html":"
If any of the conditions in paragraph 815-20-25-131D for applying the simplified hedge accounting approach subsequently cease to be met or the relationship otherwise ceases to qualify for hedge accounting, the General Subsections of this Topic shall apply at the date of change and on a prospective basis. For example, if the related variable-rate borrowing is prepaid without terminating the receive-variable, pay-fixed interest rate swap, the gain or loss on the swap in accumulated other comprehensive income shall be reclassified to earnings in accordance with paragraphs
815-30-40-1 through 40-6
with the swap measured at fair value on the date of change and subsequent changes in fair value reported in earnings in accordance with paragraph 815-10-35-2. Similarly, if the receive-variable, pay-fixed interest rate swap is terminated early without the related variable-rate borrowing being prepaid, the gain or loss on the swap in accumulated other comprehensive income shall be reclassified to earnings in accordance with paragraphs
815-30-40-1 through 40-6
.
","snippet":"If any of the conditions in paragraph 815-20-25-131D for applying the simplified hedge accounting approach subsequently cease to be met or the relationship otherwise ceases to qualify for hedge accounting, the General Su…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:83e2e393a437c13d83a98dfe2c8f2ff54222615b0fb237421e54acf3f3b2816b","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}},{"citation":"815-10-35-2","para":"35-2","html":"
The accounting for changes in the fair value (that is, gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. Subtopic 815-20 discusses the accounting for the gain or loss on a derivative instrument that is designated as a hedging instrument. Except as noted in the following paragraph, the gain or loss on a derivative instrument not designated as a hedging instrument shall be recognized currently in earnings.
","snippet":"The accounting for changes in the fair value (that is, gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for h…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a1d1cf3bdf9967879f86554008150ee2dcae3110ac24dfcc28811e5f0213ec7","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}},{"citation":"815-10-35-3","para":"35-3","html":"
An entity that does not report earnings as a separate caption in a statement of financial performance (for example, a not-for-profit entity [NFP] or a defined benefit pension plan) shall recognize the gain or loss on a nonhedging derivative instrument as a change in net assets in the period of change.
","snippet":"An entity that does not report earnings as a separate caption in a statement of financial performance (for example, a not-for-profit entity [NFP] or a defined benefit pension plan) shall recognize the gain or loss on a n…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d08ccf64e0a18569b28fb7e53823fb07eec61744b80d1713a852680a2fbd4314","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:04840227fe61584ef3bf8b7e8c666f6c83ee30850ecff128c06982a8a7d3ea41","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}},{"block":null,"heading":"Forward Commitment Dollar Rolls","paragraphs":[{"citation":"815-10-35-4","para":"35-4","html":"
A forward commitment dollar roll that is not subject otherwise to this Subtopic's provisions shall be measured subsequently at fair value.
","snippet":"A forward commitment dollar roll that is not subject otherwise to this Subtopic's provisions shall be measured subsequently at fair value.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51fd7fd8d6b12edc904854076a5c50127eb2c1a4d3aacce769280d5feb2850d5","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1cf8c0aab347e3f26ade2d2524f156a7b2a2bf9ca7c39a876450e90f5b52ad05","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}},{"block":"Certain Contracts on Debt and Equity Securities","heading":null,"paragraphs":[{"citation":"815-10-35-5","para":"35-5","html":"
Forward contracts and purchased options on debt securities within the scope of this Subsection shall be measured subsequently according to their initial classification as follows:
  1. a
    Held to maturity:
    1. 1
      Changes in the fair value of the forward contract or purchased option shall not be recognized. Credit losses on the underlying securities in a forward contract shall be recorded through an allowance for credit losses in accordance with Subtopic 326-20 on financial instruments measured at amortized cost. Credit losses on the underlying securities in a purchased option shall be recorded through an allowance for credit losses in accordance with Subtopic 326-20 and shall be limited by the amount of the option premium.
    2. 2
      Debt securities purchased under a forward contract shall be recorded at the forward contract price at the settlement date.
    3. 3
      Debt securities purchased by exercising an option shall be recorded at the option strike price plus any remaining carrying amount for the option premium at the exercise date.
    4. 4
      If an option expires worthless and the same debt security is purchased in the market, the security shall be recorded at its market price plus any remaining carrying amount for the option premium.
    5. 5
      If an entity does not take delivery under the forward contract or purchase the same security in the market if the option expires worthless, the entity's intent to hold other debt securities to maturity will be called into question.
  2. b
    Available for sale:
    1. 1
      Changes in the fair value of the forward contract or purchased option shall be recognized as part of the separate component of shareholders' equity under Topic 320 as they occur. Credit losses on the underlying securities in a forward contract shall be recorded through an allowance for credit losses in accordance with Subtopic 326-30 on measuring credit losses on available-for-sale debt securities. Credit losses on the underlying securities in a purchased option shall be recorded through an allowance for credit losses in accordance with Subtopic 326-30 and shall be limited by the amount of the option premium.
    2. 2
      Debt securities purchased under a forward contract shall be recorded at their fair values at the settlement date.
    3. 3
      Debt securities purchased by exercising an option shall be recorded at the option strike price plus the fair value of the option at the exercise date.
    4. 4
      If the option expires worthless and the same debt security is purchased in the market, the security shall be recorded at its market price plus any remaining carrying amount for the option premium.
  3. c
    Trading:
    1. 1
      Changes in the fair value of the forward contract or purchased option shall be recognized in earnings as they occur.
    2. 2
      Debt securities purchased under a forward contract or by exercising an option shall be recorded at their fair values at the settlement date.
","snippet":"Forward contracts and purchased options on debt securities within the scope of this Subsection shall be measured subsequently according to their initial classification as follows:\n(a) Held to maturity:\n(1) Changes in the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a0e919a5bb5e0242af33bae77f626c7dcc29c0a05cea24b5d54b3f534760dcfa","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}},{"citation":"815-10-35-6","para":"35-6","html":"
Changes in the fair value of forward contracts and purchased options on equity securities within the scope of this Subsection shall be recognized in earnings as they occur. Changes in observable price or impairment of forward contracts and purchased options on equity securities without readily determinable fair value within the scope of this Subsection measured in accordance with paragraph 321-10-35-2 shall be recognized in earnings as they occur. A change in observable price or impairment of the underlying securities of forward contracts and purchased options on equity securities shall result in a remeasurement of the entire fair value of the forward contracts and purchased options as of the date that the observable transaction took place. Equity securities within the scope of this Subsection purchased under a forward contract or by exercising an option shall be recorded at their fair values at the settlement date.
","snippet":"Changes in the fair value of forward contracts and purchased options on equity securities within the scope of this Subsection shall be recognized in earnings as they occur. Changes in observable price or impairment of fo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5161809e0fa19db688cfb5e9620b631f5427245130955a31fd51a5da0959c521","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:381697f21aa2c014c7f79d534dd4ac092781a558de976a23ec6bfc3cfceab1d3","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fff333ba5a92da05f7530cd8db8f4300645d9ae2fa65d0f5f13ca40d9a11a05a","downloaded_from":"2026-09-10T01:35:09.320Z","last_downloaded_at":"2026-09-10T01:35:09.320Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480526","source_sha256":"4546687f3f0fe216266d0f0b1c064b4e1d2e1d0fb2e328b2ed2da1fb51adfe18"}},{"number":"40","label":"40 Derecognition","anchor":"40-derecognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-40-1","para":"40-1","html":"
Extinguishments of derivative instruments that are liabilities are addressed by paragraph 405-20-40-1. Transfers of derivative instruments that are financial assets are addressed by Section 860-10-40.
","snippet":"Extinguishments of derivative instruments that are liabilities are addressed by paragraph 405-20-40-1. Transfers of derivative instruments that are financial assets are addressed by Section 860-10-40.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:62ae50d41e21ab7487ab6d7b39a5a56146da086d0362d01630d80cd0377fc0ab","downloaded_from":"2026-09-10T01:35:11.105Z","last_downloaded_at":"2026-09-10T01:35:11.105Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480495","source_sha256":"67c75bb05fe4be6522fa1039f5e6f0b535b12f7f2915a8302ac60fda2514507d"}},{"citation":"815-10-40-2","para":"40-2","html":"
Transfers of assets that are derivative instruments and subject to the requirements of this Subtopic but that are not financial assets shall be accounted for by analogy to Subtopic 860-10. This guidance is limited to transfers of nonfinancial assets that are derivative instruments that are or will be subject to the requirements of this Subtopic. An example would be a transfer to another entity of a derivative instrument, such as a forward contract to purchase gold that requires physical settlement and is or will be subject to the requirements of this Subtopic.
","snippet":"Transfers of assets that are derivative instruments and subject to the requirements of this Subtopic but that are not financial assets shall be accounted for by analogy to Subtopic 860-10. This guidance is limited to tra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:54e265c0140da7652410f4525aa11a33b8c243602d0bc5474db711ca5f9742a1","downloaded_from":"2026-09-10T01:35:11.105Z","last_downloaded_at":"2026-09-10T01:35:11.105Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480495","source_sha256":"67c75bb05fe4be6522fa1039f5e6f0b535b12f7f2915a8302ac60fda2514507d"}},{"citation":"815-10-40-3","para":"40-3","html":"
If a derivative instrument has the potential to be both a nonfinancial asset and a nonfinancial liability (such as a commodity forward contract that is a nonfinancial derivative instrument), then, as described in paragraph 860-10-40-40, the criteria of both Sections 405-20-40 and 860-10-40 shall be met to qualify for derecognition.
","snippet":"If a derivative instrument has the potential to be both a nonfinancial asset and a nonfinancial liability (such as a commodity forward contract that is a nonfinancial derivative instrument), then, as described in paragra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0e484827d42beb544ec508a87e7e3dbb85f35a701190d4d60b8241a0b54f8cbf","downloaded_from":"2026-09-10T01:35:11.105Z","last_downloaded_at":"2026-09-10T01:35:11.105Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480495","source_sha256":"67c75bb05fe4be6522fa1039f5e6f0b535b12f7f2915a8302ac60fda2514507d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b63ad044e4d8fa3d48029df72888807827afaf93b927d6b21d34b903e4a68111","downloaded_from":"2026-09-10T01:35:11.105Z","last_downloaded_at":"2026-09-10T01:35:11.105Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480495","source_sha256":"67c75bb05fe4be6522fa1039f5e6f0b535b12f7f2915a8302ac60fda2514507d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30d7175e9d5ef5ca398911118be7230bbae94fa0241ba2b4ef70365ecc0d7229","downloaded_from":"2026-09-10T01:35:11.105Z","last_downloaded_at":"2026-09-10T01:35:11.105Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480495","source_sha256":"67c75bb05fe4be6522fa1039f5e6f0b535b12f7f2915a8302ac60fda2514507d"}},{"number":"45","label":"45 Other Presentation Matters","anchor":"45-other-presentation-matters","is_sec":false,"groups":[{"block":null,"heading":"Balance Sheet—Netting","paragraphs":[{"citation":"815-10-45-1","para":"45-1","html":"
Subtopic 210-20 establishes the criteria for offsetting amounts in the balance sheet.
","snippet":"Subtopic 210-20 establishes the criteria for offsetting amounts in the balance sheet.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:da386efc41f4ff992ca31d75e63f2abff025f9d8dc85ae6cde2a52b1c69a952b","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-2","para":"45-2","html":"
None of the provisions in this Subtopic support netting a hedging derivative's asset (or liability) position against the hedged liability (or asset) position in the balance sheet.
","snippet":"None of the provisions in this Subtopic support netting a hedging derivative's asset (or liability) position against the hedged liability (or asset) position in the balance sheet.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bcd6e4ff454d5f11c13964371e64339b993d90049a6af59d2c49f31ffd8760ab","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-3","para":"45-3","html":"
The following guidance addresses offsetting certain amounts related to derivative instruments. For purposes of this guidance, derivative instruments include those that meet the definition of a derivative instrument but are not included in the scope of this Subtopic.
","snippet":"The following guidance addresses offsetting certain amounts related to derivative instruments. For purposes of this guidance, derivative instruments include those that meet the definition of a derivative instrument but a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c0b56d14d6a8f66551a57e54cca1466343e876980725dbb8edbbce70c0fcc479","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-4","para":"45-4","html":"
Paragraph superseded by Accounting Standards Update No. 2018-09.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-09.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:19c415dce1b021c56f4fe0f27b5e4ee87204aac71c4ba4e67830e80e7791d594","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-5","para":"45-5","html":"
In accordance with paragraph 210-20-45-1, but without regard to the condition in paragraph 210-20-45-1(c), a reporting entity may offset fair value amounts recognized for derivative instruments and fair value amounts recognized for the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) arising from derivative instrument(s) recognized at fair value executed with the same counterparty under a master netting arrangement. Solely as it relates to the right to reclaim cash collateral or the obligation to return cash collateral, fair value amounts include amounts that approximate fair value. The preceding sentence shall not be analogized to for any other asset or liability. The fair value recognized for some contracts may include an accrual component for the periodic unconditional receivables and payables that result from the contract; the accrual component included therein may also be offset for contracts executed with the same counterparty under a master netting arrangement. A master netting arrangement exists if the reporting entity has multiple contracts, whether for the same type of derivative instrument or for different types of derivative instruments, with a single counterparty that are subject to a contractual agreement that provides for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract.
","snippet":"In accordance with paragraph 210-20-45-1, but without regard to the condition in paragraph 210-20-45-1(c), a reporting entity may offset fair value amounts recognized for derivative instruments and fair value amounts rec…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:669d1794a21f232a16dd01bfd0326e687eb0af342081b8b26bf1545858e3e97f","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-6","para":"45-6","html":"
A reporting entity shall make an accounting policy decision to offset fair value amounts pursuant to the preceding paragraph. The reporting entity's choice to offset or not must be applied consistently. A reporting entity shall not offset fair value amounts recognized for derivative instruments without offsetting fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral. A reporting entity that makes an accounting policy decision to offset fair value amounts recognized for derivative instruments pursuant to the preceding paragraph but determines that the amount recognized for the right to reclaim cash collateral or the obligation to return cash collateral is not a fair value amount shall continue to offset the derivative instruments.
","snippet":"A reporting entity shall make an accounting policy decision to offset fair value amounts pursuant to the preceding paragraph. The reporting entity's choice to offset or not must be applied consistently. A reporting entit…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fa7d9a5f69485c69d03fc8b6691e33ff5c247e5e2a170687da66458950053edd","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-7","para":"45-7","html":"
A reporting entity that has made an accounting policy decision to offset fair value amounts is not permitted to offset amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against net derivative instrument positions if those amounts either:
  1. a
    Were not fair value amounts
  2. b
    Arose from instruments in a master netting arrangement that are not eligible to be offset.
","snippet":"A reporting entity that has made an accounting policy decision to offset fair value amounts is not permitted to offset amounts recognized for the right to reclaim cash collateral or the obligation to return cash collater…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:16966e558e8bb0b81580f1222b3c0b82ea2e637f2a41f9af81bcf3fbd0bab7a2","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8f9bab8061d45f1375a073f6780492ad8918eccd19d43c0126c760e250e46a2e","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"block":null,"heading":"Income Statement Classification","paragraphs":[{"citation":"815-10-45-8","para":"45-8","html":"
Except for the guidance in the following paragraph and paragraph 815-10-45-10, this Subtopic does not provide guidance about the classification in the income statement of a derivative instrument's gains or losses, including the adjustment to fair value for a contract that newly meets the definition of a derivative instrument.
","snippet":"Except for the guidance in the following paragraph and paragraph 815-10-45-10, this Subtopic does not provide guidance about the classification in the income statement of a derivative instrument's gains or losses, includ…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:979afe81f5e850a5779a02a20cdd63120f00c75e41b21016220c6046e67241cb","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-9","para":"45-9","html":"
Gains and losses (realized and unrealized) on all derivative instruments within the scope of this Subtopic shall be shown net when recognized in the income statement, whether or not settled physically, if the derivative instruments are held for trading purposes. On an ongoing basis, reclassifications into and out of trading shall be rare.
","snippet":"Gains and losses (realized and unrealized) on all derivative instruments within the scope of this Subtopic shall be shown net when recognized in the income statement, whether or not settled physically, if the derivative …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2503d4debbe76b9297994299d435b1d20a007435becb0b54a0b807864583021d","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-10","para":"45-10","html":"
Subsequent changes in the fair value of an option that was granted to a grantee and is subject to or became subject to this Subtopic shall be included in the determination of net income. (See paragraphs 815-10-55-46 through 55-48A and
815-10-55-54 through 55-55
for discussion of such an option.) Changes in fair value of the option award before vesting shall be characterized as compensation cost in the grantor's income statement. Changes in fair value of the option award after vesting may be reflected elsewhere in the grantor's income statement.
","snippet":"Subsequent changes in the fair value of an option that was granted to a grantee and is subject to or became subject to this Subtopic shall be included in the determination of net income. (See paragraphs 815-10-55-46 thro…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d91b5efcb2a39653a89accaf32831b8a8d85c03bec35c6100fc5a7585d37008e","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:44e527baf2ce4973eed0fc5dbff033475da33b8cd7646cf8bae3fae919f9b966","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"block":null,"heading":"Cash Flow Statement Classification","paragraphs":[{"citation":"815-10-45-11","para":"45-11","html":"
An instrument accounted for as a derivative instrument under this Subtopic that, at its inception, includes off-market terms, or requires an up-front cash payment, or both often contains a financing element. Identifying a financing element within a derivative instrument is a matter of judgment that depends on facts and circumstances.
","snippet":"An instrument accounted for as a derivative instrument under this Subtopic that, at its inception, includes off-market terms, or requires an up-front cash payment, or both often contains a financing element. Identifying …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b5a36f2e555a6a63f061bf0246d3bc3b145b939bb2eb665ec16db93d4e860128","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-12","para":"45-12","html":"
If an other-than-insignificant financing element is present at inception—other than a financing element inherently included in an at-the-market derivative instrument with no prepayments (that is, the forward points in an at-the-money forward contract)—then the borrower shall report all cash inflows and outflows associated with that derivative instrument in a manner consistent with financing activities as described in paragraphs
230-10-45-14 through 45-15
.
","snippet":"If an other-than-insignificant financing element is present at inception—other than a financing element inherently included in an at-the-market derivative instrument with no prepayments (that is, the forward points in an…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1f058bc0d779b8e711fa926352db0587aa02c5e620ed04602b50e7ce9f7ccaa6","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-13","para":"45-13","html":"
An at-the-money plain-vanilla interest rate swap that involves no payments between the parties at inception would not be considered as having a financing element present at inception even though, due to the implicit forward rates derived from the yield curve, the parties to the contract have an expectation that the comparison of the fixed and variable legs will result in payments being made by one party in the earlier periods and being made by the counterparty in the later periods of the swap's term.
","snippet":"An at-the-money plain-vanilla interest rate swap that involves no payments between the parties at inception would not be considered as having a financing element present at inception even though, due to the implicit forw…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:284d27116dcf56ce2e443a3ccfb1c89a847de35593789a6178397d5be1f2151f","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-14","para":"45-14","html":"
If a derivative instrument is an at-the-money or out-of-the-money option contract or contains an at-the-money or out-of-the-money option contract, a payment made at inception to the writer of the option for the option's time value by the counterparty shall not be viewed as evidence that the derivative instrument contains a financing element.
","snippet":"If a derivative instrument is an at-the-money or out-of-the-money option contract or contains an at-the-money or out-of-the-money option contract, a payment made at inception to the writer of the option for the option's …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7ca6048905c4c172c668ad532398b62b062c46e7a81487266c7163c915e9dfd1","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"citation":"815-10-45-15","para":"45-15","html":"
In contrast, if the contractual terms of a derivative instrument have been structured to ensure that net payments will be made by one party in the earlier periods and subsequently returned by the counterparty in the later periods of the derivative instrument's term, that derivative instrument shall be viewed as containing a financing element even if the derivative instrument has a fair value of zero at inception.
","snippet":"In contrast, if the contractual terms of a derivative instrument have been structured to ensure that net payments will be made by one party in the earlier periods and subsequently returned by the counterparty in the late…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb52d34d080ff04a467d582fa1ebc37a662005627fca8b587e93284aa32295f6","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:34ae44ee709f5accde7617672d66e354b1537807fc14377a4a70d892d97e3721","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:faab4f8b923474bce93df2014e3ee57cb6a2cb959b077859a964bc948b123180","downloaded_from":"2026-09-10T01:35:13.501Z","last_downloaded_at":"2026-09-10T01:35:13.501Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480463","source_sha256":"61110075281a7868f5ed0d40b4b269a137283eca3217a66987a16d15c4895d75"}},{"number":"50","label":"50 Disclosure","anchor":"50-disclosure","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-50-1","para":"50-1","html":"
An entity with derivative instruments(or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose information to enable users of the financial statements to understand all of the following:
  1. a
    How and why an entity uses derivative instruments (or such nonderivative instruments)
  2. b
    How derivative instruments (or such nonderivative instruments) and related hedged items are accounted for under Topic 815
  3. c
    How derivative instruments (or such nonderivative instruments) and related hedged items affect all of the following:
    1. 1
      An entity's financial position
    2. 2
      An entity's financial performance
    3. 3
      An entity's cash flows.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1An entity with derivative instruments(or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose information to enable users of the financial statements to understand all of the following in interim and annual reporting periods:
  1. a
    How and why an entity uses derivative instruments (or such nonderivative instruments)
  2. b
    How derivative instruments (or such nonderivative instruments) and related hedged items are accounted for under Topic 815
  3. c
    How derivative instruments (or such nonderivative instruments) and related hedged items affect all of the following:
    1. 1
      An entity's financial position
    2. 2
      An entity's financial performance
    3. 3
      An entity's cash flows.
","snippet":"An entity with derivative instruments(or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose information to enable users o…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a13af8c6df0b2dafcef80c128c4a23bf9c131f9b079e2560702e44ed995fd267","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-1A","para":"50-1A","html":"
An entity that holds or issues derivative instruments (or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose all of the following for every annual and interim reporting period for which a statement of financial position and statement of financial performance are presented:
  1. a
    Its objectives for holding or issuing those instruments
  2. b
    The context needed to understand those objectives
  3. c
    Its strategies for achieving those objectives
  4. d
    Information that would enable users of its financial statements to understand the volume of its activity in those instruments.
","snippet":"An entity that holds or issues derivative instruments (or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose all of the f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bc6079ca21d64827f158a15aa1a3869a20194c44b987f46e1d3c0a46c7d0bee4","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-1B","para":"50-1B","html":"
For item (d) in paragraph 815-10-50-1A, an entity shall select the format and the specifics of disclosures relating to its volume of such activity that are most relevant and practicable for its individual facts and circumstances. Information about the instruments in items (a) through (c) in paragraph 815-10-50-1A shall be disclosed in the context of each instrument's primary underlying risk exposure (for example, interest rate, credit, foreign exchange rate, interest rate and foreign exchange rate, or overall price). Further, those instruments shall be distinguished between those used for risk management purposes and those used for other purposes. Derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) used for risk management purposes include those designated as hedging instruments under Subtopic 815-20 as well as those used as economic hedges and for other purposes related to the entity's risk exposures.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For item (d) in paragraph 815-10-50-1A, an entity shall select the format and the specifics of disclosures relating to its volume of such activity that are most relevant and practicable for its individual facts and circumstances. Information about the instruments in items (a) through (c) in paragraph 815-10-50-1A shall be disclosed in the context of each instrument's primary underlying risk exposure (for example, interest rate, credit, foreign exchange rate, interest rate and foreign exchange rate, or overall price) in interim and annual reporting periods. Further, those instruments shall be distinguished between those used for risk management purposes and those used for other purposes. Derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) used for risk management purposes include those designated as hedging instruments under Subtopic 815-20 as well as those used as economic hedges and for other purposes related to the entity's risk exposures.
","snippet":"For item (d) in paragraph 815-10-50-1A, an entity shall select the format and the specifics of disclosures relating to its volume of such activity that are most relevant and practicable for its individual facts and circu…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:938a97eda36ee5f274ed5d473792c726db051ac84cacf3f77f66f22a48eb4768","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-2","para":"50-2","html":"
The instruments addressed by items (a) through (c) in paragraph 815-10-50-1A shall be distinguished between each of the following:
  1. a
    Derivative instruments (and nonderivative instruments as noted in items (1)(i) and (1)(iii) of this paragraph) used for risk management purposes, distinguished between each of the following:
    1. 1
      Derivative instruments (and nonderivative instruments) designated as hedging instruments, distinguished between each of the following:
      1. i
        Derivative instruments (and nonderivative instruments) designated as fair value hedging instruments
      2. ii
        Derivative instruments designated as cash flow hedging instruments
      3. iii
        Derivative instruments (and nonderivative instruments) designated as hedging instruments for hedges of the foreign currency exposure of a net investment in a foreign operation.
    2. 2
      Derivative instruments used as economic hedges and for other purposes related to the entity's risk exposures.
  2. b
    Derivative instruments used for other purposes.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, the instruments addressed by items (a) through (c) in paragraph 815-10-50-1A shall be distinguished between each of the following:
  1. a
    Derivative instruments (and nonderivative instruments as noted in items (1)(i) and (1)(iii) of this paragraph) used for risk management purposes, distinguished between each of the following:
    1. 1
      Derivative instruments (and nonderivative instruments) designated as hedging instruments, distinguished between each of the following:
      1. i
        Derivative instruments (and nonderivative instruments) designated as fair value hedging instruments
      2. ii
        Derivative instruments designated as cash flow hedging instruments
      3. iii
        Derivative instruments (and nonderivative instruments) designated as hedging instruments for hedges of the foreign currency exposure of a net investment in a foreign operation.
    2. 2
      Derivative instruments used as economic hedges and for other purposes related to the entity's risk exposures.
  2. b
    Derivative instruments used for other purposes.
","snippet":"The instruments addressed by items (a) through (c) in paragraph 815-10-50-1A shall be distinguished between each of the following:\n(a) Derivative instruments (and nonderivative instruments as noted in items (1)(i) and (1…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:70b82a76d9f21c79f79dc6a54bd89775c302975ec034233dcab630d88568005c","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-3","para":"50-3","html":"
If the simplified hedge accounting approach (see paragraphs
815-20-25-133 through 25-138
) is applied in accounting for a qualifying receive-variable, pay-fixed interest rate swap, the settlement value of that swap may be used in place of fair value when disclosing the information required by this Section or in providing other fair value disclosures, such as those required under Topic 820 on fair value. For the purposes of complying with these disclosure requirements, amounts disclosed at settlement value will be subject to all of the same disclosure requirements as amounts disclosed at fair value. Any amounts disclosed at settlement value shall be clearly stated as such and disclosed separately from amounts disclosed at fair value.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1If the simplified hedge accounting approach (see paragraphs
815-20-25-133 through 25-138
) is applied in accounting for a qualifying receive-variable, pay-fixed interest rate swap, the settlement value of that swap may be used in place of fair value when disclosing the information required by this Section or in providing other fair value disclosures, such as those required under Topic 820 on fair value. For the purposes of complying with these disclosure requirements, amounts disclosed at settlement value will be subject to all of the same disclosure requirements as amounts disclosed at fair value. Any amounts disclosed at settlement value shall be clearly stated as such and disclosed separately from amounts disclosed at fair value in interim and annual reporting periods.
","snippet":"If the simplified hedge accounting approach (see paragraphs 815-20-25-133 through 25-138) is applied in accounting for a qualifying receive-variable, pay-fixed interest rate swap, the settlement value of that swap may be…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:410c7c1cd969b545b3ff570c4547ae5e431e03bbd430215e60e9a75af36cc7a6","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4","para":"50-4","html":"
For derivative instruments not designated as hedging instruments under Subtopic 815-20, the description shall indicate the purpose of the derivative activity.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For derivative instruments not designated as hedging instruments under Subtopic 815-20, the description shall indicate the purpose of the derivative activity in interim and annual reporting periods.
","snippet":"For derivative instruments not designated as hedging instruments under Subtopic 815-20, the description shall indicate the purpose of the derivative activity. Transition date:(P) December 16, 2027; (N) December 16, 2028T…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f34471f82c3682268c08cc40c2d72d0bb1df73cad2e1d7ab7ec25f1566ed8a24","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5102d9ccfa3b877610935693fc31abc8f0c2125450e9da697ce6a8f03ced8e2f","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Overall Quantitative Disclosures","paragraphs":[{"citation":"815-10-50-4A","para":"50-4A","html":"
An entity that holds or issues derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose all of the following for every annual and interim reporting period for which a statement of financial position and statement of financial performance are presented:
  1. a
    The location and fair value amounts of derivative instruments (and such nonderivative instruments) reported in the statement of financial position
  2. b
    The location and amount of the gains and losses on derivative instruments (and such nonderivative instruments) and related hedged items reported in any of the following:
    1. 1
      The statement of financial performance
    2. 2
      The statement of financial position (for example, gains and losses initially recognized in other comprehensive income).
  3. c
    The total amount of each income and expense line item presented in the statement of financial performance in which the results of fair value or cash flow hedges are recorded.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
220-40-65-1An entity that holds or issues derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose all of the following for every annual and interim reporting period for which a statement of financial position and statement of financial performance are presented:
  1. a
    The location and fair value amounts of derivative instruments (and such nonderivative instruments) reported in the statement of financial position
  2. b
    The location and amount of the gains and losses on derivative instruments (and such nonderivative instruments) and related hedged items reported in any of the following:
    1. 1
      The statement of financial performance
    2. 2
      The statement of financial position (for example, gains and losses initially recognized in other comprehensive income).
  3. c
    The total amount of each income and expense line item presented in the statement of financial performance in which the results of fair value or cash flow hedges are recorded.
See paragraphs
220-40-50-21 through 50-25
for additional disclosure requirements.
","snippet":"An entity that holds or issues derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose all of the …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1192d58ae5b53af59a2e8447b504071b2a7316270ab409bdbfaa755a031d377a","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4B","para":"50-4B","html":"
The disclosures required by item (a) in paragraph 815-10-50-4A shall comply with all of the following:
  1. a
    The fair value of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall be presented on a gross basis, even when those instruments are subject to master netting arrangements and qualify for net presentation in the statement of financial position in accordance with Subtopic 210-20 or paragraphs
    815-10-45-5 through 45-7
    , as applicable.
  2. b
    Cash collateral payables and receivables associated with those instruments shall not be added to or netted against the fair value amounts.
  3. c
    Fair value amounts shall be presented as separate asset and liability values segregated between each of the following:
    1. 1
      Those instruments designated and qualifying as hedging instruments under Subtopic 815-20, presented separately by type of contract (for example, interest rate contracts, foreign exchange contracts, equity contracts, commodity contracts, credit contracts, other contracts, and so forth)
    2. 2
      Those instruments not designated as hedging instruments, presented separately by type of contract.
  4. d
    The disclosure shall identify the line item(s) in the statement of financial position in which the fair value amounts for these categories of derivative instruments are included.
Amounts required to be reported for nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66 shall be the carrying value of the nonderivative hedging instrument, which includes the adjustment for the foreign currency transaction gain or loss on that instrument.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1The disclosures required by item (a) in paragraph 815-10-50-4A shall comply with all of the following in interim and annual reporting periods:
  1. a
    The fair value of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall be presented on a gross basis, even when those instruments are subject to master netting arrangements and qualify for net presentation in the statement of financial position in accordance with Subtopic 210-20 or paragraphs
    815-10-45-5 through 45-7
    , as applicable.
  2. b
    Cash collateral payables and receivables associated with those instruments shall not be added to or netted against the fair value amounts.
  3. c
    Fair value amounts shall be presented as separate asset and liability values segregated between each of the following:
    1. 1
      Those instruments designated and qualifying as hedging instruments under Subtopic 815-20, presented separately by type of contract (for example, interest rate contracts, foreign exchange contracts, equity contracts, commodity contracts, credit contracts, other contracts, and so forth)
    2. 2
      Those instruments not designated as hedging instruments, presented separately by type of contract.
  4. d
    The disclosure shall identify the line item(s) in the statement of financial position in which the fair value amounts for these categories of derivative instruments are included.
Amounts required to be reported for nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66 shall be the carrying value of the nonderivative hedging instrument, which includes the adjustment for the foreign currency transaction gain or loss on that instrument.
","snippet":"The disclosures required by item (a) in paragraph 815-10-50-4A shall comply with all of the following:\n(a) The fair value of derivative instruments (and nonderivative instruments that are designated and qualify as hedgin…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:750d877e72b24c947f2380593e9e6d50613960d4ec332b7b5b9d56931985d788","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4C","para":"50-4C","html":"
For qualifying fair value and cash flow hedges, the gains and losses disclosed pursuant to paragraph 815-10-50-4A(b) shall be presented separately for all of the following by type of contract (as discussed in paragraph 815-10-50-4D) and by income and expense line item (if applicable):
  1. a
    Derivative instruments (and nonderivative instruments) designated and qualifying as hedging instruments in fair value hedges and related hedged items designated and qualifying in fair value hedges.
  2. b
    The gains and losses on derivative instruments designated and qualifying in cash flow hedges included in the assessment of effectiveness that were recognized in other comprehensive income during the current period.
  3. bb
    Amounts excluded from the assessment of effectiveness that were recognized in other comprehensive income during the period for which an amortization approach is applied in accordance with paragraph 815-20-25-83A.
  4. c
    The gains and losses on derivative instruments designated and qualifying in cash flow hedges that are included in the assessment of effectiveness and recorded in accumulated other comprehensive income during the term of the hedging relationship and reclassified into earnings during the current period.
  5. d
    The portion of gains and losses on derivative instruments designated and qualifying in fair value and cash flow hedges representing the amount, if any, excluded from the assessment of hedge effectiveness that is recognized in earnings. When disclosing this amount, an entity shall disclose separately amounts that are recognized in earnings through an amortization approach in accordance with paragraph 815-20-25-83A and amounts recognized through changes in fair value in earnings in accordance with paragraph 815-20-25-83B.
    1. 1
      Subparagraph superseded by Accounting Standards Update No. 2017-12.
    2. 2
      Subparagraph superseded by Accounting Standards Update No. 2017-12.
  6. e
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  7. f
    The gains and losses reclassified into earnings as a result of the discontinuance of cash flow hedges because it is probable that the original forecasted transactions will not occur by the end of the originally specified time period or within the additional period of time discussed in paragraphs
    815-30-40-4 through 40-5
    .
  8. g
    The amount of net gain or loss recognized in earnings when a hedged firm commitment no longer qualifies as a fair value hedge.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For qualifying fair value and cash flow hedges, the gains and losses disclosed pursuant to paragraph 815-10-50-4A(b) shall be presented separately for all of the following by type of contract (as discussed in paragraph 815-10-50-4D) and by income and expense line item (if applicable) in interim and annual reporting periods:
  1. a
    Derivative instruments (and nonderivative instruments) designated and qualifying as hedging instruments in fair value hedges and related hedged items designated and qualifying in fair value hedges.
  2. b
    The gains and losses on derivative instruments designated and qualifying in cash flow hedges included in the assessment of effectiveness that were recognized in other comprehensive income during the current period.
  3. bb
    Amounts excluded from the assessment of effectiveness that were recognized in other comprehensive income during the period for which an amortization approach is applied in accordance with paragraph 815-20-25-83A.
  4. c
    The gains and losses on derivative instruments designated and qualifying in cash flow hedges that are included in the assessment of effectiveness and recorded in accumulated other comprehensive income during the term of the hedging relationship and reclassified into earnings during the current period.
  5. d
    The portion of gains and losses on derivative instruments designated and qualifying in fair value and cash flow hedges representing the amount, if any, excluded from the assessment of hedge effectiveness that is recognized in earnings. When disclosing this amount, an entity shall disclose separately amounts that are recognized in earnings through an amortization approach in accordance with paragraph 815-20-25-83A and amounts recognized through changes in fair value in earnings in accordance with paragraph 815-20-25-83B.
    1. 1
    2. 2
  6. e
  7. f
    The gains and losses reclassified into earnings as a result of the discontinuance of cash flow hedges because it is probable that the original forecasted transactions will not occur by the end of the originally specified time period or within the additional period of time discussed in paragraphs
    815-30-40-4 through 40-5
    .
  8. g
    The amount of net gain or loss recognized in earnings when a hedged firm commitment no longer qualifies as a fair value hedge.
","snippet":"For qualifying fair value and cash flow hedges, the gains and losses disclosed pursuant to paragraph 815-10-50-4A(b) shall be presented separately for all of the following by type of contract (as discussed in paragraph 8…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c8e351cf81f4db60238215e12403c9bd058b46b40a06289216803a7be1c4378","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4CC","para":"50-4CC","html":"
An entity shall present separately by type of contract (as discussed in paragraph 815-10-50-4D) the gains and losses disclosed in accordance with paragraph 815-10-50-4A(b) for derivative instruments not designated or qualifying as hedging instruments under Topic 815 (see paragraph 815-10-50-4F).
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, an entity shall present separately by type of contract (as discussed in paragraph 815-10-50-4D) the gains and losses disclosed in accordance with paragraph 815-10-50-4A(b) for derivative instruments not designated or qualifying as hedging instruments under Topic 815 (see paragraph 815-10-50-4F).
","snippet":"An entity shall present separately by type of contract (as discussed in paragraph 815-10-50-4D) the gains and losses disclosed in accordance with paragraph 815-10-50-4A(b) for derivative instruments not designated or qua…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c729656e518f5624db91f7c3eab2d97840598ae3c1f960fe6183170606a52903","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4CCC","para":"50-4CCC","html":"
For qualifying net investment hedges, an entity shall present the gains and losses disclosed in accordance with paragraph 815-10-50-4A(b) separately for all of the following by type of contract (as discussed in paragraph 815-10-50-4D):
  1. a
    The gains and losses on derivative instruments (and nonderivative instruments) designated and qualifying in net investment hedges that were recognized in the cumulative translation adjustment section of other comprehensive income during the current period
  2. b
    The gains and losses on derivative instruments (and nonderivative instruments) designated and qualifying in net investment hedges recorded in the cumulative translation adjustment section of accumulated other comprehensive income during the term of the hedging relationship and reclassified into earnings during the current period
  3. c
    The portion of gains and losses on derivative instruments (and nonderivative instruments) designated and qualifying in net investment hedges representing the amount, if any, excluded from the assessment of hedge effectiveness.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For qualifying net investment hedges, an entity shall present the gains and losses disclosed in accordance with paragraph 815-10-50-4A(b) separately for all of the following by type of contract (as discussed in paragraph 815-10-50-4D)in interim and annual reporting periods:
  1. a
    The gains and losses on derivative instruments (and nonderivative instruments) designated and qualifying in net investment hedges that were recognized in the cumulative translation adjustment section of other comprehensive income during the current period
  2. b
    The gains and losses on derivative instruments (and nonderivative instruments) designated and qualifying in net investment hedges recorded in the cumulative translation adjustment section of accumulated other comprehensive income during the term of the hedging relationship and reclassified into earnings during the current period
  3. c
    The portion of gains and losses on derivative instruments (and nonderivative instruments) designated and qualifying in net investment hedges representing the amount, if any, excluded from the assessment of hedge effectiveness.
","snippet":"For qualifying net investment hedges, an entity shall present the gains and losses disclosed in accordance with paragraph 815-10-50-4A(b) separately for all of the following by type of contract (as discussed in paragraph…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba566bdfae68e8c33661568f9f39d41c460e6ddc67ded426e20f69734e2d1863","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4D","para":"50-4D","html":"
Disclosures pursuant to paragraphs 815-10-50-4C through 50-4CCC shall both:
  1. a
    Be presented separately by type of contract, for example:
    1. 1
      Interest rate contracts
    2. 2
      Foreign exchange contracts
    3. 3
      Equity contracts
    4. 4
      Commodity contracts
    5. 5
      Credit contracts
    6. 6
      Other contracts.
  2. b
    Identify the line item(s) in the statement of financial performance in which the gains and losses for these categories of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) are included.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, disclosures pursuant to paragraphs 815-10-50-4C through 50-4CCC shall both:
  1. a
    Be presented separately by type of contract, for example:
    1. 1
      Interest rate contracts
    2. 2
      Foreign exchange contracts
    3. 3
      Equity contracts
    4. 4
      Commodity contracts
    5. 5
      Credit contracts
    6. 6
      Other contracts.
  2. b
    Identify the line item(s) in the statement of financial performance in which the gains and losses for these categories of derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) are included.
","snippet":"Disclosures pursuant to paragraphs 815-10-50-4C through 50-4CCC shall both:\n(a) Be presented separately by type of contract, for example:\n(1) Interest rate contracts\n(2) Foreign exchange contracts\n(3) Equity contracts\n(4…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c0f117ed164fbf9ecf8981d5be37de67826920213f6b1e544094163fc92db8ff","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4E","para":"50-4E","html":"
The quantitative disclosures required by paragraphs 815-10-50-4A through 50-4CCC shall be presented in tabular format.If a proportion of a derivative instrument is designated and qualifying as a hedging instrument and a proportion is not designated and qualifying as a hedging instrument, an entity shall allocate the related amounts to the appropriate categories within the disclosure tables. Example 21 (see paragraph 815-10-55-182) illustrates the disclosures described in paragraphs
815-10-50-4A through 50-4E
.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, the quantitative disclosures required by paragraphs 815-10-50-4A through 50-4CCC shall be presented in tabular format.If a proportion of a derivative instrument is designated and qualifying as a hedging instrument and a proportion is not designated and qualifying as a hedging instrument, an entity shall allocate the related amounts to the appropriate categories within the disclosure tables. Example 21 (see paragraph 815-10-55-182) illustrates the disclosures described in paragraphs
815-10-50-4A through 50-4E
.
","snippet":"The quantitative disclosures required by paragraphs 815-10-50-4A through 50-4CCC shall be presented in tabular format.If a proportion of a derivative instrument is designated and qualifying as a hedging instrument and a …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba8861607bd3b05efa7e05f19c14aca3aac58af8295d6434f289cd34d0c63bb2","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4EE","para":"50-4EE","html":"
An entity shall disclose in tabular format the following for items designated and qualifying as hedged items in fair value hedges:
  1. a
    The carrying amount of hedged assets and liabilities recognized in the statement of financial position. For an available-for-sale debt security, the amount disclosed is the amortized cost basis.
  2. b
    The cumulative amount of fair value hedging adjustments to hedged assets and liabilities included in the carrying amount of the hedged assets and liabilities recognized in the statement of financial position.
  3. c
    The line item in the statement of financial position that includes the hedged assets and liabilities.
  4. d
    The cumulative amount of fair value hedging adjustments remaining for any hedged assets and liabilities for which hedge accounting has been discontinued.
The disclosures required by (b) and (d) shall exclude cumulative basis adjustments related to foreign exchange risk.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, an entity shall disclose in tabular format the following for items designated and qualifying as hedged items in fair value hedges:
  1. a
    The carrying amount of hedged assets and liabilities recognized in the statement of financial position. For an available-for-sale debt security, the amount disclosed is the amortized cost basis.
  2. b
    The cumulative amount of fair value hedging adjustments to hedged assets and liabilities included in the carrying amount of the hedged assets and liabilities recognized in the statement of financial position.
  3. c
    The line item in the statement of financial position that includes the hedged assets and liabilities.
  4. d
    The cumulative amount of fair value hedging adjustments remaining for any hedged assets and liabilities for which hedge accounting has been discontinued.
The disclosures required by (b) and (d) shall exclude cumulative basis adjustments related to foreign exchange risk.
","snippet":"An entity shall disclose in tabular format the following for items designated and qualifying as hedged items in fair value hedges:\n(a) The carrying amount of hedged assets and liabilities recognized in the statement of f…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e68c29e500425debff39ff7bd43a9b9246d6c049d825546d73bbef2d0d52d22f","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4EEE","para":"50-4EEE","html":"
For each line item disclosed in accordance with paragraph 815-10-50-4EE(c) that includes hedging relationships designated under the portfolio layer method in accordance with paragraph 815-20-25-12A, the following information shall be disclosed separately:
  1. a
    The amortized cost basis of the closed portfolio(s) of financial assets or the beneficial interest(s)
  2. b
    The amount that represents the hedged item(s) (that is, the hedged layer or layers)
  3. c
    The basis adjustment associated with the hedged item(s) (that is, the hedged layer or layers).
Example 20 (see paragraph 815-10-55-181) illustrates these disclosures.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For each line item disclosed in accordance with paragraph 815-10-50-4EE(c) that includes hedging relationships designated under the portfolio layer method in accordance with paragraph 815-20-25-12A, the following information shall be disclosed separately in interim and annual reporting periods:
  1. a
    The amortized cost basis of the closed portfolio(s) of financial assets or the beneficial interest(s)
  2. b
    The amount that represents the hedged item(s) (that is, the hedged layer or layers)
  3. c
    The basis adjustment associated with the hedged item(s) (that is, the hedged layer or layers).
Example 20 (see paragraph 815-10-55-181) illustrates these disclosures.
","snippet":"For each line item disclosed in accordance with paragraph 815-10-50-4EE(c) that includes hedging relationships designated under the portfolio layer method in accordance with paragraph 815-20-25-12A, the following informa…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:94d0742d8e988ce16b8e3dd289a4d268a3f0e6615e20dbd21ac51327737789c9","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4EEEE","para":"50-4EEEE","html":"
If an entity elects to record changes in the fair value of amounts excluded from the assessment of effectiveness currently in earnings in accordance with paragraph 815-20-25-83B, the entity shall disclose this election in its summary of significant accounting policies.
","snippet":"If an entity elects to record changes in the fair value of amounts excluded from the assessment of effectiveness currently in earnings in accordance with paragraph 815-20-25-83B, the entity shall disclose this election i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3e5daf202519765b232ab038aa6e173b31427d985804c63ce902410273714fc6","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4F","para":"50-4F","html":"
For derivative instruments that are not designated or qualifying as hedging instruments under Subtopic 815-20, if an entity's policy is to include those derivative instruments in its trading activities (for example, as part of its trading portfolio that includes both derivative instruments and nonderivative or cash instruments), the entity can elect to not separately disclose gains and losses as required by paragraph 815-10-50-4CC provided that the entity discloses all of the following:
  1. a
    The gains and losses on its trading activities (including both derivative instruments and nonderivative instruments) recognized in the statement of financial performance, separately by major types of items, for example:
    1. 1
      Fixed income/interest rates
    2. 2
      Foreign exchange
    3. 3
      Equity
    4. 4
      Commodity
    5. 5
      Credit.
  2. b
    The line items in the statement of financial performance in which trading activities gains and losses are included
  3. c
    A description of the nature of its trading activities and related risks, and how the entity manages those risks.
If the disclosure option in this paragraph is elected, the entity shall include a footnote in the required tables referencing the use of alternative disclosures for trading activities. Example 21 (see paragraph 815-10-55-182) illustrates a footnote referencing the use of alternative disclosures for trading activities. Example 22 (see paragraph 815-10-55-184) illustrates the disclosure of the information required in items (a) and (b).
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For derivative instruments that are not designated or qualifying as hedging instruments under Subtopic 815-20, if an entity's policy is to include those derivative instruments in its trading activities (for example, as part of its trading portfolio that includes both derivative instruments and nonderivative or cash instruments), the entity can elect to not separately disclose gains and losses as required by paragraph 815-10-50-4CC provided that the entity discloses all of the following in interim and annual reporting periods:
  1. a
    The gains and losses on its trading activities (including both derivative instruments and nonderivative instruments) recognized in the statement of financial performance, separately by major types of items, for example:
    1. 1
      Fixed income/interest rates
    2. 2
      Foreign exchange
    3. 3
      Equity
    4. 4
      Commodity
    5. 5
      Credit.
  2. b
    The line items in the statement of financial performance in which trading activities gains and losses are included
  3. c
    A description of the nature of its trading activities and related risks, and how the entity manages those risks.
If the disclosure option in this paragraph is elected, the entity shall include a footnote in the required tables referencing the use of alternative disclosures for trading activities. Example 21 (see paragraph 815-10-55-182) illustrates a footnote referencing the use of alternative disclosures for trading activities. Example 22 (see paragraph 815-10-55-184) illustrates the disclosure of the information required in items (a) and (b).
","snippet":"For derivative instruments that are not designated or qualifying as hedging instruments under Subtopic 815-20, if an entity's policy is to include those derivative instruments in its trading activities (for example, as p…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:10f016684f903cef565209ec92748b4eab643ad563ff6f2179f1cf5c14c686d2","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4G","para":"50-4G","html":"
For purposes of the disclosure requirements beginning in paragraph 815-10-50-4A, not-for-profit entities within the scope of Topic 954 should present a similarly formatted table. Those entities shall refer to amounts within their performance indicator, instead of in income, and amounts outside their performance indicator, instead of in other comprehensive income. Not-for-profit entities not within the scope of Topic 954 shall disclose the gain or loss recognized in changes in net assets using a similar format. All not-for-profit entities also would indicate which class or classes of net assets (without donor restrictions or with donor restrictions) are affected.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For purposes of the disclosure requirements beginning in paragraph 815-10-50-4A, not-for-profit entities within the scope of Topic 954 should present a similarly formatted table. Those entities shall refer to amounts within their performance indicator, instead of in income, and amounts outside their performance indicator, instead of in other comprehensive income. Not-for-profit entities not within the scope of Topic 954 shall disclose the gain or loss recognized in changes in net assets using a similar format. All not-for-profit entities also would indicate which class or classes of net assets (without donor restrictions or with donor restrictions) are affected. The disclosures in this paragraph are required in interim and annual reporting periods.
","snippet":"For purposes of the disclosure requirements beginning in paragraph 815-10-50-4A, not-for-profit entities within the scope of Topic 954 should present a similarly formatted table. Those entities shall refer to amounts wit…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c2c786187a5ef4d0f5306d16440f6e8230ae67a2fb424ae41e8837a99c8cb97a","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6f78d426db312ef2ec6d8414dd4aa7d55de483b85977dc7e38e8bb9e49a07b56","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Credit-Risk-Related Contingent Features","paragraphs":[{"citation":"815-10-50-4H","para":"50-4H","html":"
An entity that holds or issues derivative instruments (or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose all of the following for every annual and interim reporting period for which a statement of financial position is presented:
  1. a
    The existence and nature of credit-risk-related contingent features
  2. b
    The circumstances in which credit-risk-related contingent features could be triggered in derivative instruments (or such nonderivative instruments) that are in a net liability position at the end of the reporting period
  3. c
    The aggregate fair value amounts of derivative instruments (or such nonderivative instruments) that contain credit-risk-related contingent features that are in a net liability position at the end of the reporting period
  4. d
    The aggregate fair value of assets that are already posted as collateral at the end of the reporting period
  5. e
    The aggregate fair value of additional assets that would be required to be posted as collateral if the credit-risk-related contingent features were triggered at the end of the reporting period
  6. f
    The aggregate fair value of assets needed to settle the instrument immediately if the credit-risk-related contingent features were triggered at the end of the reporting period.
Amounts required to be reported for nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66 shall be the carrying value of the nonderivative hedging instrument, which includes the adjustment for the foreign currency transaction gain or loss on that instrument. Example 23 (see paragraph 815-10-55-185) illustrates a credit-risk-related contingent feature disclosure.
","snippet":"An entity that holds or issues derivative instruments (or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) shall disclose all of the f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:469be6e0ee5b1004a3639b6fa4064316df11507245a253a13420eb69b5557bb9","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2290a9ae1993f3af80f08132f175927d367cd836bfff255b189f37fea693c73e","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Information in More than One Note","paragraphs":[{"citation":"815-10-50-4I","para":"50-4I","html":"
If information on derivative instruments (or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) is disclosed in more than a single note to financial statements, an entity shall cross-reference from the derivative instruments (or nonderivative instruments) note to other notes in which derivative-instrument-related information is disclosed.
","snippet":"If information on derivative instruments (or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) is disclosed in more than a single note …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:07a343e7ebc5fefd88f68ba4c7bea907bbb10946b523571c810447b6582240fb","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b1a9c988b6a28a513a9f7ba979b1e23d65904d825071c498db91c64ec04edf97","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Credit Derivatives","paragraphs":[{"citation":"815-10-50-4J","para":"50-4J","html":"
For purposes of the following paragraph, the term seller (sometimes referred to as a writer of the contract) refers to the party that assumes credit risk, which could be either:
  1. a
    A guarantor in a guarantee type contract
  2. b
    Any party that provides the credit protection in an option type contract, a credit default swap, or any other credit derivative contract.
","snippet":"For purposes of the following paragraph, the term seller (sometimes referred to as a writer of the contract) refers to the party that assumes credit risk, which could be either:\n(a) A guarantor in a guarantee type contra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ac384fb13839eccc2ac60b3efe0a7bb3570f9f6a8abbf003219a8a422b06e791","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4K","para":"50-4K","html":"
A seller of credit derivatives shall disclose information about its credit derivatives and hybrid instruments (for example, a credit-linked note) that have embedded credit derivativesto enable users of financial statements to assess their potential effect on its financial position, financial performance, and cash flows. Specifically, for each statement of financial position presented, the seller of a credit derivative shall disclose all of the following information for each credit derivative, or each group of similar credit derivatives, even if the likelihood of the seller's having to make any payments under the credit derivative is remote:
  1. a
    The nature of the credit derivative, including all of the following:
    1. 1
      The approximate term of the credit derivative
    2. 2
      The reason(s) for entering into the credit derivative
    3. 3
      The events or circumstances that would require the seller to perform under the credit derivative
    4. 4
      The current status (that is, as of the date of the statement of financial position) of the payment/performance risk of the credit derivative, which could be based on either recently issued external credit ratings or current internal groupings used by the seller to manage its risk
    5. 5
      If the entity uses internal groupings for purposes of item (a)(4), how those groupings are determined and used for managing risk.
  2. b
    All of the following information about the maximum potential amount of future payments under the credit derivative:
    1. 1
      The maximum potential amount of future payments (undiscounted) that the seller could be required to make under the credit derivative, which shall not be reduced by the effect of any amounts that may possibly be recovered under recourse or collateralization provisions in the credit derivative (which are addressed in items (c) through (f))
    2. 2
      The fact that the terms of the credit derivative provide for no limitation to the maximum potential future payments under the contract, if applicable
    3. 3
      If the seller is unable to develop an estimate of the maximum potential amount of future payments under the credit derivative, the reasons why it cannot estimate the maximum potential amount.
  3. c
    The fair value of the credit derivative as of the date of the statement of financial position
  4. d
    The nature of any recourse provisions that would enable the seller to recover from third parties any of the amounts paid under the credit derivative
  5. e
    The nature of any assets held either as collateral or by third parties that, upon the occurrence of any specified triggering event or condition under the credit derivative, the seller can obtain and liquidate to recover all or a portion of the amounts paid under the credit derivative
  6. f
    If estimable, the approximate extent to which the proceeds from liquidation of assets held either as collateral or by third parties would be expected to cover the maximum potential amount of future payments under the credit derivative. In its estimate of potential recoveries, the seller of credit protection shall consider the effect of any purchased credit protection with identical underlying(s).
However, the disclosures required by this paragraph do not apply to an embedded derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another, as described in paragraph 815-15-15-9.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, a seller of credit derivatives shall disclose information about its credit derivatives and hybrid instruments (for example, a credit-linked note) that have embedded credit derivativesto enable users of financial statements to assess their potential effect on its financial position, financial performance, and cash flows. Specifically, for each statement of financial position presented, the seller of a credit derivative shall disclose all of the following information for each credit derivative, or each group of similar credit derivatives, even if the likelihood of the seller's having to make any payments under the credit derivative is remote:
  1. a
    The nature of the credit derivative, including all of the following:
    1. 1
      The approximate term of the credit derivative
    2. 2
      The reason(s) for entering into the credit derivative
    3. 3
      The events or circumstances that would require the seller to perform under the credit derivative
    4. 4
      The current status (that is, as of the date of the statement of financial position) of the payment/performance risk of the credit derivative, which could be based on either recently issued external credit ratings or current internal groupings used by the seller to manage its risk
    5. 5
      If the entity uses internal groupings for purposes of item (a)(4), how those groupings are determined and used for managing risk.
  2. b
    All of the following information about the maximum potential amount of future payments under the credit derivative:
    1. 1
      The maximum potential amount of future payments (undiscounted) that the seller could be required to make under the credit derivative, which shall not be reduced by the effect of any amounts that may possibly be recovered under recourse or collateralization provisions in the credit derivative (which are addressed in items (c) through (f))
    2. 2
      The fact that the terms of the credit derivative provide for no limitation to the maximum potential future payments under the contract, if applicable
    3. 3
      If the seller is unable to develop an estimate of the maximum potential amount of future payments under the credit derivative, the reasons why it cannot estimate the maximum potential amount.
  3. c
    The fair value of the credit derivative as of the date of the statement of financial position
  4. d
    The nature of any recourse provisions that would enable the seller to recover from third parties any of the amounts paid under the credit derivative
  5. e
    The nature of any assets held either as collateral or by third parties that, upon the occurrence of any specified triggering event or condition under the credit derivative, the seller can obtain and liquidate to recover all or a portion of the amounts paid under the credit derivative
  6. f
    If estimable, the approximate extent to which the proceeds from liquidation of assets held either as collateral or by third parties would be expected to cover the maximum potential amount of future payments under the credit derivative. In its estimate of potential recoveries, the seller of credit protection shall consider the effect of any purchased credit protection with identical underlying(s).
However, the disclosures required by this paragraph do not apply to an embedded derivative feature related to the transfer of credit risk that is only in the form of subordination of one financial instrument to another, as described in paragraph 815-15-15-9.
","snippet":"A seller of credit derivatives shall disclose information about its credit derivatives and hybrid instruments (for example, a credit-linked note) that have embedded credit derivativesto enable users of financial statemen…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ed8b79bbd35b773a942435e61aca6f099b0148916249d211aa0f1feca6b0aedc","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-4L","para":"50-4L","html":"
One way to present the information required by paragraph 815-10-50-4K for groups of similar credit derivatives would be first to segregate the disclosures by major types of contracts (for example, single-name credit default swaps, traded indexes, other portfolio products, and swaptions) and then, for each major type, provide additional subgroups for major types of referenced (or underlying) asset classes (for example, corporate debt, sovereign debt, and structured finance). With respect to hybrid instruments that have embedded credit derivatives, the seller of the embedded credit derivative shall disclose the information required by paragraph 815-10-50-4K for the entire hybrid instrument, not just the embedded credit derivatives.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1One way to present the information required by paragraph 815-10-50-4K for groups of similar credit derivatives would be first to segregate the disclosures by major types of contracts (for example, single-name credit default swaps, traded indexes, other portfolio products, and swaptions) and then, for each major type, provide additional subgroups for major types of referenced (or underlying) asset classes (for example, corporate debt, sovereign debt, and structured finance). With respect to hybrid instruments that have embedded credit derivatives, the seller of the embedded credit derivative shall disclose the information required by paragraph 815-10-50-4K for the entire hybrid instrument, not just the embedded credit derivatives. The disclosures in this paragraph are required in interim and annual reporting periods.
","snippet":"One way to present the information required by paragraph 815-10-50-4K for groups of similar credit derivatives would be first to segregate the disclosures by major types of contracts (for example, single-name credit defa…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:05245f369c87dac4d26d34eb2fc12aa722c56c8d71e35d0af2946b5c770bace6","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:546b987c05b024a696f0db3c42529818a064b5285c67534b84f80940644a05d5","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Qualitative Disclosures","paragraphs":[{"citation":"815-10-50-5","para":"50-5","html":"
Qualitative disclosures about an entity's objectives and strategies for using derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) may be more meaningful if such objectives and strategies are described in the context of an entity's overall risk exposures relating to all of the following:
  1. a
    Interest rate risk
  2. b
    Foreign exchange risk
  3. c
    Commodity price risk
  4. d
    Credit risk
  5. e
    Equity price risk.
Those additional qualitative disclosures, if made, should include a discussion of those exposures even though the entity does not manage some of those exposures by using derivative instruments. An entity is encouraged, but not required, to provide such additional qualitative disclosures about those risks and how they are managed.
","snippet":"Qualitative disclosures about an entity's objectives and strategies for using derivative instruments (and nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4d4c9eba28cfdab027a8d0e9dc949edc3242b2a8e255ff37bf6fced9f06df83a","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-5A","para":"50-5A","html":"
The quantitative disclosures about derivative instruments may be more useful, and less likely to be perceived to be out of context or otherwise misunderstood, if similar information is disclosed about other financial instruments or nonfinancial assets and liabilities to which the derivative instruments are related by activity. Accordingly, in those situations, an entity is encouraged, but not required, to present a more complete picture of its activities by disclosing that information.
","snippet":"The quantitative disclosures about derivative instruments may be more useful, and less likely to be perceived to be out of context or otherwise misunderstood, if similar information is disclosed about other financial ins…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4dbfb59418bb002658b6a20202eee021591f1b503ab7d1ea98b31a0d4fb51b83","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:55cec8feab7a6dbde16b9da368d8f8af1a0ac36e2e2a2c8535fb7c59ac22c0ac","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Basis Adjustment Considerations under the Portfolio Layer Method","paragraphs":[{"citation":"815-10-50-5B","para":"50-5B","html":"
For existing hedging relationships designated under the portfolio layer method, an entity shall not disclose the basis adjustment on a more disaggregated basis than the portfolio layer method closed portfolio to meet the objectives of disclosure requirements in other Topics unless that disaggregation is required in accordance with paragraph 815-20-45-4. After an entity allocates a basis adjustment in accordance with paragraph 815-20-45-4 (if applicable), if other Topics require the disclosure of the amortized cost basis of assets included in the closed portfolio on a basis that requires disaggregating the assets included in the closed portfolio, the entity shall exclude the portfolio layer method basis adjustment from the amortized cost basis of those assets. In that case, the entity shall disclose the total amount of the portfolio layer method basis adjustment excluded from the amortized cost basis of the assets included in the closed portfolio.
","snippet":"For existing hedging relationships designated under the portfolio layer method, an entity shall not disclose the basis adjustment on a more disaggregated basis than the portfolio layer method closed portfolio to meet the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3c58307ca30127322e190aad89bc8b1a672c764b333f4ab6c415363e4f4ffca2","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-5C","para":"50-5C","html":"
For hedging relationships designated under the portfolio layer method, if the outstanding amount of the closed portfolio is less than the hedged layer or layers in accordance with paragraph 815-25-40-8(b) (that is, a breach occurred), an entity shall disclose:
  1. a
    The amount of the hedge basis adjustment recognized in current-period interest income because of the breach
  2. b
    The circumstances that led to the breach.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For hedging relationships designated under the portfolio layer method, if the outstanding amount of the closed portfolio is less than the hedged layer or layers in accordance with paragraph 815-25-40-8(b) (that is, a breach occurred), an entity shall disclose in interim and annual reporting periods the following:
  1. a
    The amount of the hedge basis adjustment recognized in current-period interest income because of the breach
  2. b
    The circumstances that led to the breach.
","snippet":"For hedging relationships designated under the portfolio layer method, if the outstanding amount of the closed portfolio is less than the hedged layer or layers in accordance with paragraph 815-25-40-8(b) (that is, a bre…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0de2cb2ddc8b6549e899360f127e4db964000f47b0d9d01d5c2f6468914601f5","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a3c5b147dfdaa9bfec1606e618cfd094d6cc71af9b4374b1504df0cbd847491","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Unconditional Purchase Obligations","paragraphs":[{"citation":"815-10-50-6","para":"50-6","html":"
If an unconditional purchase obligation is subject to the requirements of both Topic 440 and this Subtopic, the entity shall comply with both sets of disclosure requirements, including paragraph 440-10-50-4. For example, a power purchase agreement entered into in connection with the financing of a generation facility subject to the disclosure requirements of Topic 440 may also meet the definition of derivative instrument in paragraphs
815-10-15-83 through 15-139
and is accounted for as a derivative instrument at fair value in the balance sheet.
","snippet":"If an unconditional purchase obligation is subject to the requirements of both Topic 440 and this Subtopic, the entity shall comply with both sets of disclosure requirements, including paragraph 440-10-50-4. For example,…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f0650fd3d215532ebdfdbbef692cb855ddcb3cc30b980ad28137e233d049f130","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8274b898fceab039bdf4a0069354f24bc32eae68daa676b8879bc6c338d5a8dd","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Balance Sheet Offsetting","paragraphs":[{"citation":"815-10-50-7","para":"50-7","html":"
A reporting entity's accounting policy to offset or not offset in accordance with paragraph 815-10-45-6 shall be disclosed.
","snippet":"A reporting entity's accounting policy to offset or not offset in accordance with paragraph 815-10-45-6 shall be disclosed.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:780ad31049c9e7e6da849866eff976705b6bf3bd2eb26560b9268706628928bb","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-7A","para":"50-7A","html":"
A reporting entity also shall disclose the information required by paragraphs
210-20-50-1 through 50-6
for all recognized derivative instruments accounted for in accordance with Topic 815, including bifurcated embedded derivatives, which are either:
  1. a
    Offset in accordance with either Section 210-20-45 or Section 815-10-45
  2. b
    Subject to an enforceable master netting arrangement or similar agreement.
","snippet":"A reporting entity also shall disclose the information required by paragraphs 210-20-50-1 through 50-6 for all recognized derivative instruments accounted for in accordance with Topic 815, including bifurcated embedded d…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:080e99e8be1043db3f3e8abceb219786ca4e8fba92106a6ed3d5d055562613ae","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-8","para":"50-8","html":"
A reporting entity shall disclose the amounts recognized at the end of each reporting period for the right to reclaim cash collateral or the obligation to return cash collateral as follows:
  1. a
    A reporting entity that has made an accounting policy decision to offset fair value amounts shall separately disclose amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral that have been offset against net derivative positions in accordance with paragraph 815-10-45-5.
  2. b
    A reporting entity shall separately disclose amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under master netting arrangements that have not been offset against net derivative instrument positions.
  3. c
    A reporting entity that has made an accounting policy decision to not offset fair value amounts shall separately disclose the amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under master netting arrangements.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, a reporting entity shall disclose the amounts recognized at the end of each reporting period for the right to reclaim cash collateral or the obligation to return cash collateral as follows:
  1. a
    A reporting entity that has made an accounting policy decision to offset fair value amounts shall separately disclose amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral that have been offset against net derivative positions in accordance with paragraph 815-10-45-5.
  2. b
    A reporting entity shall separately disclose amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under master netting arrangements that have not been offset against net derivative instrument positions.
  3. c
    A reporting entity that has made an accounting policy decision to not offset fair value amounts shall separately disclose the amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral under master netting arrangements.
","snippet":"A reporting entity shall disclose the amounts recognized at the end of each reporting period for the right to reclaim cash collateral or the obligation to return cash collateral as follows:\n(a) A reporting entity that ha…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:05c72addcff8738862aee3912d58e300fa38a9359a80a8d5d3da5ebe8c309986","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c154e395030b154a1b8e5d5d585a8c8c016ef502233f9ad98cf8a28bc7fdd335","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Convertible Securities","paragraphs":[{"citation":"815-10-50-8A","para":"50-8A","html":"
For guidance on disclosures of information about derivative instrument transactions entered into in connection with the issuance of the convertible securities, see paragraph 470-20-50-1I for convertible debt instruments and paragraph 505-10-50-18 for convertible preferred stock.
","snippet":"For guidance on disclosures of information about derivative instrument transactions entered into in connection with the issuance of the convertible securities, see paragraph 470-20-50-1I for convertible debt instruments …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cbe40bc44f6ba25ba22a59ed5750d6a9e0b9e184ec66d4e03b4c9936c9a4bc0f","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"citation":"815-10-50-8B","para":"50-8B","html":"
The disclosure guidance on convertible debt instruments in Section 470-20-50 and on convertible preferred stock in Section 505-10-50 also shall be considered after considering the disclosure guidance in this Section for a conversion option accounted for as a derivative instrument.
","snippet":"The disclosure guidance on convertible debt instruments in Section 470-20-50 and on convertible preferred stock in Section 505-10-50 also shall be considered after considering the disclosure guidance in this Section for …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:80e9562480bf2bf3baaeeedfda40c00eb70eec66e1f9652462a4e04dc748a488","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:358d76b4be1618cb1e3e90926028adef2119ba04f6ee66127bead295a6f282a6","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":null,"heading":"Accounting Policy for Statement of Cash Flows","paragraphs":[{"citation":"815-10-50-8C","para":"50-8C","html":"
Transition date:(P) June 30, 2027; (N) June 30, 2027Transition guidance:
105-10-65-7See paragraph 230-10-50-9 for disclosure requirements related to where cash flows associated with derivative instruments and their related gains and losses are presented in the statement of cash flows.
","snippet":"Transition date:(P) June 30, 2027; (N) June 30, 2027Transition guidance:105-10-65-7See paragraph 230-10-50-9 for disclosure requirements related to where cash flows associated with derivative instruments and their relate…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2895001c1a817167e148a7e41e91bf2b2700b75195011fce3c5de969e60b671a","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c87a0383bd6504b7e4f4d16cb4254a6c1d151b710535a35b2dfc912f39918b02","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"block":"Certain Contracts on Debt and Equity Securities","heading":null,"paragraphs":[{"citation":"815-10-50-9","para":"50-9","html":"
An entity shall disclose its accounting policy for the premium paid (time value) to acquire an option that is classified as held to maturity or available for sale.
","snippet":"An entity shall disclose its accounting policy for the premium paid (time value) to acquire an option that is classified as held to maturity or available for sale.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:21627a953dbfc8a6951f0fa530185072d8bc424fb6ba712f64a19cdd677382bf","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5eb461847a67efd4a3cbe6fa77715f96f2876e42cfff8103b99fdecb12b7fafd","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:89738863c8b2f43dffd0395266ef4b4e87dfa6fdca451ceabdfef53cbfb7d095","downloaded_from":"2026-09-10T01:35:15.706Z","last_downloaded_at":"2026-09-10T01:35:15.706Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480434","source_sha256":"2d09e376a30784b872c166cb011dcca2712d15d8e30b109030b6bc58ccc45bed"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Implementation Guidance","paragraphs":[{"citation":"815-10-55-1","para":"55-1","html":"
This Section provides guidance on the following implementation matters:
  1. a
    Determining whether a contract is within the scope of this Subtopic
  2. b
    Unit of accounting—a transferable option is considered freestanding, not embedded
  3. c
    Definition of derivative instrument
  4. d
    Instruments not within scope
  5. e
    Scope application to certain contracts
  6. f
    Other presentation matters
  7. g
    Synthetic guaranteed investment contracts.
  8. h
    Subparagraph not used.
","snippet":"This Section provides guidance on the following implementation matters:\n(a) Determining whether a contract is within the scope of this Subtopic\n(b) Unit of accounting—a transferable option is considered freestanding, not…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f43d06c792191c35e27fdd8411d0bbed435d33c9e0df7a34d9bfbaf913aa6b45","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-2","para":"55-2","html":"
The following diagram depicts the process for determining whether a freestanding contract is within the scope of this Subtopic. The diagram is a visual supplement to the written standards Sections. It shall not be interpreted to alter any requirements of this Subtopic nor shall it be considered a substitute for the requirements. The relevant paragraphs are identified in the parenthetical note after the question.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8
Editor's Note: The content of paragraph 815-10-55-2 will change upon transition, together with a change in the heading noted below.
• > Determining Whether a Contract Is within the Scope of This Subtopic
The following diagram depicts the process for determining whether a freestanding contract is within the scope of this Subtopic. The diagram is a visual supplement to the written standards Sections. It shall not be interpreted to alter any requirements of this Subtopic or be considered a substitute for the requirements. The relevant paragraphs are identified in the parenthetical note after the question.
","snippet":"The following diagram depicts the process for determining whether a freestanding contract is within the scope of this Subtopic. The diagram is a visual supplement to the written standards Sections. It shall not be interp…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:103c322a746793c02c4418dc2fff5e1e5cc7b98ba97e7c1eb54cfa6dd57f081e","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-3","para":"55-3","html":"
Certain structured transactions involving the issuance of a bond incorporate transferable options to call or put the bond. As such, those options are potentially exercisable by a party other than the debtor or the investor. For example, certain put bond structures involving three separate parties—the debtor, the investor, and an investment bank—may incorporate options that are ultimately held by the investment bank, giving that party the right to call the bond from the investor. For example, a call option that is transferable either by the debtor to a third party and thus is potentially exercisable by a party other than the debtor or by the original investor based on the legal agreements governing the debt issuance can result in the investor having different counterparties for the option and the original debt instrument. Accordingly, even if incorporated into the terms of the original debt agreement, such an option may not be considered an embedded derivative by either the debtor or the investor because it can be separated from the bond and effectively sold to a third party.
","snippet":"Certain structured transactions involving the issuance of a bond incorporate transferable options to call or put the bond. As such, those options are potentially exercisable by a party other than the debtor or the invest…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:22bcb12e8cb4aa732f8e4aff1308deb4feee3c9fc06896474f83cf1641bcb670","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-4","para":"55-4","html":"
This guidance addresses the following matters:
  1. a
    Notional amount—identifying a commodity contract's notional amount
  2. b
    Initial net investment—initial exchange under currency swap not an initial net investment
  3. c
    Net settlement.
","snippet":"This guidance addresses the following matters:\n(a) Notional amount—identifying a commodity contract's notional amount\n(b) Initial net investment—initial exchange under currency swap not an initial net investment\n(c) Net …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8aa0cf437a47213782c8c7706b2283764d30e797a353498d5ead2e02d1947a4a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-5","para":"55-5","html":"
Many commodity contracts specify a fixed number of units of a commodity to be bought or sold under the pricing terms of the contract (for example, a fixed price). However, some contracts do not specify a fixed number of units. For example, consider the following four contracts that require one party to buy the following indicated quantities:
  1. a
    Contract 1: As many units as required to satisfy its actual needs (that is, to be used or consumed) for the commodity during the period of the contract (a requirements contract). The party is not permitted to buy more than its actual needs (for example, the party cannot buy excess units for resale).
  2. b
    Contract 2: Only as many units as needed to satisfy its actual needs up to a maximum of 100 units. The party is not permitted to buy more than its actual needs (for example, the party cannot buy excess units for resale).
  3. c
    Contract 3: A minimum of 60 units and as many units needed to satisfy its actual needs in excess of 60 units. The party is not permitted to buy more than its actual needs (for example, the party cannot buy excess units for resale).
  4. d
    Contract 4: A minimum of 60 units and as many units needed to satisfy its actual needs in excess of 60 units up to a maximum of 100 units. The party is not permitted to buy more than its actual needs (for example, the party cannot buy excess units for resale).
","snippet":"Many commodity contracts specify a fixed number of units of a commodity to be bought or sold under the pricing terms of the contract (for example, a fixed price). However, some contracts do not specify a fixed number of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:872435d4576b72de1b994003b3043436ce3fba44a63a7df55458c1623f2b558b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-6","para":"55-6","html":"
Generally, the anticipated number of units covered by a requirements contract is equal to the buyer's needs. When a requirements contract is negotiated between the seller and buyer, both parties typically have the same general understanding of the buyer's estimated needs. Given the buyer's often exclusive reliance on the seller to supply all its needs of the commodity, it is imperative from the buyer's perspective that the supplier be knowledgeable with respect to anticipated volumes. In fact, the pricing provisions within requirements contracts are directly influenced by the estimated volumes.
","snippet":"Generally, the anticipated number of units covered by a requirements contract is equal to the buyer's needs. When a requirements contract is negotiated between the seller and buyer, both parties typically have the same g…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:154f04b3f1cfc75835a9a4c6d861572d17097ab05218c39846a11d22806f4141","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-7","para":"55-7","html":"
This guidance focuses solely on whether the contracts under consideration have a notional amount pursuant to the definition in this Subtopic. These types of contracts may not satisfy certain of the other required criteria in this Subtopic for them to meet the definition of a derivative instrument. The conclusion that a requirements contract has a notional amount as defined in this Subtopic can be reached only if a reliable means to determine such a quantity exists. Application of this guidance to specific contracts is as follows:
  1. a
    Contract 1—requirements contract. The identification of a requirements contract's notional amount may require the consideration of volumes or formulas contained in attachments or appendixes to the contract or other legally binding side agreements. The determination of a requirements contract's notional amount must be performed over the life of the contract and could result in the fluctuation of the notional amount if, for instance, the default provisions reference a rolling cumulative average of historical usage. If the notional amount is not determinable, making the quantification of such an amount highly subjective and relatively unreliable (for example, if a contract does not contain settlement and default provisions that explicitly reference quantities or provide a formula based on historical usage), such contracts are considered not to contain a notional amount as that term is used in this Subtopic. One technique to quantify and validate the notional amount in a requirements contract is to base the estimated volumes on the contract's settlement and default provisions. Often the default provisions of requirements contracts will specifically refer to anticipated quantities to utilize in the calculation of penalty amounts in the event of nonperformance. Other default provisions stipulate penalty amounts in the event of nonperformance based on average historical usage quantities of the buyer. If those amounts are determinable, they shall be considered the notional amount of the contract.
  2. b
    Contract 2—requirements contract with a specified maximum quantity. Whether the contract has a notional amount depends. The same considerations discussed in (a) with respect to Contract 1 also apply to Contract 2; however, the notional amount cannot exceed 100 units.
  3. c
    Contract 3—requirements contract with a specified minimum quantity. The contract has a notional amount. The same considerations discussed in (a) with respect to Contract 1 also apply to Contract 3; however, the notional amount of Contract 3 cannot be less than 60 units. A contract that specifies a minimum number of units always has a notional amount at least equal to the required minimum number of units. Only that portion of the requirements contract with a determinable notional amount would be accounted for as a derivative instrument under this Subtopic.
  4. d
    Contract 4—requirements contract with a specified maximum and minimum quantities. The contract has a notional amount. The same considerations discussed in (a) with respect to Contract 1 also apply to Contract 4; however, the notional amount of Contract 4 cannot be less than 60 units or greater than 100 units. A contract that specifies a minimum number of units always has a notional amount at least equal to the required minimum number of units. Only that portion of the requirements contract with a determinable notional amount would be accounted for as a derivative instrument under this Subtopic.
","snippet":"This guidance focuses solely on whether the contracts under consideration have a notional amount pursuant to the definition in this Subtopic. These types of contracts may not satisfy certain of the other required criteri…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f0fba7876da3ee751c91deae181946c49c3edcf4e4afa28c3b4e2c2d079cb213","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-8","para":"55-8","html":"
The definition of a derivative instrument includes contracts that require gross exchanges of currencies (for example, currency swaps that require an exchange of different currencies at both inception and maturity). The initial exchange of currencies of equal fair values in those arrangements does not constitute an initial net investment in the contract. Instead, it is the exchange of one kind of cash for another kind of cash of equal value. The balance of the agreement, a forward contract that obligates and entitles both parties to exchange specified currencies, on specified dates, at specified prices, is a derivative instrument.
","snippet":"The definition of a derivative instrument includes contracts that require gross exchanges of currencies (for example, currency swaps that require an exchange of different currencies at both inception and maturity). The i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e7eae15fb4955d17f885048ea40b86e13c1c3526efe094a4a771c18c71697a14","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-9","para":"55-9","html":"
This guidance addresses the following matters:
  1. a
    Asymmetrical default provision does not constitute net settlement.
  2. b
    Determining whether a structured payout constitutes net settlement.
","snippet":"This guidance addresses the following matters:\n(a) Asymmetrical default provision does not constitute net settlement.\n(b) Determining whether a structured payout constitutes net settlement.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9e3cf44047e6c3d36b8f661b8373c4c0967545d5f46677d2979e7ee4bafa407d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-10","para":"55-10","html":"
Many commodity forward contracts contain default provisions that require the defaulting party (the party that fails to make or take physical delivery of the commodity) to reimburse the nondefaulting party for any loss incurred as illustrated in the following examples:
  1. a
    If the buyer under the forward contract (Buyer) defaults (that is, does not take physical delivery of the commodity), the seller under that contract (Seller) will have to find another buyer in the market to take delivery. If the price received by Seller in the market is less than the contract price, Seller incurs a loss equal to the quantity of the commodity that would have been delivered under the forward contract multiplied by the difference between the contract price and the current market price. Buyer must pay Seller a penalty for nonperformance equal to that loss.
  2. b
    If Seller defaults (that is, does not deliver the commodity physically), Buyer will have to find another seller in the market. If the price paid by Buyer in the market is more than the contract price, Seller must pay Buyer a penalty for nonperformance equal to the quantity of the commodity that would have been delivered under the forward contract multiplied by the difference between the contract price and the current market price.
","snippet":"Many commodity forward contracts contain default provisions that require the defaulting party (the party that fails to make or take physical delivery of the commodity) to reimburse the nondefaulting party for any loss in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9b1b8ca63f96d538cb93404029508db5f6ebb3ead33038466e9ad8551e13b065","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-11","para":"55-11","html":"
For example, Buyer agreed to purchase 100 units of a commodity from Seller at $1.00 per unit:
  1. a
    Assume Buyer defaults on the forward contract by not taking delivery and Seller must sell the 100 units in the market at the prevailing market price of $.75 per unit. To compensate Seller for the loss incurred due to Buyer's default, Buyer must pay Seller a penalty of $25.00—that is, 100 units × ($1.00 - $.75).
  2. b
    Similarly, assume that Seller defaults and Buyer must buy the 100 units it needs in the market at the prevailing market price of $1.30 per unit. To compensate Buyer for the loss incurred due to Seller's default, Seller must pay Buyer a penalty of $30.00—that is, 100 units × ($1.30 - $1.00).
","snippet":"For example, Buyer agreed to purchase 100 units of a commodity from Seller at $1.00 per unit:\n(a) Assume Buyer defaults on the forward contract by not taking delivery and Seller must sell the 100 units in the market at t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0142f2709130cae4d3821f2b3b0f897d0b839487d17261ef57eacc0f623f937b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-12","para":"55-12","html":"
Note that an asymmetrical default provision is designed to compensate the nondefaulting party for a loss incurred. The defaulting party cannot demand payment from the nondefaulting party to realize the changes in market price that would be favorable to the defaulting party if the contract were honored.
","snippet":"Note that an asymmetrical default provision is designed to compensate the nondefaulting party for a loss incurred. The defaulting party cannot demand payment from the nondefaulting party to realize the changes in market …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8b0c011780f196c6e8509bf856d58f07346b32eb555a5a938f38fc731284b14a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-13","para":"55-13","html":"
Under the forward contract in the example, if Buyer defaults when the market price is $1.10, Seller will be able to sell the units of the commodity into the market at $1.10 and realize a $10.00 greater gain than it would have under the contract. In that circumstance, the defaulting Buyer is not required to pay a penalty for nonperformance to Seller, nor is Seller required to pass the $10.00 extra gain to the defaulting Buyer.
","snippet":"Under the forward contract in the example, if Buyer defaults when the market price is $1.10, Seller will be able to sell the units of the commodity into the market at $1.10 and realize a $10.00 greater gain than it would…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9257d47187602c195c87696677d911754aa6bbe2e1c044fd0a478cc2f656383d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-14","para":"55-14","html":"
Similarly, if Seller defaults when the market price is $.80, Buyer will be able to buy the units of the commodity in the market and pay $20.00 less than under the contract. In that circumstance, the defaulting Seller is not required to pay a penalty for nonperformance to Buyer, nor is Buyer required to pass the $20.00 savings on to the defaulting Seller.
","snippet":"Similarly, if Seller defaults when the market price is $.80, Buyer will be able to buy the units of the commodity in the market and pay $20.00 less than under the contract. In that circumstance, the defaulting Seller is …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9e404ef6c5336b9b4bacd572fb86dd72000fce1723d28b27ce119bbed8567777","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-15","para":"55-15","html":"
In a forward contract with only an asymmetrical default provision, neither Buyer nor Seller can realize the benefits of changes in the price of the commodity through default on the contract. That is, Buyer cannot realize favorable changes in the intrinsic value of the forward contract except in both of the following circumstances:
  1. a
    By taking delivery of the physical commodity
  2. b
    In the event of default by Seller (which is an event beyond the control of Buyer).
","snippet":"In a forward contract with only an asymmetrical default provision, neither Buyer nor Seller can realize the benefits of changes in the price of the commodity through default on the contract. That is, Buyer cannot realize…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50ccef9b396ef36d2d0161c4a43d5e8cbfcb591ffe45d709b845e8b9d50aaa58","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-16","para":"55-16","html":"
Similarly, Seller cannot realize favorable changes in the intrinsic value of the forward contract except in either of the following circumstances:
  1. a
    By making delivery of the physical commodity
  2. b
    In the event of default by Buyer, which is an event beyond the control of Seller.
","snippet":"Similarly, Seller cannot realize favorable changes in the intrinsic value of the forward contract except in either of the following circumstances:\n(a) By making delivery of the physical commodity\n(b) In the event of defa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:67efddb9016257e485459d76502f79d912fd0f6dc55c8bfe394b7c0e3282580d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-17","para":"55-17","html":"
However, a pattern of having the asymmetrical default provision applied in contracts between certain counterparties would indicate the existence of a tacit agreement between those parties that the party in a loss position would always elect the default provision, thereby resulting in the understanding that there would always be net settlement. In that situation, those kinds of commodity contracts would meet the characteristic described as net settlement in paragraph 815-10-15-100.
","snippet":"However, a pattern of having the asymmetrical default provision applied in contracts between certain counterparties would indicate the existence of a tacit agreement between those parties that the party in a loss positio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bea9850a34ec0d52d1388e9482f8b4ed349a9aa6b729c97434c20fdd204f3086","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-18","para":"55-18","html":"
In contrast, a contract that permits only one party to elect net settlement of the contract (by default or otherwise), and thus participate in either favorable changes only or both favorable and unfavorable price changes in the underlying, meets the derivative characteristic described in paragraph 815-10-15-83(c) and discussed in paragraph 815-10-15-100 for all parties to that contract. Such a default provision allows one party to elect net settlement of the contract under any pricing circumstance and consequently does not require delivery of an asset that is associated with the underlying. That default provision differs from the asymmetrical default provision in the example contract in paragraph 815-10-55-10 because it is not limited to compensating only the nondefaulting party for a loss incurred and is not solely within the control of the defaulting party.
","snippet":"In contrast, a contract that permits only one party to elect net settlement of the contract (by default or otherwise), and thus participate in either favorable changes only or both favorable and unfavorable price changes…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2186b9765f6a4529343d966b29c9182532a2b9d5c8c31b1ee4405db73890c877","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-19","para":"55-19","html":"
Paragraph 815-10-15-104 explains that, upon settlement of a contract, in lieu of immediate net cash settlement of the gain or loss under the contract, the holder may receive a financial instrument involving terms that would provide for the gain or loss under the contract to be received or paid over a specified time period. Such a structured payout of the gain on a contract could also be described as an abnormally high yield on a required investment or borrowing in which the overall return is related to the amount of that contract's gain, in which case the contract would be considered to have met the characteristic of net settlement in paragraph 815-10-15-100.
","snippet":"Paragraph 815-10-15-104 explains that, upon settlement of a contract, in lieu of immediate net cash settlement of the gain or loss under the contract, the holder may receive a financial instrument involving terms that wo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a55601cdd4835bfcd38b85ab1594ea3e3ac1de9c066c04122390cd92ee83a7a1","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-20","para":"55-20","html":"
Assume, instead, that, upon settlement of a contract, in lieu of immediate net cash settlement of the gain or loss under the contract, the holder is required to invest funds in or borrow funds from the other party so that the party in a gain position under the contract can obtain the value of that gain only over time as a traditional adjustment of the yield on the amount invested or the interest element on the amount borrowed. (A fixed-rate mortgage loan commitment is an example of a contract that requires the party in a gain position under the contract to borrow funds at a below-market interest rate at the time of the borrowing to obtain the benefit of that gain.) Paragraph 815-10-15-105 indicates that such a contract does not meet the characteristic of net settlement in paragraph 815-10-15-100.
","snippet":"Assume, instead, that, upon settlement of a contract, in lieu of immediate net cash settlement of the gain or loss under the contract, the holder is required to invest funds in or borrow funds from the other party so tha…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9ba94b09056301a942d11f95dc7e78a6ff1a8d33089b91ff8821517857f758d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-21","para":"55-21","html":"
In contrast, paragraph 815-10-15-106 explains that a contract that requires one party to the contract to invest funds in or borrow funds from the other party so that the party in a gain position under the contract can obtain the value of that gain over time as a nontraditional adjustment of the yield on the amount invested or the interest element on the amount borrowed may meet the characteristic of net settlement in paragraph 815-10-15-100. For example, if a contract required the party in a gain position under the contract to invest $100 in the other party's debt instrument that paid an abnormally high interest rate of 5,000 percent per day for a term whose length is dependent on the changes in the contract's underlying, an analysis of those terms would lead to the conclusion that the contract's settlement terms were in substance a structured payout of the contract's gain and thus that contract would be considered to have met the characteristic of net settlement in that paragraph.
","snippet":"In contrast, paragraph 815-10-15-106 explains that a contract that requires one party to the contract to invest funds in or borrow funds from the other party so that the party in a gain position under the contract can ob…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d0211960b471ba70b79ef6cbe8faf822dc7e97d2a88bf7993f51d904c565fc81","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-22","para":"55-22","html":"
This guidance addresses the following matters:
  1. a
    Normal purchases and normal sales—application to power purchase or sales agreements
  2. b
    Dual-trigger financial guarantee contracts
  3. c
    Certain insurance contracts—dual-trigger property and casualty insurance contracts
  4. d
    Derivative instrument that impedes sale accounting
  5. e
    Subparagraph superseded by Accounting Standards Update No. 2012-04.
","snippet":"This guidance addresses the following matters:\n(a) Normal purchases and normal sales—application to power purchase or sales agreements\n(b) Dual-trigger financial guarantee contracts\n(c) Certain insurance contracts—dual-t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2f23082b3fcfe75015c985bcdb5bf148307ff16a2bff40ff60c4f09178066d97","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-23","para":"55-23","html":"
This guidance addresses the following matters:
  1. a
    Contracts that combine a forward contract and a purchased option contract
  2. b
    Distinguishing between options that are capacity contracts and financial options on electricity.
","snippet":"This guidance addresses the following matters:\n(a) Contracts that combine a forward contract and a purchased option contract\n(b) Distinguishing between options that are capacity contracts and financial options on electri…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7a4d501bafebeed7b43337ed2950787e85013907f701bf49a862d2592890f85b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-24","para":"55-24","html":"
Paragraph 815-10-15-44 states that the inclusion of a purchased option that would, if exercised, require delivery of the related asset at an established price under the contract within a single contract that meets the definition of a derivative instrument disqualifies the entire contract from being eligible to qualify for the normal purchases and normal sales scope exception in this Subsection except as provided in paragraphs
815-10-15-45 through 15-51
with respect to certain power purchase or sales agreements. Although the guidance that follows discusses such circumstances in the context of utilities and independent power producers, it applies to all entities that enter into contracts that combine a forward contract and a purchased option contract, not just to utilities and independent power producers. Some utilities and independent power producers have fuel supply contracts that require delivery of a contractual minimum quantity of fuel at a fixed price and have an option that permits the holder to take specified additional amounts of fuel at the same fixed price at various times. Essentially, that option to take more fuel is a purchased option that is combined with the forward contract in a single supply contract. Typically, the option to take additional fuel is built into the contract to ensure that the buyer has a supply of fuel to produce the electricity during peak demands; however, the buyer may have the ability to sell to third parties the additional fuel purchased through exercise of the purchased option. Due to the difficulty in estimating peak electricity load and thus the amount of fuel needed to generate the required electricity, those fuel supply contracts are common in the electric utility industry (though similar supply contracts may exist in other industries).
","snippet":"Paragraph 815-10-15-44 states that the inclusion of a purchased option that would, if exercised, require delivery of the related asset at an established price under the contract within a single contract that meets the de…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:39e23990b63e568fcd8e0516bcab20cb2cbab8e238a5286b45b4c1d05a10af2a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-25","para":"55-25","html":"
Those fuel supply contracts are not requirements contracts that are addressed in paragraphs
815-10-55-5 through 55-7
. Many of those contracts meet the definition of a derivative instrument because they have a notional amount and an underlying, require no or a smaller initial net investment, and provide for net settlement (for example, through their default provisions or by requiring delivery of an asset that is readily convertible to cash). The fuel supply contract cannot qualify for the normal purchases and normal sales exception because of the optionality regarding the quantity of fuel to be delivered under the contract.
","snippet":"Those fuel supply contracts are not requirements contracts that are addressed in paragraphs 815-10-55-5 through 55-7. Many of those contracts meet the definition of a derivative instrument because they have a notional am…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:64726f2d6b4d1b4ed38fe63a68a12bb5be09947857842f91717957d7af302cca","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-26","para":"55-26","html":"
An entity shall not bifurcate the forward contract component and the option component of a fuel supply contract that in its entirety meets the definition of a derivative instrument and then assert that the forward contract component is eligible to qualify for the normal purchases and normal sales exception.
","snippet":"An entity shall not bifurcate the forward contract component and the option component of a fuel supply contract that in its entirety meets the definition of a derivative instrument and then assert that the forward contra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f4507525580572803b1b823cebc09612d57ba21a0ea5307155d56e37d2b479ab","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-27","para":"55-27","html":"
An entity may wish to enter into two separate contracts—a forward contract and an option—that economically achieve the same results as the single derivative instrument and determine whether the normal purchases and normal sales scope exception (as discussed beginning in paragraph 815-10-15-22) applies to the separate forward contract.
","snippet":"An entity may wish to enter into two separate contracts—a forward contract and an option—that economically achieve the same results as the single derivative instrument and determine whether the normal purchases and norma…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2ce796c89b0ae8c033bc42d30d3787d7e7415df1505a27dde8ed6ed94ec886b1","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-28","para":"55-28","html":"
Similar to the contractual options discussed in Example 10 (see paragraph 815-10-55-121), this guidance addresses option components that would require delivery of the related asset at an established price under the contract.
","snippet":"Similar to the contractual options discussed in Example 10 (see paragraph 815-10-55-121), this guidance addresses option components that would require delivery of the related asset at an established price under the contr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:674481833b71ec174d62264d58f20f187ebe8aa0cfedaa158bdfd57b9a36134a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-29","para":"55-29","html":"
If the option component does not provide any benefit to the holder beyond the assurance of a guaranteed supply of the underlying commodity for use in the normal course of business and that option component only permits the holder to purchase additional quantities at the market price at the date of delivery (that is, that option component will always have a fair value of zero), that option component would not require delivery of the related asset at an established price under the contract.
","snippet":"If the option component does not provide any benefit to the holder beyond the assurance of a guaranteed supply of the underlying commodity for use in the normal course of business and that option component only permits t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:685ef5fb3242f8fde3921cf050072d016413f3541ca1d6e0ca409a385c48170c","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-30","para":"55-30","html":"
If an entity's single supply contract included at its inception both a forward contract and an option and, in subsequent renegotiations, that contract is negated and replaced by two separate contracts (a forward contract for a specific quantity that will be purchased and an option for additional quantities whose purchase is conditional upon exercise of the option), the new forward contract would be eligible to qualify for the normal purchases and normal sales exception (as discussed beginning in paragraph 815-10-15-22), whereas the new option would not be eligible for that exception. From its inception the new separate option would be accounted for under this Subtopic.
","snippet":"If an entity's single supply contract included at its inception both a forward contract and an option and, in subsequent renegotiations, that contract is negated and replaced by two separate contracts (a forward contract…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3e8e28a51975d2aa362bc65df90bbf02e3fbb4c9bd2d41504b9690aa1d7b919c","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-31","para":"55-31","html":"
The following table lists characteristics of an option that is a capacity contract and a traditional option. The characteristics listed may be relevant to the application of paragraph 815-10-15-45(a)(2). Other characteristics not listed may also be relevant.
","snippet":"The following table lists characteristics of an option that is a capacity contract and a traditional option. The characteristics listed may be relevant to the application of paragraph 815-10-15-45(a)(2). Other characteri…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a1e4ba643bcac48d5c94e30243124ab53387708a1b5a9322884a865320168eef","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-32","para":"55-32","html":"
Entity ABC extends credit to consumers through credit cards and personal loans of various sorts. Entity ABC is exposed to credit losses from its managed asset portfolio, including owned and securitized receivables. Entity ABC would like to purchase an insurance policy to protect itself against high levels of consumer default.
","snippet":"Entity ABC extends credit to consumers through credit cards and personal loans of various sorts. Entity ABC is exposed to credit losses from its managed asset portfolio, including owned and securitized receivables. Entit…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e267f40119e97b0554ec75c4c96ff7dd19794fc33cdb29ca0774fa6ba7742f7","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-33","para":"55-33","html":"
The proposed insurance policy will entitle Entity ABC to collect claims to the extent that its credit losses exceed a specified minimum level but limited to the amount by which the credit losses on a customized pool or index of consumer loans exceed that same specified minimum level. Thus, Entity ABC will collect claims based on the lesser of the following:
  1. a
    Entity ABC's actual credit losses
  2. b
    The credit losses on a customized pool or index of consumer loans.
","snippet":"The proposed insurance policy will entitle Entity ABC to collect claims to the extent that its credit losses exceed a specified minimum level but limited to the amount by which the credit losses on a customized pool or i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6e12cee7c94d185fe4ace83cb42def6ce55b0ab3a4936e2fa4fcac5f0c976e3a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-34","para":"55-34","html":"
Although the insurer's payment to Entity ABC may be affected by credit losses on a customized pool, the payment nevertheless represents compensation for actual credit losses Entity ABC incurred. Entity ABC purchases this insurance to obtain a lower premium because claims are limited by external charge-off rates and the insurer is not exposed to Entity ABC's underwriting performance.
","snippet":"Although the insurer's payment to Entity ABC may be affected by credit losses on a customized pool, the payment nevertheless represents compensation for actual credit losses Entity ABC incurred. Entity ABC purchases this…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:37f31eadfaa4069c2267cf938286023ead41f6fbcb92244e14bb55cd93642981","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-35","para":"55-35","html":"
This type of control may also exist in property and casualty reinsurance policies. For example, an insurance entity may purchase reinsurance that covers actual hurricane losses in excess of a specified level in their block of business, but the coverage does not apply to losses in excess of a geographically diversified index of hurricane losses.
","snippet":"This type of control may also exist in property and casualty reinsurance policies. For example, an insurance entity may purchase reinsurance that covers actual hurricane losses in excess of a specified level in their blo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bdd5ff9e4f7ecc57676dbbc29f9b54a0580351af073922db769c913f2ef7c7c8","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-36","para":"55-36","html":"
Financial guarantee insurance contracts are not subject to this Subtopic only if all of the conditions in paragraph 815-10-15-58 are met. The description of the financial guarantee insurance contract in paragraph 815-10-55-32 is insufficient for determining whether those conditions are met. The following provisions of that contract represent a type of deductible and do not affect the application of the conditions in paragraph 815-10-15-58:
  1. a
    The provision that limits any claims to the extent that Entity ABC's actual credit losses exceed a specified minimum level
  2. b
    The provision that limits any payments for those claims to the amount by which the credit losses on a customized pool or index of consumer loans exceed that same specified minimum level.
","snippet":"Financial guarantee insurance contracts are not subject to this Subtopic only if all of the conditions in paragraph 815-10-15-58 are met. The description of the financial guarantee insurance contract in paragraph 815-10-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d3ce46cfbefbc1fc05162ad41629b73e53db2bb96e485abf379a119bfcc420bc","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-37","para":"55-37","html":"
A common characteristic of dual-trigger policies is that the payment of a claim is triggered by the occurrence of two events (that is, the occurrence of both an insurable event and changes in a separate pre-identified variable). Because the likelihood of both events occurring is less than the likelihood of only one of the events occurring, the dual-trigger policy premiums are lower than traditional policies that insure only one of the risks. The policyholder is often purchasing the policy to provide for coverage against a catastrophe because if both events occur, the combined impact may be disastrous to its business.
","snippet":"A common characteristic of dual-trigger policies is that the payment of a claim is triggered by the occurrence of two events (that is, the occurrence of both an insurable event and changes in a separate pre-identified va…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3efa142c65dbcc68d63bdfa9bce6fc19b23ef0e8b1628e3f843ab69aec22bb49","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-38","para":"55-38","html":"
Paragraph 815-10-55-40 addresses seven contracts that illustrate the characteristics of dual-trigger policies offered to different types of policyholders that have different risk management needs. All seven contracts qualify for either the exception in paragraph 815-10-15-53(b) for traditional property and casualty contracts or the exception in paragraph 815-10-15-59(b) for non-exchange-traded contracts involving nonfinancial assets. Therefore, the dual-trigger variable in those contracts is not separated and accounted for separately as a derivative instrument.
","snippet":"Paragraph 815-10-55-40 addresses seven contracts that illustrate the characteristics of dual-trigger policies offered to different types of policyholders that have different risk management needs. All seven contracts qua…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:73b8435531fe7222924c7aed592614ce43f391edac3a6cec1029963b2ae8d176","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-39","para":"55-39","html":"
In contrast, paragraph 815-15-55-12 states that, if a contract issued by an insurance entity involves essentially assured amounts of cash flows based on insurable events that are highly probable of occurrence (as discussed in paragraph 815-10-15-55(c)), an embedded derivative related to changes in the separate pre-identified variable for that portion of the contract would be required to be separately accounted for as a derivative instrument.
","snippet":"In contrast, paragraph 815-15-55-12 states that, if a contract issued by an insurance entity involves essentially assured amounts of cash flows based on insurable events that are highly probable of occurrence (as discuss…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:142f7f1f6ae1c5b65fd040d59c1f0e2de93dc3076da9e66cb7a51fc521fa5a95","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-40","para":"55-40","html":"
Following are descriptions of seven contracts:
  1. a
    Contract A—electric utility. A dual-trigger policy pays for a level of actual losses caused by the following two events occurring simultaneously:
    1. 1
      A power outage resulting from equipment failure or storm-related damage causes more than 500 megawatts of lost power.
    2. 2
      The spot market price for power exceeds $65 per megawatt hour during the storm or equipment-failure period.
    The contract pays the difference between the strike price and the actual market price for the lost power (that is, the cost of replacement power).
  2. b
    Contract B—trucking delivery entity. A dual-trigger policy pays extra expenses associated with rerouting trucks over a certain time period if snowfall exceeds a specified level during that time period. The snowfall causes delays and creates the need to reroute trucks to meet delivery demands.
  3. c
    Contract C—hospital.A dual-trigger policy pays actual medical malpractice claims above a specified level only if the value of the hospital's equity portfolio falls below a specified level during the same period.
  4. d
    Contract D—iron ore mining entity. A dual-trigger policy pays a specified level of workers' compensation claims (not to exceed actual claims) if the claims exceed a specified level at the same time iron ore prices decrease below a specified level.
  5. e
    Contract E—golf resort in Florida. A dual-trigger policy pays property damage from hurricanes incurred by a specific golf resort in Florida; however, the losses are covered only if other golf courses in the region incur hurricane-related losses and the claims cannot exceed the average property damages incurred by the other golf resorts in the county.
  6. f
    Contract F—cherry orchard in Michigan. A dual-trigger policy pays crop losses incurred due to bad weather during growing season, and the claims are at risk of being reduced based on changes in the inflation rate in Brazil. The cherry producer has no operations in Brazil or any transactions in Brazilian currency. However, a Brazilian cherry producer exports cherries to the United States and is a competitor of the Michigan cherry producer.
  7. g
    Contract G—property-casualty reinsurance contract. Reinsurance contracts, which indemnify the holder of the contract (the reinsured) against loss or liability relating to insurance risk, are accounted for under the provisions of Topic 944. Reinsurance contract provisions often adjust the amount at risk or the price of the amount at risk for a number of events or circumstances, such as loss experience or premium volume, while continuing to provide indemnification related to insurance risk. One type of reinsurance contract, an excess contract, provides the reinsured with indemnification against a finite amount of insured losses in excess of a defined level of insured losses retained by the reinsured. Example 11 (see paragraph 815-10-55-132) illustrates a reinsurance contract with a provision that adjusts the retention amount downward based on the performance of a specified equity index.
","snippet":"Following are descriptions of seven contracts:\n(a) Contract A—electric utility. A dual-trigger policy pays for a level of actual losses caused by the following two events occurring simultaneously:\n(1) A power outage resu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b5bd14666eb913081baebb39418bb81698d2602e7bcf369b8989366e28e42148","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-41","para":"55-41","html":"
The following guidance illustrates application of the scope exception (as discussed beginning in paragraph 815-10-15-63) for a derivative instrument that impedes sales accounting to situations in which the transferor accounts for the transfer as a financing:
  1. a
    If a transferor transfers financial assets but retains a call option on those assets, the net settlement criterion (as discussed beginning in paragraph 815-10-15-119) may be satisfied because the assets transferred are readily obtainable; however, the transfer may fail the isolation criterion in paragraph 860-10-40-5(a) because of significant continued involvement by the transferor. In that example, because the transferor is required to continue to recognize the assets transferred, recognition of the call option on those assets would effectively result in recording the assets twice. Therefore, the derivative instrument is not subject to the scope of this Subtopic.
  2. b
    In the situation described in (a), the transferor may have sold to the transferee a put option. Exercise of the put option by the transferee would result in the transferor repurchasing certain assets that it has transferred, but which it still records as assets in its balance sheet. Because the transferor is required to recognize the borrowing, recognition of the put option would result in recording the liability twice. Therefore, the derivative instrument is not subject to the scope of this Subtopic.
  3. c
    A transferor may transfer fixed-rate financial assets to a transferee and guarantee a variable-rate return. If the transfer is accounted for as a sale and an interest-rate swap is entered into as part of the contractual provisions of the transfer, the transferor records the interest rate swap as one of the financial components. In that case, the interest rate swap should be accounted for separately in accordance with this Subtopic. However, if the transfer is accounted for as a financing, the transferor records on its balance sheet the issuance of variable-rate debt and continues to report the fixed-rate financial assets; no derivative instrument is recognized under this Subtopic.
  4. d
    In a securitization transaction, a transferor transfers $100 of fixed-rate financial assets and the contractual terms of the beneficial interests incorporate an interest rate swap with a notional principal of $1 million. If the transfer is accounted for as a sale and the interest rate swap is entered into as part of the contractual provisions of the transfer, the transferor identifies and records the interest rate swap as one of the financial components. In that case, the interest rate swap would be accounted for separately in accordance with this Subtopic. However, if the transfer is accounted for as a financing, the transferor records in its balance sheet a $100 variable-rate borrowing and continues to report the $100 of fixed-rate financial assets. In this instance, because the liability is leveraged, requiring computation of interest flows based on a $1 million notional amount, the liability (which does not meet the definition of a derivative instrument in its entirety) is a hybrid instrument that contains an embedded derivative—such as an interest rate swap with a notional amount of $999,900. That embedded derivative is not clearly and closely related to the host contract under Section 815-15-25 (see paragraph 815-15-25-1[c]) because it could result in a rate of return on the counterparty's asset that is at least double the initial rate and that is at least twice what otherwise would be the then-current market return for a contract that has the same terms as the host contract and that involves a debtor with credit quality similar to the issuer's credit quality at inception. Therefore, the derivative instrument must be recorded separately under paragraph 815-15-25-1.
","snippet":"The following guidance illustrates application of the scope exception (as discussed beginning in paragraph 815-10-15-63) for a derivative instrument that impedes sales accounting to situations in which the transferor acc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30c868326df9dcfbe4050e7dbe64c1821843df5e78112334242bb5b28b44d3bb","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-42","para":"55-42","html":"
Paragraph not used.
","snippet":"Paragraph not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d32dfa240cefd3990f86a817e2959492b2d27526010724406094db43228a1223","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-43","para":"55-43","html":"
This guidance illustrates the application of Section 815-10-15 in the following situations:
  1. a
    Contract with payment provision
  2. b
    Credit derivatives
  3. c
    Equity options issued to employees and nonemployees
  4. d
    Subparagraph superseded by Accounting Standards Update No. 2018-07
  5. e
    Repurchase agreements and wash sales
  6. f
    Short sales (sales of borrowed securities)
  7. g
    Take-or-pay contracts.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8This guidance illustrates the application of Section 815-10-15 in the following situations:
  1. a
  2. b
    Credit derivatives
  3. c
    Equity options issued to employees and nonemployees
  4. d
  5. e
    Repurchase agreements and wash sales
  6. f
    Short sales (sales of borrowed securities)
  7. g
    Take-or-pay contracts.
","snippet":"This guidance illustrates the application of Section 815-10-15 in the following situations:\n(a) Contract with payment provision\n(b) Credit derivatives\n(c) Equity options issued to employees and nonemployees\n(d) Subparagr…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6cb5883a39ff3ddcc82021ce6e5f3001a43e63737288f1f3547b18e1f3d1491d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-44","para":"55-44","html":"
If the contract contains a payment provision that requires the issuer to pay to the holder a specified dollar amount based on a financial variable, the contract is subject to the requirements of this Subtopic.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8
Editor's Note: Paragraph 815-10-55-44 will be will be superseded upon transition, together with its heading.
• • > Contract with Payment Provision
Paragraph superseded by Accounting Standards Update No. 2025-07.
","snippet":"If the contract contains a payment provision that requires the issuer to pay to the holder a specified dollar amount based on a financial variable, the contract is subject to the requirements of this Subtopic. Transition…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:83eab411a6d7e93334d49298d1890e3937ad7423b55bded02fd95de9e5e7f549","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-45","para":"55-45","html":"
Many different types of contracts are indexed to the creditworthiness of a specified entity or group of entities, but not all of them are derivative instruments. Credit-indexed contracts that have certain characteristics described in paragraph 815-10-15-58 are guarantees and are not subject to the requirements of this Subtopic. Credit-indexed contracts (often referred to as credit derivatives) that do not have the characteristics necessary to qualify for the exception in that paragraph are subject to the requirements of this Subtopic. One example of the latter is a credit-indexed contract that requires a payment due to changes in the creditworthiness of a specified entity even if neither party incurs a loss due to the change (other than a loss caused by the payment under the credit-indexed contract).
","snippet":"Many different types of contracts are indexed to the creditworthiness of a specified entity or group of entities, but not all of them are derivative instruments. Credit-indexed contracts that have certain characteristics…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c53be9572eeef451baa871729dfda2d1c9ddc01b13ed693906bae14fc4a909e","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-46","para":"55-46","html":"
Some entities issue stock options to grantees in which the underlying shares are stock of an unrelated entity. Consider the following example:
  1. a
    Entity A awards an option to a grantee.
  2. b
    The terms of the option award provide that, if the grantee continues to provide services to Entity A for 3 years, the grantee may exercise the option and purchase 1 share of common stock of Entity B, a publicly traded entity, for $10 from Entity A.
  3. c
    Entity B is unrelated to Entity A and, therefore, is not a subsidiary or accounted for by the equity method.
","snippet":"Some entities issue stock options to grantees in which the underlying shares are stock of an unrelated entity. Consider the following example:\n(a) Entity A awards an option to a grantee.\n(b) The terms of the option award…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:54a25bb0656c3cf4f2df054a308c023e365fc4fa5a5c81f7c0e64d1182d50f2a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-47","para":"55-47","html":"
The option award in this example is not within the scope of Topic 718 because the underlying stock is not an equity instrument of the grantor.
","snippet":"The option award in this example is not within the scope of Topic 718 because the underlying stock is not an equity instrument of the grantor.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e8359708194e7d542df44d0ed6f86777144ab9c3838872ef50bbb6ffec1064f8","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-48","para":"55-48","html":"
The option award is not subject to Topic 718. Rather, the option award in the example in paragraph 815-10-55-46 meets the definition of a derivative instrument in this Subtopic and, therefore, should be accounted for by the grantor as a derivative instrument under this Subtopic. After vesting, the option award would continue to be accounted for as a derivative instrument under this Subtopic.
","snippet":"The option award is not subject to Topic 718. Rather, the option award in the example in paragraph 815-10-55-46 meets the definition of a derivative instrument in this Subtopic and, therefore, should be accounted for by …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b4f81cb28bb54ab88669394213615ff6fe8ba28b189693c79e88bd3ce059df4e","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-48A","para":"55-48A","html":"
Paragraphs
718-10-35-9 through 35-14
contain the concept that equity instruments that are granted in share-based payment transactions may initially be subject to that Subtopic, but after certain events or circumstances, those equity instruments may cease being subject to that Subtopic. The terms of an award that ceases to be subject to Topic 718 in accordance with paragraphs
718-10-35-9 through 35-14
should be analyzed to determine whether the award is subject to this Subtopic.
","snippet":"Paragraphs 718-10-35-9 through 35-14 contain the concept that equity instruments that are granted in share-based payment transactions may initially be subject to that Subtopic, but after certain events or circumstances, …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cfb733a7a1f211c87d165ce3f4a01ec53a304d011a736fe50bf284363e896d46","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-49","para":"55-49","html":"
Paragraph superseded by Accounting Standards Update No. 2018-07.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-07.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a11ab3e6e13edf1eed039939e0de6658c2c4b571cd09ac4dc9216f5502f9415","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-50","para":"55-50","html":"
Paragraph superseded by Accounting Standards Update No. 2018-07.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-07.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:155d5a3c37f14f4ad2cbef63a6d2c2c6c6d50ccb0c8201e79d9f7bcae78f732a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-51","para":"55-51","html":"
Paragraph superseded by Accounting Standards Update No. 2018-07.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-07.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6e1325e9050204dab264638213b304c5658005e5917fde657ad412563089c324","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-52","para":"55-52","html":"
Paragraph superseded by Accounting Standards Update No. 2018-07.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-07.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7b486d519ec25d6e449b700e1272b5d0b52a37324c69c1bafcb9747502f697bf","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-53","para":"55-53","html":"
Paragraph superseded by Accounting Standards Update No. 2018-07.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-07.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ce97765f25676e368f3965301d664ea3c7d4862481abc0b6db143c2dfa8072a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-54","para":"55-54","html":"
The exception in paragraph 815-10-15-74(b) does not apply to the holder of those derivative instruments.
","snippet":"The exception in paragraph 815-10-15-74(b) does not apply to the holder of those derivative instruments.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3045575897ed68eb3f88f6da2d23d8aa73c9b49dfc3954bc7b4ce510eb7e8934","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-55","para":"55-55","html":"
Thus, paragraph 815-10-15-75(a) explains that equity instruments (including stock options) received by nonemployees as compensation for goods and services are included in the scope of this Subtopic assuming the contract has all the characteristics of a derivative instrument.
","snippet":"Thus, paragraph 815-10-15-75(a) explains that equity instruments (including stock options) received by nonemployees as compensation for goods and services are included in the scope of this Subtopic assuming the contract …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e8526c674300ba3b067e3667c6684d54382770815c2402047510f9b6c99e169","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-56","para":"55-56","html":"
Repurchase agreements and wash sales that are accounted for as sales (as described in paragraphs 860-10-55-55 and 860-10-55-57) and in which the transferor is both obligated and entitled to repurchase the transferred asset at a fixed or determinable price contain two separate features, one of which may be a derivative instrument. The initial exchange of financial assets for cash is a sale-purchase transaction—generally not a transaction that involves a derivative instrument. However, the accompanying forward contract that gives the transferor the right and obligation to repurchase the transferred asset involves an underlying and a notional amount (the price of the security and its denomination), and it does not require an initial net investment in the contract. Consequently, if the forward contract requires delivery of a security that is readily convertible to cash or otherwise meets the net settlement criterion as discussed beginning in paragraph 815-10-15-99, it is subject to the requirements of this Subtopic.
","snippet":"Repurchase agreements and wash sales that are accounted for as sales (as described in paragraphs 860-10-55-55 and 860-10-55-57) and in which the transferor is both obligated and entitled to repurchase the transferred ass…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1771956aabb6ce45f38a682207db5dce0133e535b43ec2e9744b8dc242db827b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-57","para":"55-57","html":"
The following discussion applies only to short sales with the characteristics described. Some groups of transactions that are referred to as short sales may have different characteristics. If so, a different analysis would be appropriate, and other derivative instruments may be involved. Short sales (sales of borrowed securities) typically involve all of the following activities:
  1. a
    Selling a security (by the short seller to the purchaser)
  2. b
    Borrowing a security (by the short seller from the lender)
  3. c
    Delivering the borrowed security (by the short seller to the purchaser)
  4. d
    Purchasing a security (by the short seller from the market)
  5. e
    Delivering the purchased security (by the short seller to the lender).
Those five activities involve three separate contracts.
","snippet":"The following discussion applies only to short sales with the characteristics described. Some groups of transactions that are referred to as short sales may have different characteristics. If so, a different analysis wou…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:965f7f010c7e062917d3c71ae1c1deea9fd42affcece50bb222e2b75b0eabb62","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-58","para":"55-58","html":"
A contract that distinguishes a short sale involves activities in (b) and (e) in the preceding paragraph, borrowing a security and replacing it by delivering an identical security. Such a contract has two of the three characteristics of a derivative instrument. The settlement is based on an underlying (the price of the security) and a notional amount (the face amount of the security or the number of shares), and the settlement is made by delivery of a security that is readily convertible to cash. However, the other characteristic, no initial net investment or an initial net investment that is smaller by more than a nominal amount than would be required for other types of contracts that would be expected to have a similar response to changes in market factors, is not present. (See paragraphs
815-10-15-94 through 15-96
.) The borrowed security is the lender's initial net investment in the contract. Consequently, the contract relating to activities in (b) and in (e) in the preceding paragraph is not a derivative instrument.
","snippet":"A contract that distinguishes a short sale involves activities in (b) and (e) in the preceding paragraph, borrowing a security and replacing it by delivering an identical security. Such a contract has two of the three ch…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0a8fd410850a646f42fa888a966fdaa6276aff520ac87f9caf9a3bd1167c64fc","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-59","para":"55-59","html":"
The other two contracts (one for activities in paragraph 815-10-55-57[a] and in paragraph 815-10-55-57[c] and the other for activity in paragraph 815-10-55-57[d]) are routine and do not generally involve derivative instruments. However, if a forward purchase or forward sale is involved, and the contract does not qualify for the exception in paragraphs
815-10-15-15 through 15-17
, it is subject to the requirements of this Subtopic.
","snippet":"The other two contracts (one for activities in paragraph 815-10-55-57[a] and in paragraph 815-10-55-57[c] and the other for activity in paragraph 815-10-55-57[d]) are routine and do not generally involve derivative instr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:264fe3dbf7093623cde1e5fb1ad6d93970b9c912d124eaccf591da9a8065cf08","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-60","para":"55-60","html":"
Whether a take-or-pay contract is subject to this Subtopic depends on its terms. For example, if the product to be delivered is not readily convertible to cash and there is no net settlement option, the contract fails to meet the net settlement criterion in paragraph 815-10-15-83(c) and is not subject to the requirements of this Subtopic. In certain circumstances, a take-or-pay contract may represent or contain a lease that should be accounted for in accordance with Topic 842. (Paragraph 815-10-15-79 explains that leases subject to that Topic are not subject to this Subtopic.)
","snippet":"Whether a take-or-pay contract is subject to this Subtopic depends on its terms. For example, if the product to be delivered is not readily convertible to cash and there is no net settlement option, the contract fails to…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6d19c0fc6c67d28bf929d3b5a3e864876f3ac512122678e73b26651217a205e2","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-61","para":"55-61","html":"
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Determining whether realized gains and losses on physically settled derivative instruments not held for trading purposes should be reported in the income statement on a gross or net basis is a matter of judgment that depends on the relevant facts and circumstances. Consideration of the facts and circumstances should be made in the context of the various activities of the entity rather than based solely on the terms of the individual contracts. In evaluating the facts and circumstances for purposes of determining whether an arrangement should be reported on a gross or net basis, all of the following may be considered:
  1. a
    The economic substance of the transaction
  2. b
    The guidance set forth in Topic 845 relative to nonmonetary exchanges
  3. c
    The principal versus agent considerations provided in paragraphs
    606-10-55-36 through 55-40
    .
","snippet":"Determining whether realized gains and losses on physically settled derivative instruments not held for trading purposes should be reported in the income statement on a gross or net basis is a matter of judgment that dep…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b10d8b8d4c40074747b083482cef72c2a169cc79ebd04b76900f7059ebd73d1f","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-63","para":"55-63","html":"
From the perspective of the issuer of the contract, synthetic guaranteed investment contracts are derivative instruments as defined in this Subtopic. Synthetic guaranteed investment contracts contain an underlying, the formula by which interest is calculated, and a notional amount. The interplay between the fair value of a portfolio of segregated assets and a notional amount together determine the amount of the settlement(s), if any, due from the contract issuer, after considering all contract terms. Depending on the specifics of the contract, a synthetic guaranteed investment contract requires either no initial investment or the payment of a risk charge or fee (covering either the entire contract or, more typically, an initial period of the contract). The terms of a synthetic guaranteed investment contract require net settlement because the issuer of the contract makes a payment to the holder equal to the net amount due. For a background discussion of synthetic guaranteed investment contracts, including a comparison with traditional and benefit-responsive guaranteed investment contracts, see paragraph 815-10-05-8. Example 17 (see paragraph 815-10-55-169) illustrates contractual terms of a synthetic guaranteed investment contracts.
","snippet":"From the perspective of the issuer of the contract, synthetic guaranteed investment contracts are derivative instruments as defined in this Subtopic. Synthetic guaranteed investment contracts contain an underlying, the f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:72046e10f0bd9562297d5d3dcca86c11780ba278316b55c7decfe453ebb60989","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-64","para":"55-64","html":"
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The following Cases illustrate the application of paragraph 815-10-15-6:
  1. a
    Attached call option (Case A)
  2. b
    Transferable call option (Case B).
","snippet":"The following Cases illustrate the application of paragraph 815-10-15-6:\n(a) Attached call option (Case A)\n(b) Transferable call option (Case B).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1eaf65bb6e819e757be2fddabbab1dc55ea5c28b64372ea9a9e4446b6b72cbe1","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-67","para":"55-67","html":"
This Case presents a transaction that involves the addition of a call option contemporaneously with or after the issuance of debt.
","snippet":"This Case presents a transaction that involves the addition of a call option contemporaneously with or after the issuance of debt.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1b70b8bb49ff8be689a0d50af2051ab48eda5ccca5f811738e76d72baaec1bd1","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-68","para":"55-68","html":"
Entity X issues 15-year puttable bonds to an Investment Banker for $102. The put option may be exercised at the end of five years. Contemporaneously, the Investment Banker sells the bonds with an attached call option to Investor A for $100. (The call option is a written option from the perspective of Investor A and a purchased option from the perspective of the Investment Banker.) The Investment Banker also sells to Investor B for $3 the call option purchased from Investor A on those bonds. The call option has an exercise date that is the same as the exercise date on the embedded put option. At the end of five years, if interest rates increase, Investor A would presumably put the bonds back to Entity X, the issuer. If interest rates decrease, Investor B would presumably call the bonds from Investor A.
","snippet":"Entity X issues 15-year puttable bonds to an Investment Banker for $102. The put option may be exercised at the end of five years. Contemporaneously, the Investment Banker sells the bonds with an attached call option to …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e5303ae3b36d98b50105fc631910dfd750d6cf7427423fc307f426ad634b4eb8","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-69","para":"55-69","html":"
As required by paragraph 815-10-15-6, the call option that is attached by the Investment Banker is a separate derivative instrument from the perspective of Investor A.
","snippet":"As required by paragraph 815-10-15-6, the call option that is attached by the Investment Banker is a separate derivative instrument from the perspective of Investor A.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:436a541b198d6f822d1128105d6e04f3a328061ccc5b9c352ee97eb3ec7ba45d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-70","para":"55-70","html":"
This Case presents a group of transactions with a similar overall effect to that in Case A.
","snippet":"This Case presents a group of transactions with a similar overall effect to that in Case A.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:38e023a7e812a8f2fe21824ddf984111c37345c073eb355a7743f70eb3fa2a37","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-71","para":"55-71","html":"
Entity Y issues 15-year puttable bonds to Investor A for $102. The put option may be exercised at the end of five years. Contemporaneously, Entity Y purchases a transferable call option on the bonds from Investor A for $2. Entity Y immediately sells that call option to Investor B for $3. The call option has an exercise date that is the same as the exercise date of the embedded put option. At the end of five years, if rates increase, Investor A would presumably put the bonds back to Entity Y, the issuer. If rates decrease, Investor B would presumably call the bonds from Investor A.
","snippet":"Entity Y issues 15-year puttable bonds to Investor A for $102. The put option may be exercised at the end of five years. Contemporaneously, Entity Y purchases a transferable call option on the bonds from Investor A for $…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7bc81026208596999a32b873bf1ea33f507bbd88c68f565a16572b94d38d49d0","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-72","para":"55-72","html":"
As required by paragraph 815-10-15-6, the call option is a separate freestanding derivative instrument that must be reported at fair value with changes in value recognized currently in earnings unless designated as a hedging instrument.
","snippet":"As required by paragraph 815-10-15-6, the call option is a separate freestanding derivative instrument that must be reported at fair value with changes in value recognized currently in earnings unless designated as a hed…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e5a8133dbe66a39fcfa6b1b1e0229e32f803fd898acc9dcf0cdb1941f4525b13","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-73","para":"55-73","html":"
This Example illustrates whether a contract meets the criterion in paragraph 815-10-15-83(b) related to initial net investment and therefore meets the definition of a derivative instrument and, if not, whether there is an embedded derivative that warrants separate accounting.
","snippet":"This Example illustrates whether a contract meets the criterion in paragraph 815-10-15-83(b) related to initial net investment and therefore meets the definition of a derivative instrument and, if not, whether there is a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0c1e5e060c644939ff56ac22c1d9035a682e6b9bd98603ccd19a827390b0d8f0","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-74","para":"55-74","html":"
An entity enters into a forward contract that requires the purchase of 1 share of an unrelated entity's common stock in 1 year for $110 (the market forward price) and at inception of the contract, the entity elects to prepay the contract pursuant to its terms for $105 (the current price of the share of common stock).
","snippet":"An entity enters into a forward contract that requires the purchase of 1 share of an unrelated entity's common stock in 1 year for $110 (the market forward price) and at inception of the contract, the entity elects to pr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e250812ea1d8f1e2b3f742da60a7801cac9e712bce34331c62e6563c80b8aa91","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-75","para":"55-75","html":"
If no prepayment is made at inception, the contract would meet the criterion in paragraph 815-10-15-83(b) because it does not require an initial net investment but, rather, contains an unexercised election to prepay the contract at inception. If the contract gives the entity the option to prepay the contract at a later date during its 1-year term (at $105 or some other specified amount), exercise of that option would be accounted for as a loan that is repayable at $110 at the end of the forward contract's 1-year term. If, instead, the entity elects to prepay the contract at inception for $105, the contract does not meet the definition of a freestanding derivative instrument. The initial net investment of $105 is equal to the initial price of the 1 share of stock being purchased under the contract and therefore is equal to the investment that would be required for other types of contracts that would be expected to have a similar response to changes in market factors. That is, the initial net investment is equal to the amount that would be exchanged to acquire the asset related to the underlying.
","snippet":"If no prepayment is made at inception, the contract would meet the criterion in paragraph 815-10-15-83(b) because it does not require an initial net investment but, rather, contains an unexercised election to prepay the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a43a7bae603391b2c8124f1285176b3aea45bf87a85b0cc6720c27eb34ff9b6","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-76","para":"55-76","html":"
However, the entity must assess whether that nonderivative instrument contains an embedded derivative that, pursuant to paragraph 815-15-25-1, requires separate accounting as a derivative unless the fair value election is made pursuant to paragraph 815-15-25-4. In this instance, the prepaid contract is a hybrid instrument that is composed of a debt instrument as the host contract (that is, a loan that is repayable at $110 at the end of the forward contract's 1-year term) and an embedded derivative based on equity prices. The host contract is a debt instrument because the holder has none of the rights of a shareholder, such as the ability to vote the shares and receive distributions to shareholders. (See paragraph 815-15-25-16.) Unless the hybrid instrument is remeasured at fair value with changes in value recorded in earnings as they occur, the embedded derivative must be separated from the host contract because the economic characteristics and risks of a derivative based on equity prices are not clearly and closely related to a debt host contract, and a separate instrument with the same terms as the embedded derivative would be a derivative instrument subject to the requirements of this Subtopic.
","snippet":"However, the entity must assess whether that nonderivative instrument contains an embedded derivative that, pursuant to paragraph 815-15-25-1, requires separate accounting as a derivative unless the fair value election i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0de7a22e367c951cca5ed5df0ba5e1b7ec90d5eaf429def698b3adb8b3f2ba6e","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-77","para":"55-77","html":"
The following Cases illustrate the determination of an underlying if a commodity contract includes a fixed element and a variable element:
  1. a
    A commodity contract between two parties to transact a fixed quantity at a specified future date at a fixed price (such as the commodity's forward price at the inception of the contract) (Case A)
  2. b
    A commodity contract between two parties to transact a fixed quantity at a specified future date at whatever the prevailing market price might be at that future date (Case B)
  3. c
    A commodity contract having features of both a fixed-price contract and variable-price contract; specifically, an agreement to purchase a commodity in the future at the prevailing market index price at that future date plus or minus a fixed basis differential set at the inception of the contract (Case C).
","snippet":"The following Cases illustrate the determination of an underlying if a commodity contract includes a fixed element and a variable element:\n(a) A commodity contract between two parties to transact a fixed quantity at a sp…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ad11b399b7f59d8d7c402e0074ddff0e96d4c338698ee0482605dedc6633d3f","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-78","para":"55-78","html":"
Assume that each of the contracts in Cases A, B, and C has the characteristics of notional amount, underlying, and no initial net investment and that the commodity to be delivered is readily convertible to cash as discussed beginning in paragraph 815-10-15-119.
","snippet":"Assume that each of the contracts in Cases A, B, and C has the characteristics of notional amount, underlying, and no initial net investment and that the commodity to be delivered is readily convertible to cash as discus…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:10abfe0d224f13d49cc7b783676ce3ba55f5c665427c9516dffb4ed958400aeb","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-79","para":"55-79","html":"
This fixed-price commodity contract is a derivative instrument because it meets all the criteria in paragraph 815-10-15-83, including having an underlying (namely, the price of the commodity), as required by paragraph 815-10-15-83(a)(1). The contract's fair value will change as the underlying changes because the contract price is not the prevailing market price at the future transaction date. A party to this contract would need to determine if the normal purchases and normal sales exception (see discussion beginning in paragraph 815-10-15-22) applies to the contract.
","snippet":"This fixed-price commodity contract is a derivative instrument because it meets all the criteria in paragraph 815-10-15-83, including having an underlying (namely, the price of the commodity), as required by paragraph 81…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8b18e39cce195fe58c6e2d5b65680adabaa30a3201126c951de4a6d5132990da","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-80","para":"55-80","html":"
This variable-price commodity contract is a derivative instrument because it meets all the criteria in paragraph 815-10-15-83, including having an underlying (namely, the price of the commodity), as required by paragraph 815-10-15-83(a)(1). However, because the contract price is the prevailing market price at the future transaction date, the variable-price commodity contract would not be expected to have a fair value other than zero. A party to this contract would need to determine if the normal purchases and normal sales exception (see discussion beginning in paragraph 815-10-15-22) applies to the contract.
","snippet":"This variable-price commodity contract is a derivative instrument because it meets all the criteria in paragraph 815-10-15-83, including having an underlying (namely, the price of the commodity), as required by paragraph…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ae292a713e8a725c7a81176fbc63ad5e9a585d21a08ae5fe3686abcda990ccc","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-81","para":"55-81","html":"
In a commodity contract between a buyer and seller of crude oil, the buyer is a refinery that seeks to use the crude oil in the production of unleaded gasoline. The buyer agrees in January to buy 1,000,000 barrels of a specific type of crude oil in July from the seller at the July 1 West Texas Intermediate index price plus $1.00 per barrel. The contract appears to be primarily a variable-price contract, but includes a fixed margin above that price. (If the buyer or the seller no longer wants exposure to fluctuations in the West Texas Intermediate index between January and July, it will separately use the futures market to fix the West Texas Intermediate index portion of the contract.)
","snippet":"In a commodity contract between a buyer and seller of crude oil, the buyer is a refinery that seeks to use the crude oil in the production of unleaded gasoline. The buyer agrees in January to buy 1,000,000 barrels of a s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9acdb15dda9fe82e55b86821daadea80fe9eb95d84cca0044146bc672112c234","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-82","para":"55-82","html":"
The fixed $1.00 differential is commonly referred to as the basis differential, but it reflects multiple factors, such as timing, quality, and location. If not fixed, the basis differential can be very volatile, because it captures the passage of time (a financing element), changes in relative value of different qualities (or grades) of crude to each other (light versus heavy, sweet versus sour), and changes in the attractiveness of locations from the central pricing hub (Cushing, Oklahoma) relative to each other factor. Supply and demand is a critical factor in influencing the changes in basis due to quality and location; for example, an increase in imports of light crude through the Gulf of Mexico corridor will tend to lower the basis differential for light crude (falling prices due to increased supply) and tend to direct domestic supplies of light crude to northern U.S. locations (because the foreign oil fills southern U.S. demand), lowering the basis differential for contracts calling for delivery at northern points (again due to increased supply in the North). The basis differential therefore is not a simple fixed transport charge, but rather a complex and volatile variable in itself. For this reason, energy traders may specialize solely in trading basis and seeking the most attractive differential at all times relative to the West Texas Intermediate index—fixing and unfixing basis by selling contracts back to counterparties or entering into offsetting contracts with third parties.
","snippet":"The fixed $1.00 differential is commonly referred to as the basis differential, but it reflects multiple factors, such as timing, quality, and location. If not fixed, the basis differential can be very volatile, because …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66e247c07c9bccc7a497af4b7dc0cb17667da466ee84360980967b890e21b956","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-83","para":"55-83","html":"
The whole mixed-attribute contract is a derivative instrument because the basis differential is a market variable in determining the final transaction price under the contract, and this variable has been fixed in the contract, producing an underlying. (If the differential was a market pricing convention that typically would not be expected to change, the contract would be a derivative instrument with very minor, if any, fluctuations in fair value.) The fact that the base commodity price in the contract is variable will help to mute the fluctuations in fair value of the contract as a whole, but there still will be potential changes in fair value of the overall contract because of the fixed-basis element. A party to this contract would need to determine if the normal purchases and normal sales exception applies to the contract. (Paragraph 815-20-55-47 explains why such a mixed-attribute contract that is a derivative instrument would generally not be sufficiently effective if designated as the sole hedging instrument in a cash flow hedge of the anticipated purchase or sale of the commodity.)
","snippet":"The whole mixed-attribute contract is a derivative instrument because the basis differential is a market variable in determining the final transaction price under the contract, and this variable has been fixed in the con…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2a60860e7ceb9674b77e9495f06b91810bcdc30be93f7349547fcc3d73d94343","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-84","para":"55-84","html":"
As required by paragraphs
815-10-15-110 through 15-118
and
815-10-15-119 through 15-120
, respectively, the evaluation of whether a market mechanism exists and whether items to be delivered under a contract are readily convertible to cash must be performed at inception and on an ongoing basis throughout a contract's life. For example, if a market develops, if an entity effects an initial public offering, or if daily trading volume changes for a sustained period of time, then those events need to be considered in reevaluating whether the contract meets the definition of a derivative instrument. Similarly, if events occur after the inception or acquisition of a contract that would cause a contract that previously met the definition of a derivative instrument to cease meeting the criteria (for example, an entity becomes delisted from a national stock exchange), then that contract cannot continue to be accounted for under this Subtopic. The guidance in paragraphs
815-10-15-125 through 15-127
about assessing the significance of transaction costs is not relevant when determining whether such a contract no longer meets the definition of a derivative instrument.
","snippet":"As required by paragraphs 815-10-15-110 through 15-118 and 815-10-15-119 through 15-120, respectively, the evaluation of whether a market mechanism exists and whether items to be delivered under a contract are readily co…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:82cf442f16d584789016caed3944e76fd257d20ecf69db033a38bbebc31ec019","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-85","para":"55-85","html":"
The following Cases illustrate the importance of ongoing evaluation:
  1. a
    Market mechanism develops after contract inception (Case A).
  2. b
    Initial public offering makes shares readily convertible to cash after contract inception (Case B).
  3. c
    Increased trading activity makes shares readily convertible to cash after contract inception (Case C).
  4. d
    Delisting makes shares not readily convertible to cash after contract inception (Case D).
","snippet":"The following Cases illustrate the importance of ongoing evaluation:\n(a) Market mechanism develops after contract inception (Case A).\n(b) Initial public offering makes shares readily convertible to cash after contract in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:387360383157ec1bda706634df93ad4ace7ee89b0e0679416e3291c55c692c63","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-86","para":"55-86","html":"
A purchase contract for future delivery of commodity X is entered into and, at the inception of the contract, the market for contracts on commodity X is a relatively thin market, such that brokers do not stand ready to buy and sell the contracts. As time passes, the market for commodity X matures and broker-dealer networks develop. The existence of the broker-dealer market and the ability of the purchaser to be relieved of its rights and obligations under the purchase contract are consistent with the characteristics of a market mechanism as discussed beginning in paragraph 815-10-15-110. Accordingly, the purchase contract will have the characteristics of net settlement as defined by paragraph 815-10-15-110 as broker-dealer networks develop.
","snippet":"A purchase contract for future delivery of commodity X is entered into and, at the inception of the contract, the market for contracts on commodity X is a relatively thin market, such that brokers do not stand ready to b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6e81a09e036c84ae3879d129923bf9772302b7c62b71e35a1e48c27cf2f4aeca","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-87","para":"55-87","html":"
A nontransferable forward contract on a nonpublic entity's stock that provides only for gross physical settlement is generally not a derivative instrument because the net settlement criteria are not met. If the entity, at some point in the future, accomplishes an initial public offering of its shares and the original contract is still outstanding, the shares to be delivered would be considered to be readily convertible to cash (assuming that the shares under the contract could be rapidly absorbed in the market without significantly affecting the price).
","snippet":"A nontransferable forward contract on a nonpublic entity's stock that provides only for gross physical settlement is generally not a derivative instrument because the net settlement criteria are not met. If the entity, a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bd2e18c0afea247deb0e09a46f0eb739c502b78efd845da1d48507fca8a1e4f3","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-88","para":"55-88","html":"
A nontransferable forward contract on a public entity's stock provides for delivery on a single date of a significant number of shares that, at the inception of the contract, would significantly affect the price of the public entity's stock in the market if sold within a few days. As a result, the contract does not satisfy the readily-convertible-to-cash criterion. However, at some later date, the trading activity of the public entity's stock increases significantly. Upon a subsequent evaluation of whether the shares are readily convertible to cash, the number of shares to be delivered would be minimal in relation to the new average daily trading volume such that the contract would then satisfy the net settlement characteristic.
","snippet":"A nontransferable forward contract on a public entity's stock provides for delivery on a single date of a significant number of shares that, at the inception of the contract, would significantly affect the price of the p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8486ac03b02c71567b7d171052982b1702797be671711a9ce64dc3c3ce74693a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-89","para":"55-89","html":"
A nontransferable forward contract on a public entity's stock meets the net settlement criteria (as discussed beginning in paragraph 815-10-15-119) in that, at inception of the contract, the shares are expected to be readily convertible to cash when delivered under the contract. Assume that there is no other way that the contract meets the net settlement criteria. The public entity subsequently becomes delisted from the stock exchange, thus causing the shares to be delivered under the contract to no longer be readily convertible to cash.
","snippet":"A nontransferable forward contract on a public entity's stock meets the net settlement criteria (as discussed beginning in paragraph 815-10-15-119) in that, at inception of the contract, the shares are expected to be rea…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:65c26d03ec9e04c2553b9c59a7e71a06666002a89b9e5208762a6edd16e0e55c","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-90","para":"55-90","html":"
This Example illustrates the concept of net share settlement. Entity A has a warrant to buy 100 shares of the common stock of Entity X at $10 a share. Entity X is a privately held entity. The warrant provides Entity X with the choice of settling the contract physically (gross 100 shares) or on a net share basis. The stock price increases to $20 a share. Instead of Entity A paying $1,000 cash and taking full physical delivery of the 100 shares, the contract is net share settled and Entity A receives 50 shares of stock without having to pay any cash for them. (Net share settlement is sometimes described as a cashless exercise.) The 50 shares are computed as the warrant's $1,000 fair value upon exercise divided by the $20 stock price per share at that date.
","snippet":"This Example illustrates the concept of net share settlement. Entity A has a warrant to buy 100 shares of the common stock of Entity X at $10 a share. Entity X is a privately held entity. The warrant provides Entity X wi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ca369d93368639865403162e02a873aa4ba9e3c50329040f3ea89d7284670ba","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-91","para":"55-91","html":"
The following Cases illustrate whether an ability to offset constitutes a market mechanism as discussed under paragraph 815-10-15-111(b):
  1. a
    Market mechanism relieves rights and obligations (Case A).
  2. b
    Mechanism to offset does not relieve rights and obligations (Case B).
  3. c
    Mechanism to offset relieves rights and obligations (Case C).
","snippet":"The following Cases illustrate whether an ability to offset constitutes a market mechanism as discussed under paragraph 815-10-15-111(b):\n(a) Market mechanism relieves rights and obligations (Case A).\n(b) Mechanism to of…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:58d7d501eae8d3373d4ef153596c6d336154d3a83178aa3ba5aa330c5fb6eb96","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-92","para":"55-92","html":"
For Cases A and B, assume that the contract would not qualify for the normal purchases and sales exception (as discussed beginning in paragraph 815-10-15-22). Assume also for Cases A and B that the asset associated with the underlying is not readily convertible to cash (as discussed beginning in paragraph 815-10-15-119).
","snippet":"For Cases A and B, assume that the contract would not qualify for the normal purchases and sales exception (as discussed beginning in paragraph 815-10-15-22). Assume also for Cases A and B that the asset associated with …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:104edac9d170e3b36331b08263437a2ecc5ff3ea9bfcdd11d671fd8368320d43","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-93","para":"55-93","html":"
Assume a broker-dealer stands ready to buy and sell a non-exchange-traded commodity forward contract that would relieve either party to the contract of its obligation to make (or right to accept) delivery of the commodity and its right to receive (or obligation to make) payment under the contract by arranging for a broker-dealer to make or accept delivery and paying the broker-dealer a commission plus any difference between the contract price and the current market price of the commodity.
","snippet":"Assume a broker-dealer stands ready to buy and sell a non-exchange-traded commodity forward contract that would relieve either party to the contract of its obligation to make (or right to accept) delivery of the commodit…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9027876421c4d7e62a47dcbc0cd6e43da4e9ac7ca4cd1716f061194f5ac0ad9b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-94","para":"55-94","html":"
The arrangement is considered a market mechanism under paragraph 815-10-15-110.
","snippet":"The arrangement is considered a market mechanism under paragraph 815-10-15-110.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0ffa9d6f436b9384b9558fdc27a41d1dfa6cff95e2eb3f06a68f711898768f2d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-95","para":"55-95","html":"
In contrast, an agreement whereby the broker-dealer will merely make (or accept) delivery on behalf of an entity does not relieve the entity of its rights and obligations under the contract and is thereby is not a market mechanism.
","snippet":"In contrast, an agreement whereby the broker-dealer will merely make (or accept) delivery on behalf of an entity does not relieve the entity of its rights and obligations under the contract and is thereby is not a market…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:348b9039e57b6b273d0ddd152837b0a823f51ebb56e3fc401e36113ed296a37b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-96","para":"55-96","html":"
Entity A contracts to sell a commodity such as iron ore to Entity B at a fixed price, and Entity B offsets its purchase contract by entering into a separate contract to sell the same commodity to Entity C at a different fixed price, instructing Entity A to deliver directly to Entity C. If Entity A fails to deliver to Entity C, Entity C will legally look to Entity B for remedy, not Entity A. Even absent failure to perform, Entity B will still pay Entity A, and Entity C will pay Entity B, even though Entity A may deliver directly to Entity C. Assume the contracts in this series have an underlying and a notional amount and, therefore, they will at any given point in time have a positive or negative fair value.
","snippet":"Entity A contracts to sell a commodity such as iron ore to Entity B at a fixed price, and Entity B offsets its purchase contract by entering into a separate contract to sell the same commodity to Entity C at a different …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:65043ea186fc5061cff84548540acc31748c37f17c5b1ea795d15716cba7439f","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-97","para":"55-97","html":"
The arrangement is not a market mechanism because Entity B is not relieved of its rights and obligations from the original contract. The original contract survives and is not actually sold. The offsetting contract carries a new set of legal rights and obligations; however, those rights and obligations generally offset, rather than relieve, the original contract's set of legal rights and obligations.
","snippet":"The arrangement is not a market mechanism because Entity B is not relieved of its rights and obligations from the original contract. The original contract survives and is not actually sold. The offsetting contract carrie…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5554697ec391599b4272f3436288b518d5f461371bcbc03b4b0c4ea46aa4d75d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-98","para":"55-98","html":"
A mercantile exchange that trades futures contracts offers a ready opportunity to enter into an offsetting contract that can precisely cancel the rights and obligations of another futures contract (because the counterparty legally is the futures exchange itself), and thus the mercantile exchange does constitute a market mechanism.
","snippet":"A mercantile exchange that trades futures contracts offers a ready opportunity to enter into an offsetting contract that can precisely cancel the rights and obligations of another futures contract (because the counterpar…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fd97ed7ae30f636dc00335f4f11d6f5492f08140382175c9901aac5ad027fbce","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-99","para":"55-99","html":"
The following Cases illustrate consideration of the relevance of daily transaction volumes to the characteristic of net settlement in deciding whether, from the investor's perspective, the convertible bond contains an embedded derivative that must be accounted for separately:
  1. a
    Single bond with multiple conversion options (Case A)
  2. b
    Multiple bonds each having single conversion option (Case B).
","snippet":"The following Cases illustrate consideration of the relevance of daily transaction volumes to the characteristic of net settlement in deciding whether, from the investor's perspective, the convertible bond contains an em…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3130d6b190d681b5d8225257850cab787710ab75b1e2997a3785d6f1464aae9c","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-100","para":"55-100","html":"
The Cases illustrate that the form of the financial instrument is important; paragraph 815-10-15-123 explains that individual instruments cannot be combined for evaluation purposes to circumvent compliance with the criteria beginning in paragraph 815-10-15-119. Further, paragraph 815-10-15-111(c) explains that contracts shall be evaluated on an individual basis, not on an aggregate-holdings basis.
","snippet":"The Cases illustrate that the form of the financial instrument is important; paragraph 815-10-15-123 explains that individual instruments cannot be combined for evaluation purposes to circumvent compliance with the crite…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:898e515ced97b9aa65d8392329ac8366b2334ecfdb14fe80c00d9c9a61624c10","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-101","para":"55-101","html":"
Investor A holds a convertible bond classified as an available-for-sale security under Topic 320. The bond has all of the following additional characteristics:
  1. a
    It is not exchange-traded and can be converted into common stock of the debtor, which is traded on an exchange.
  2. b
    It has a face amount of $100 million and is convertible into 10 million shares of common stock.
  3. c
    It may be converted in full or in increments of $1,000 immediately or at any time during the next 2 years.
  4. d
    If it were converted in a $1,000 increment, Investor A would receive 100 shares of common stock.
","snippet":"Investor A holds a convertible bond classified as an available-for-sale security under Topic 320. The bond has all of the following additional characteristics:\n(a) It is not exchange-traded and can be converted into comm…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8710260925073fc0de614145f53be49f4cf3bb89c149b6d99dc358f729c1276f","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-102","para":"55-102","html":"
Assume further that the market condition for the debtor's stock is such that up to 500,000 shares of its stock can be sold rapidly without the share price being significantly affected.
","snippet":"Assume further that the market condition for the debtor's stock is such that up to 500,000 shares of its stock can be sold rapidly without the share price being significantly affected.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:05ff8c5e0037b97ce41508bb5584bddf9484fe803739904cd89ea9e23f8e7986","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-103","para":"55-103","html":"
The embedded conversion option meets the criteria in paragraph 815-10-15-83(a) through (b) but does not meet the criteria in paragraphs 815-10-15-100 and 815-10-15-110, in part because the option is not traded and it cannot be separated and transferred to another party.
","snippet":"The embedded conversion option meets the criteria in paragraph 815-10-15-83(a) through (b) but does not meet the criteria in paragraphs 815-10-15-100 and 815-10-15-110, in part because the option is not traded and it can…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2702ba0753d534fdbfd111bab6d583f16c35bd833b7f554c2210f1f312d9ad22","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-104","para":"55-104","html":"
It is clear that the embedded equity conversion feature is not clearly and closely related to the debt host instrument.
","snippet":"It is clear that the embedded equity conversion feature is not clearly and closely related to the debt host instrument.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:690516adc092cc48c875b9f754e88960109f7b2c073288f2dc2cb9048194db07","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-105","para":"55-105","html":"
The bond may be converted in $1,000 increments and those increments, by themselves, may be sold rapidly without significantly affecting price, in which case the criteria discussed beginning in paragraph 815-10-15-119 would be met. However, if the holder simultaneously converted the entire bond, or a significant portion of the bond, the shares received could not be readily converted to cash without incurring a significant block discount.
","snippet":"The bond may be converted in $1,000 increments and those increments, by themselves, may be sold rapidly without significantly affecting price, in which case the criteria discussed beginning in paragraph 815-10-15-119 wou…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:831ba6a4581b3f709ae32e7fe93b705da1d25599bc07a3a7f3ab69df20c19063","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-106","para":"55-106","html":"
From Investor A's perspective, the conversion option should be accounted for as a compound embedded derivative in its entirety, separately from the debt host, because the conversion feature allows the holder to convert the convertible bond in 100,000 increments and the shares converted in each increment are readily convertible to cash under the criteria discussed beginning in paragraph 815-10-15-119. Investor A need not determine whether the entire bond, if converted, could be sold without affecting the price.
","snippet":"From Investor A's perspective, the conversion option should be accounted for as a compound embedded derivative in its entirety, separately from the debt host, because the conversion feature allows the holder to convert t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f33b5ee905fa492ee16fa4a91ea8c2c2f402cf5db0bdb4e154b64850e3d0886e","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-107","para":"55-107","html":"
Because the $100 million bond is convertible in increments of $1,000, the convertible bond is essentially embedded with 100,000 equity conversion options, each with a notional amount of 100 shares. Each of the equity conversion options individually has the characteristic of net settlement discussed beginning in paragraph 815-10-15-119 because the 100 shares to be delivered are readily convertible to cash. Because the equity conversion options are not clearly and closely related to the host debt instrument, they must be separately accounted for. However, because an entity cannot identify more than 1 embedded derivative that warrants separate accounting, the 100,000 equity conversion options must be bifurcated as a single compound derivative. (Paragraphs
815-15-25-7 through 25-10
say an entity is not permitted to account separately for more than one derivative feature embedded in a single hybrid instrument.)
","snippet":"Because the $100 million bond is convertible in increments of $1,000, the convertible bond is essentially embedded with 100,000 equity conversion options, each with a notional amount of 100 shares. Each of the equity con…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8e3a2474d2fefcb20523eebaba9d79ca5a6647d42a6edc7d2f94bbeadd0b0475","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-108","para":"55-108","html":"
There is a substantive difference between a $100 million convertible debt instrument that can be converted into equity shares only at one time in its entirety and a similar instrument that can be converted in increments of $1,000 of tendered debt; the analysis of the latter should not presume equality with the former.
","snippet":"There is a substantive difference between a $100 million convertible debt instrument that can be converted into equity shares only at one time in its entirety and a similar instrument that can be converted in increments …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f497b0511dfe86b303499e9ddd9a805e3eede7273e79688005c279da1abbe5b4","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-109","para":"55-109","html":"
Investor B has 100,000 individual $1,000 bonds that each convert into 100 shares of common stock. Assume those bonds are individual instruments but they were issued concurrently to Investor B.
","snippet":"Investor B has 100,000 individual $1,000 bonds that each convert into 100 shares of common stock. Assume those bonds are individual instruments but they were issued concurrently to Investor B.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e498de03bf9c9d05edf452eb26dd2afbc38b77c3b8eac33aaa7e45dc2486c5f2","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-110","para":"55-110","html":"
From Investor B's perspective, the individual bonds each contain an embedded derivative that must be separately accounted for. Each individual bond is convertible into 100 shares, and the market would absorb 100 shares without significantly affecting the price of the stock.
","snippet":"From Investor B's perspective, the individual bonds each contain an embedded derivative that must be separately accounted for. Each individual bond is convertible into 100 shares, and the market would absorb 100 shares w…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ea8192b2a84f0faa52390d3de17bb6361bf095ee755a69d03a0d4b6a6f3ee53e","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-111","para":"55-111","html":"
This Example illustrates the effect of multiple deliveries on the consideration of net settlement described in Section 815-10-15. An entity has a five-year supply contract that obligates it to deliver at a specified price each month a specified quantity of a commodity that has interchangeable (fungible) units and for which quoted prices are available in an active market. However, the quoted prices that are available are for either a spot sale or a forward sale of the commodity with a maturity of 12 months or less. In other words, the forward market for the commodity beyond the next 12 months does not currently exist and is not expected to develop. There are brokers who are willing to take over the rights and obligations relating to the next 12 months of the supply contract, but not for periods beyond the next 12 months. With respect to the active spot market for the commodity, it can rapidly absorb the quantity specified in the supply contract for each individual month but not the total quantity for the entire five-year period in a single transaction (or in multiple transactions over the course of a day or so).
","snippet":"This Example illustrates the effect of multiple deliveries on the consideration of net settlement described in Section 815-10-15. An entity has a five-year supply contract that obligates it to deliver at a specified pric…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6e2f0c896b4be86e7b5b9940cd80c355d534d848fbe95c6c4067df79487dc9cb","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-112","para":"55-112","html":"
The supply contract does not contain a net settlement provision as described in paragraphs
815-10-15-100 through 15-109
.
","snippet":"The supply contract does not contain a net settlement provision as described in paragraphs 815-10-15-100 through 15-109.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9a9aec787642fe3671de1ea0862b6f51477f91d111b2f23b5f6ca2c143748fdd","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-113","para":"55-113","html":"
The 5-year commodity supply contract does not meet the net settlement characteristic in paragraph 815-10-15-110 at its inception because there is no market mechanism to net settle the entire 5-year contract—the forward market exists only for the next 12 months while the contract period is for the next 5 years. Accordingly, there is no market mechanism for the entity to settle the entire contract on a net basis. However, if the contract contained contractually separable increments that individually met the net settlement criteria, those contractually separable increments may be embedded derivatives. In this instance, the brokers in the market will not assume the rights and obligations of the entire contract. Note that the market mechanism in the net settlement characteristic in paragraph 815-10-15-110 relates to whether a party to the contract can be relieved of its rights and obligations under the entire contract, not merely whether an independent broker in the market stands ready to assume the selected rights and obligations.
","snippet":"The 5-year commodity supply contract does not meet the net settlement characteristic in paragraph 815-10-15-110 at its inception because there is no market mechanism to net settle the entire 5-year contract—the forward m…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:29ad601b2c36c91c23dd71db5a1d631318eeda700a906d38005edca73d186ec5","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-114","para":"55-114","html":"
The definition of a derivative instrument in this Subtopic must be applied based on the actual terms of the contract, including its maturity date and the total quantity of the underlying. This Subtopic does not permit bifurcation of a 5-year contract into 5 annual contracts, 60 monthly contracts, or 1,826 daily contracts in an attempt to assert that only a portion of the contract meets the definition of a derivative instrument. To do so would be to disregard one of the critical terms of the contract, that is, the term to the maturity date of the contract.
","snippet":"The definition of a derivative instrument in this Subtopic must be applied based on the actual terms of the contract, including its maturity date and the total quantity of the underlying. This Subtopic does not permit bi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a929d5f23297cd9dae9458e5451f2558686f4156ac95c3e12631a22b622cf1ca","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-115","para":"55-115","html":"
Based on the guidance in paragraph 815-10-15-3, the five-year commodity supply contract in the example, would, at the beginning of the fifth year, be reevaluated to determine whether the contract meets the net settlement characteristic in paragraph 815-10-15-110 and would likely meet the characteristic because a forward market for the contract would then exist for the remaining term of the contract.
","snippet":"Based on the guidance in paragraph 815-10-15-3, the five-year commodity supply contract in the example, would, at the beginning of the fifth year, be reevaluated to determine whether the contract meets the net settlement…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b437f6cd8a8ae23d2b106ae9db7e55d5acba6ec84909f2a4c8eda321b53430e6","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-116","para":"55-116","html":"
The five-year commodity supply contract meets the net settlement characteristic as discussed beginning in paragraph 815-10-15-119. The criterion discussed beginning in that paragraph is met because an active spot market for the commodity exists today and is expected to be in existence in the future for each delivery date (for example, for quantities to be delivered each day or each month for the next five years) under the multiple delivery supply contract. The spot market can rapidly absorb the quantities specified for each monthly delivery without significantly affecting the price. The fact that the spot market may not be able to absorb within a few days the quantity specified in the entire five-year contract is irrelevant because the performance of the contract is spread out over a five-year period and, therefore, is not expected to occur within a few days.
","snippet":"The five-year commodity supply contract meets the net settlement characteristic as discussed beginning in paragraph 815-10-15-119. The criterion discussed beginning in that paragraph is met because an active spot market …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3e90ec3cbc365d4e3d6713036b7898922630c55c18600fc21436915ec8ed5dee","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-117","para":"55-117","html":"
This Example does not address whether or not the contract would qualify for the normal purchases and normal sales scope exception as discussed beginning in paragraph 815-10-15-22.
","snippet":"This Example does not address whether or not the contract would qualify for the normal purchases and normal sales scope exception as discussed beginning in paragraph 815-10-15-22.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d9d2545188f0e39cc080b633436fbd9037e53b1fe7fe9bdabe767ff171dd5849","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-118","para":"55-118","html":"
This Example illustrates the application of paragraph 815-10-15-17(c). Assume a variety of forward contracts exists for a when-issued security, such as a to-be-announced security, that provides a choice of settlement dates for each of the next three months (such as November, December, or January). An entity enters into a forward contract to purchase the to-be-announced security, which will otherwise meet the qualifications of paragraphs
815-10-15-13 through 15-20
, that requires delivery in the second-nearest month (such as December), not the nearest month (such as November). The entity may not apply the regular-way security trade exception to the forward purchase contract that requires delivery of the to-be-announced security in the second-nearest month (such as December).
","snippet":"This Example illustrates the application of paragraph 815-10-15-17(c). Assume a variety of forward contracts exists for a when-issued security, such as a to-be-announced security, that provides a choice of settlement dat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:756892174303047c54be08d10287653a2968b70dc16d6ceeb502b7e002a9e246","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-119","para":"55-119","html":"
In this Example, the to-be-announced security (identified by issuer, contractual maturity of the underlying loans, and the net coupon, such as 30-year Government National Mortgage Association [GNMA] securities bearing interest of 7 percent) is available under multiple settlement periods (that is, the standardized settlement date in November, December, or January). The regular-way security trade exception may be applied only to forward contracts for that to-be-announced security that require delivery in November, the shortest period permitted for that type of to-be-announced security. The December and January settlement to-be-announced forward contracts must be accounted for as derivative instruments under this Subtopic.
","snippet":"In this Example, the to-be-announced security (identified by issuer, contractual maturity of the underlying loans, and the net coupon, such as 30-year Government National Mortgage Association [GNMA] securities bearing in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:94c1744413eb663e5c55d0f69d2971e93a58320bf008d9afdade13ad4b6cfc93","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-120","para":"55-120","html":"
If the forward contracts in this Example meet the hedge accounting criteria, they may be designated in cash flow hedges of the anticipated purchase of the securities, as discussed in paragraph 815-20-25-22.
","snippet":"If the forward contracts in this Example meet the hedge accounting criteria, they may be designated in cash flow hedges of the anticipated purchase of the securities, as discussed in paragraph 815-20-25-22.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:170e63aaa027ef90336d685fa415a61541c17dce35107eda7469ffaf1358c0f2","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-121","para":"55-121","html":"
In some circumstances, an option may be combined with a forward contract. In some instances, the optionality feature in the forward contract can modify the quantity of the asset to be delivered under the contract. In other cases, the optionality feature in the forward contract can modify only the price to be paid or the timing of the delivery.
","snippet":"In some circumstances, an option may be combined with a forward contract. In some instances, the optionality feature in the forward contract can modify the quantity of the asset to be delivered under the contract. In oth…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:860dbb10ab6251dbbeea3e76c84500c0eb27d3dc372f48906368ee246b4bb0e9","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-122","para":"55-122","html":"
This Example presents three Cases of forward contracts with optionality features:
  1. a
    Optionality feature involving price floor (cash-settled put option) written by purchaser and price cap (cash-settled call option) written by seller (Case A)
  2. b
    Optionality feature involving cash-settled put option written by purchaser (Case B)
  3. c
    Optionality feature involving physically settled put option written by purchaser (Case C).
","snippet":"This Example presents three Cases of forward contracts with optionality features:\n(a) Optionality feature involving price floor (cash-settled put option) written by purchaser and price cap (cash-settled call option) writ…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:06a3a5c12246acaa367a923b0e9453616a8c62b8f196975684a07d4110a831e9","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-123","para":"55-123","html":"
In Cases A, B, and C, the optionality feature must be analyzed to determine whether it could modify the quantity of the asset to be delivered under the contract. In doing so, the conclusion as to whether the contract is eligible for the normal purchases and normal sales scope exception applies in the same way to both counterparties—the purchaser and the writer of the option (within the forward contract).
","snippet":"In Cases A, B, and C, the optionality feature must be analyzed to determine whether it could modify the quantity of the asset to be delivered under the contract. In doing so, the conclusion as to whether the contract is …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7a7c4e7116876f1a7e9e6520fe1693a488a8275084b15e4f82faf63b49cb9738","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-124","para":"55-124","html":"
The contracts addressed in this Example do not have a price based on an underlying that is not clearly and closely related to the asset being purchased, nor do they require cash settlement of gains or losses as stipulated in paragraph 815-10-15-22.
","snippet":"The contracts addressed in this Example do not have a price based on an underlying that is not clearly and closely related to the asset being purchased, nor do they require cash settlement of gains or losses as stipulate…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aab8df5a77be6699e88fd4e8eeaf89e17cdf00a7e4b65a33aa4868f1b63d8b6a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-125","para":"55-125","html":"
Paragraph 815-10-15-43 explains that, if the optionality feature in the forward contract can modify the quantity of the asset to be delivered under the contract, but that option feature has expired or has been completely exercised (even if delivery has not yet occurred), there is no longer any uncertainty as to the quantity to be delivered under the forward contract. That paragraph explains that, following such expiration or exercise, the forward contract would be eligible for designation as a normal purchase or normal sale, provided that the other conditions in paragraph 815-10-15-22 are met.
","snippet":"Paragraph 815-10-15-43 explains that, if the optionality feature in the forward contract can modify the quantity of the asset to be delivered under the contract, but that option feature has expired or has been completely…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4702a00c6b042760b8e3f769f3780d855a7046c9ff55e356c7ed09d87292d9ac","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-126","para":"55-126","html":"
Entity A enters into a forward contract to purchase on a specified date a specified quantity of a raw material that is readily convertible to cash. The purchase price is the current market price on the date of purchase, not to exceed a specified maximum price (a cap) nor to be less than a specified minimum price (a floor).
","snippet":"Entity A enters into a forward contract to purchase on a specified date a specified quantity of a raw material that is readily convertible to cash. The purchase price is the current market price on the date of purchase, …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ee6c29ca4b314dae9aa9737452d5ded4a40f248a12530d37ffa3dc311eb4755c","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-127","para":"55-127","html":"
In this Case, the optionality feature cannot modify the quantity to be delivered; thus, the contract is eligible to qualify for the normal purchases and normal sales scope exception.
","snippet":"In this Case, the optionality feature cannot modify the quantity to be delivered; thus, the contract is eligible to qualify for the normal purchases and normal sales scope exception.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bfa93fa056f42af2a2d791c39530684f0bb91ea54eb9045dc0fa1effbfb6c606","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-128","para":"55-128","html":"
Entity B enters into a forward contract to purchase on a specified date a specified quantity of a raw material that is readily convertible to cash. The contract's purchase price is a fixed amount per unit that is below the current forward price; however, if the market price on the date of purchase has fallen below a specified level, Entity B's purchase price would be adjusted to a higher fixed amount significantly in excess of the current forward price at the inception of the contract. (The contract entered into by Entity B is a compound derivative consisting of a forward contract to purchase raw material at the original fixed price and a written option that obligates Entity B to purchase the raw material for the higher adjusted price if the market price of the raw material falls below the specified level. In exchange for the written option, Entity B received a premium representing the difference between the purchase price in the contract and the forward market price of the raw material at the inception of the contract.)
","snippet":"Entity B enters into a forward contract to purchase on a specified date a specified quantity of a raw material that is readily convertible to cash. The contract's purchase price is a fixed amount per unit that is below t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:03dce91301cebd8fb19423bf618f6baaf2a832759a1f27b5549826d7b5244b10","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-129","para":"55-129","html":"
The forward purchase contract in this Case is eligible to qualify for the normal purchases and normal sales scope exception because the optionality feature in the contract cannot modify the quantity to be delivered.
","snippet":"The forward purchase contract in this Case is eligible to qualify for the normal purchases and normal sales scope exception because the optionality feature in the contract cannot modify the quantity to be delivered.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6ac3ed4dc80da5a0fe4dc8a0413f5b28dca3f66302d8311cc969d256136678d5","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-130","para":"55-130","html":"
Entity C enters into a forward contract to purchase on a specified date a specified quantity of a raw material that is readily convertible to cash. The contract's purchase price is a fixed amount per unit that is below the current forward price. However, if the market price on the date of purchase has fallen below a specified level that is below the contract's fixed purchase price, Entity C would be required to purchase a specified additional quantity of the raw material at the contract's fixed purchase price (which is above the current market price on the date of purchase). (The contract entered into by Entity C is a compound derivative consisting of a forward contract to purchase raw material at the original fixed price and a written option that obligates Entity C to purchase additional quantities of the raw material at an above-market price if the market price of the raw material falls below the specified level.)
","snippet":"Entity C enters into a forward contract to purchase on a specified date a specified quantity of a raw material that is readily convertible to cash. The contract's purchase price is a fixed amount per unit that is below t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:27e62f73c66ea84699a14ab9ac61bc93719fb5307ecfde98aaa45ca007005df9","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-131","para":"55-131","html":"
The contract in this Case is not eligible to qualify for the normal purchases and normal sales scope exception because the optionality feature in the contract can modify the quantity of the asset to be delivered under the contract.
","snippet":"The contract in this Case is not eligible to qualify for the normal purchases and normal sales scope exception because the optionality feature in the contract can modify the quantity of the asset to be delivered under th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e7ea390bea1926528121c23c2a7841d3a5180222b3f4edc3636243dc7b751552","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-132","para":"55-132","html":"
This Example illustrates a reinsurance contract with a provision that adjusts the retention amount downward based on the performance of a specified equity index as discussed in paragraph 815-10-55-40(g). Reinsurer enters into a reinsurance contract with Reinsured to indemnify Reinsured for certain insured losses in excess of a defined retention. The intent of the coverage is to protect Reinsured from significant or catastrophic property-casualty losses. The coverage would include a retention amount that would be adjusted downward according to a scale tied to the Dow Jones Industrial Average. If a catastrophic loss occurs, Reinsured would likely have to liquidate some of its investment holdings (bonds or equities) to pay its losses, which exposes Reinsured to significant investment risk in a down market. The adjustment feature provides protection against investment risk by allowing Reinsured to recover more losses in a declining investment market. Reinsured has no ability to receive appreciation in the Dow Jones Industrial Average.
  1. a
    Parties: Reinsurer and Reinsured
  2. b
    Coverage: Property losses
  3. c
    Period: January 1, X1, through December 31, X1
  4. d
    Retention: $20 million per occurrence, adjusted downward in the same percentage as period-to-date (from January 1, X1, to measurement date) decreases in the Dow Jones Industrial Average, not to exceed 50%
  5. e
    Limit: $15 million per occurrence, $15 million per annum
  6. f
    Premium: $1.4 million per annum.
","snippet":"This Example illustrates a reinsurance contract with a provision that adjusts the retention amount downward based on the performance of a specified equity index as discussed in paragraph 815-10-55-40(g). Reinsurer enters…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6aab80414cda7c634b95982fc2d5ce48fd04bd6685071b77244bb56afe2dc71","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-133","para":"55-133","html":"
Both of the following scenarios assume that the Dow Jones Industrial Average on January 1, X1, was 10,000.
","snippet":"Both of the following scenarios assume that the Dow Jones Industrial Average on January 1, X1, was 10,000.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c2df148d38a9b6bfb7cbe237bc809659bb54842912daecad8bd0d9009c1617a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-133A","para":"55-133A","html":"
As discussed in paragraph 815-10-55-38, the contract qualifies for the exception in paragraph 815-10-15-53(b) for traditional property and casualty contracts and, so, the dual-trigger variable in the contract is not separated and accounted for separately as a derivative instrument.
","snippet":"As discussed in paragraph 815-10-55-38, the contract qualifies for the exception in paragraph 815-10-15-53(b) for traditional property and casualty contracts and, so, the dual-trigger variable in the contract is not sepa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4b8e4d912db5388b78af8d76f8543f37ea1a5d097cfa381647cbf2949c131a57","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-134","para":"55-134","html":"
This Example illustrates the guidance in paragraph 815-10-15-55(c) for a contract involving essentially assured amounts. Insured Entity has received at least $2 million in claim payments from its insurance entity (or at least $2 million in claim payments were made by the insurance entity on the insured entity's behalf) for each of the previous 5 years related to specific types of insured events that occur each year. That minimum level of coverage would not qualify for the insurance contract scope exclusion.
","snippet":"This Example illustrates the guidance in paragraph 815-10-15-55(c) for a contract involving essentially assured amounts. Insured Entity has received at least $2 million in claim payments from its insurance entity (or at …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:92ac63e7d2c5bcea3c45a3d2b00eccfb5a80c7b3575f29b75cc10ca7a582205a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-135","para":"55-135","html":"
The following Cases illustrate the difference between physical and financial variables for purposes of applying the scope exception in paragraph 815-10-15-59(a):
  1. a
    Contract containing both a physical variable and a financial variable (Case A)
  2. b
    Contract containing only a physical variable (Case B)
  3. c
    Contract containing only a financial variable (Case C).
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8
Editor's Note: The heading that precedes paragraph 815-10-55-135 will be amended upon transition as shown below. The content of the paragraph will not change.
•> Example 13: Certain Contracts That Are Not Traded on an Exchange—Distinguishing between Physical and Financial Variables
The following Cases illustrate the difference between physical and financial variables for purposes of applying the scope exception in paragraph 815-10-15-59(a):
  1. a
    Contract containing both a physical variable and a financial variable (Case A)
  2. b
    Contract containing only a physical variable (Case B)
  3. c
    Contract containing only a financial variable (Case C).
","snippet":"The following Cases illustrate the difference between physical and financial variables for purposes of applying the scope exception in paragraph 815-10-15-59(a):\n(a) Contract containing both a physical variable and a fin…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c230532bca4dc42b0d20c0cd161d328a8d6723fe6c8c4c1ff9a713afd25de171","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-136","para":"55-136","html":"
A contract's payment provision specifies that the issuer will pay to the holder $10,000,000 if aggregate property damage from all hurricanes in the state of Florida exceeds $50,000,000 during the year 2001.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8
Editor's Note: The content of paragraph 815-10-55-136 will change upon transition, together with a change in the heading noted below.
••> Case A: Contract Containing both a Physical Variable and a Financial Variable
A contract's payment provision specifies that the issuer will pay to the holder $10,000,000 if aggregate property damage from all hurricanes in the state of Florida exceeds $50,000,000 during the year 2001.
","snippet":"A contract's payment provision specifies that the issuer will pay to the holder $10,000,000 if aggregate property damage from all hurricanes in the state of Florida exceeds $50,000,000 during the year 2001. Transition da…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9d93afe905932ae3c804329f4501fa34f020fd6967be8442b0c1534ea9801e8d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-137","para":"55-137","html":"
In this Case, the payment under the contract occurs if aggregate property damage from all hurricanes in the state of Florida exceeds $50,000,000 during the year 2001. The contract contains 2 underlyings—a physical variable (that is, the occurrence of at least 1 hurricane) and a financial variable (that is, aggregate property damage exceeding a specified or determinable dollar limit of $50,000,000). Because of the presence of the financial variable as an underlying, the derivative instrument does not qualify for the scope exclusion in paragraph 815-10-15-59(a).
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8If the contract contains a payment provision that requires the issuer to pay to the holder a specified dollar amount based on a financial variable, the contract is subject to the requirements of this Subtopic. In this Case, the payment under the contract occurs if aggregate property damage from all hurricanes in the state of Florida exceeds $50,000,000 during the year 2001. The contract contains 2 underlyings—a physical variable (that is, the occurrence of at least 1 hurricane) and a financial variable (that is, aggregate property damage exceeding a specified or determinable dollar limit of $50,000,000). Because of the presence of the financial variable as an underlying, the derivative instrument does not qualify for the scope exclusion in paragraph 815-10-15-59(a).
","snippet":"In this Case, the payment under the contract occurs if aggregate property damage from all hurricanes in the state of Florida exceeds $50,000,000 during the year 2001. The contract contains 2 underlyings—a physical variab…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d10935a1ca717b34cd27db5d90f18594bb2f2921cea6e18d6936b2facb5b2d6c","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-138","para":"55-138","html":"
A contract specifies that the issuer pays the holder $10,000,000 in the event that a hurricane occurs in Florida in 2001.
","snippet":"A contract specifies that the issuer pays the holder $10,000,000 in the event that a hurricane occurs in Florida in 2001.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f99d88d297eb4f6980a334c15a580c548c53d8c75fea88a46d4d8b4fa06d816b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-139","para":"55-139","html":"
If a contract contains a payment provision that requires the issuer to pay to the holder a specified dollar amount that is linked solely to a climatic or other physical variable (for example, wind velocity or flood-water level), paragraph 815-10-15-59(a) provides that the contract is not subject to the requirements of this Subtopic.
","snippet":"If a contract contains a payment provision that requires the issuer to pay to the holder a specified dollar amount that is linked solely to a climatic or other physical variable (for example, wind velocity or flood-water…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4405de799eb14dcfa3d645cdb65f58b4111d433d925694c7df9879d33f8b1b84","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-140","para":"55-140","html":"
In this Case, the payment provision is triggered if a hurricane occurs in Florida in 2001. The underlying is a physical variable (that is, occurrence of a hurricane). Therefore, the contract qualifies for the scope exclusion in paragraph 815-10-15-59(a).
","snippet":"In this Case, the payment provision is triggered if a hurricane occurs in Florida in 2001. The underlying is a physical variable (that is, occurrence of a hurricane). Therefore, the contract qualifies for the scope exclu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1400021ee428cb582217bbd57b612eff1db4c376beff822bcea1048aff09616d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-141","para":"55-141","html":"
A contract would be a traditional insurance contract that is excluded from the scope of this Subtopic under the exception discussed beginning in paragraph 815-10-15-52if the contract requires a payment only if the holder incurs a decline in revenue or an increase in expense as a result of an event (for example, a hurricane) and the amount of the payoff is solely compensation for the amount of the holder's loss.
","snippet":"A contract would be a traditional insurance contract that is excluded from the scope of this Subtopic under the exception discussed beginning in paragraph 815-10-15-52if the contract requires a payment only if the holder…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6add083c53369b6a3f3e125b60237586a3a821f06ed5168e4f923d1739463dea","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-142","para":"55-142","html":"
This Example addresses the application of the scope exception in paragraph 815-10-15-59(b). Entity A enters into a non-exchange-traded forward contract to buy from Entity B 100 interchangeable (fungible) units of a nonfinancial asset that are not readily convertible to cash. The contract permits net settlement through its default provisions. Entity A already owns more than 100 units of that nonfinancial asset, but Entity B does not own any units of that nonfinancial asset.
","snippet":"This Example addresses the application of the scope exception in paragraph 815-10-15-59(b). Entity A enters into a non-exchange-traded forward contract to buy from Entity B 100 interchangeable (fungible) units of a nonfi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a181b4f4008b62a6dbf0e0558e04b25eb2db84d4e85345208f4aafd5e097e8ea","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143","para":"55-143","html":"
The scope exception in paragraph 815-10-15-59(b) does not apply to the accounting for the contract for both of the following reasons:
  1. a
    The contract's settlement is based on an underlying associated with a nonfinancial asset that is not unique (because it is based on the price or value of an interchangeable, nonfinancial unit).
  2. b
    The entity that owns the nonfinancial asset related to the underlying (that is, Entity A) is the buyer of the units and thus would benefit from the forward contract if the price or value increases.
Consequently, neither Entity A nor Entity B qualifies for the scope exception in paragraph 815-10-15-59(b).
","snippet":"The scope exception in paragraph 815-10-15-59(b) does not apply to the accounting for the contract for both of the following reasons:\n(a) The contract's settlement is based on an underlying associated with a nonfinancial…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:97c111ad26c52d126f92e09ece13c4a74d142cd7edeecaec206380647ffcab1e","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143A","para":"55-143A","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The following Cases illustrate application of the scope exception in paragraph 815-10-15-59(e):
  1. a
    Research and Development Funding Arrangement—Underlyings based on the occurrence of regulatory approval and achieving an earnings target (Case A)
  2. b
    Monetization Transaction—Underlyings based on the occurrence of regulatory approval and achieving a sales target (Case B)
  3. c
    Sustainability-Linked Bond—Underlying based on the failure to meet a greenhouse gas emissions reduction target (Case C)
  4. d
    Litigation Funding Arrangement between Litigant and Funder—Underlying based on the occurrence of a successful litigation outcome (Case D)
  5. e
    Litigation Funding Arrangement between Law Firm and Funder—Underlying based on the occurrence of a successful litigation outcome (Case E)
  6. f
    Commodities-Based Arrangement—Underlying based on a market price of gold (Case F)
  7. g
    Variable Payment Arrangement—Underlying based on the occurrence of regulatory approval (Case G)
  8. h
    Earnout Arrangement—Underlying based on earnings activity (Case H)
  9. i
    Variable Payment Arrangement—Underlying based on stock price differential (Case I)
  10. j
    Credit Default Swap Arrangement—Underlying based on the occurrence of a credit event by the reference entity (Case J).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8The following Cases illustrate application of the scope exception in paragraph 815-10-15-59(e):\n(a) Research and Development Fund…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51df2ce3740ba75645998b6224d9cd689a41e318d2dc932278ef87faeef7a257","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143B","para":"55-143B","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity A and Entity B enter into a research and development funding arrangement. Under the arrangement, Entity B provides funding of $50 million so that Entity A may develop and commercialize a drug compound. The arrangement has no clawback feature. Upon regulatory approval of the drug, Entity A pays $20 million to Entity B. Once the drug is commercialized, Entity A pays an additional $80 million to Entity B when gross profit related to the drug exceeds $500 million.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8Entity A and Entity B enter into a research and development funding arrangement. Under the arrangement, Entity B provides funding…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:54ea16fdd550d10be1629d3be57c7b1c0bfc71c75f68afca3ef0b5f1b7aeea89","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143C","para":"55-143C","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The arrangement contains 2 underlyings: the occurrence of regulatory approval and an earnings measure (gross profit related to the drug exceeding $500 million). Because the occurrence of regulatory approval and gross profit relate to the drug that Entity A is developing, both of the underlyings are based on the operations or activities of Entity A. Whether the occurrence of regulatory approval is within the control of Entity A does not impact the conclusion that the underlying qualifies for the scope exception. Neither underlying is based on a market rate, market price, market index, or the price or performance (including default) of a financial asset or financial liability of one of the parties to the contract as described in paragraph 815-10-15-59(e)(1) and (e)(2). Also, the exclusions related to contracts involving an entity’s own equity or call options and put options on debt instruments as described in paragraph 815-10-15-59(e)(3) and (e)(4) do not apply. Therefore, those two underlyings each qualify for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8The arrangement contains 2 underlyings: the occurrence of regulatory approval and an earnings measure (gross profit related to th…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b2b326e03f5470775739be17a545eb09a213b88b10cfbf260f6c4e5e85579e6a","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143D","para":"55-143D","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity A licenses its intellectual property to a third party to develop and commercialize a drug compound. While Entity A is not involved in the development and commercialization activities of the drug compound, the third party has agreed to pay Entity A (a) $20 million upon regulatory approval of the drug and (b) future royalties based on sales of the drug once the drug is commercialized. Entity A separately enters into an arrangement with Entity B. Under this arrangement, Entity B pays $50 million to Entity A in exchange for the right to receive a portion of both the (a) $20 million payment upon regulatory approval of the drug and (b) future royalties based on sales of the drug. Entity B is involved in the arrangement solely for investment purposes and is not involved in the development and commercialization of the drug.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8Entity A licenses its intellectual property to a third party to develop and commercialize a drug compound. While Entity A is not …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5e05a490f009a4a1215841253821db6e5c27fb679362a6834195e758cd336ff","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143E","para":"55-143E","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The evaluation of the scope exception in this Example focuses on the arrangement between Entity A and Entity B. That arrangement contains two underlyings: the occurrence of regulatory approval and sales of the drug. Both of the underlyings are based on the operations or activities of Entity A because in this arrangement Entity A licenses the intellectual property and receives licensing income for both the regulatory approval payment and the royalties from sales of the drug. Whether the occurrence of regulatory approval is within the control of Entity A does not impact the conclusion that the underlying qualifies for the scope exception. Neither underlying is based on a market rate, market price, market index, or the price or performance (including default) of a financial asset or financial liability of one of the parties to the contract as described in paragraph 815-10-15-59(e)(1) and (e)(2). Also, the exclusions related to contracts involving an entity’s own equity or call options and put options on debt instruments as described in paragraph 815-10-15-59(e)(3) and (e)(4) do not apply. Therefore, those two underlyings each qualify for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8The evaluation of the scope exception in this Example focuses on the arrangement between Entity A and Entity B. That arrangement …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d7a2a5337f2f93ca70b839d30e89c8501490ecc1e73746502a7f3b28fd0a40e4","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143F","para":"55-143F","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8On July 1, 20X1, Entity A issues a five-year fixed-rate bond. If Entity A’s parent entity, Parent Company, fails to meet a specified greenhouse gas emissions reduction target that includes both direct and indirect greenhouse gas emissions (including upstream and downstream emissions) at the consolidated group level by June 30, 20X3, the fixed interest rate on Entity A’s bond increases by 0.25 percent for the remaining term. Entity A and Parent Company are committed to meeting the target and taking actions to reduce greenhouse gas emissions. The bond is a hybrid instrument that contains an embedded feature that is required to be evaluated for bifurcation. The embedded feature contains one underlying: the failure to meet a greenhouse gas emissions reduction target at the consolidated group level. Because Entity A is a subsidiary of Parent Company, the failure to meet the greenhouse gas emissions reduction target at the consolidated level is considered an activity specific to one of the parties to the contract for the purposes of both Entity A’s standalone financial statements and Parent Company’s consolidated financial statements. The underlying is not based on a market rate, market price, market index, or the price or performance (including default) of a financial asset or financial liability of one of the parties to the contract as described in paragraph 815-10-15-59(e)(1) and (e)(2). Also, the exclusions related to contracts involving an entity’s own equity or call options and put options on debt instruments as described in paragraph 815-10-15-59(e)(3) and (e)(4) do not apply. Therefore, the underlying qualifies for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8On July 1, 20X1, Entity A issues a five-year fixed-rate bond. If Entity A’s parent entity, Parent Company, fails to meet a specif…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:75e0a6fc8a125e1398d60c04c2edfe25515409bedcea7acd6854770b1b69125b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143G","para":"55-143G","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity A, a litigant seeking to recover patent infringement damages, enters into a funding arrangement with Entity B. Under the arrangement, Entity B provides $1 million to fund Entity A’s litigation. The arrangement has no clawback feature. Upon a successful litigation outcome, Entity A will pay Entity B 50 percent of the settlement amount that it receives from the resolution of the litigation.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8Entity A, a litigant seeking to recover patent infringement damages, enters into a funding arrangement with Entity B. Under the a…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9d52f6d4a25dd4b154872e390052b18089a763b0685b746eeead40984d40ac95","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143H","para":"55-143H","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The arrangement between Entity A and Entity B contains one underlying: the occurrence of a successful litigation outcome. The settlement amount (and the percentage of this amount) received from the resolution of the litigation is a payment provision. Because Entity A is engaged in the legal proceeding, the underlying is based on the operations or activities of Entity A. The underlying is not based on a market rate, market price, market index, or the price or performance (including default) of a financial asset or financial liability of one of the parties to the contract as described in paragraph 815-10-15-59(e)(1) and (e)(2). Also, the exclusions related to contracts involving an entity’s own equity or call options and put options on debt instruments as described in paragraph 815-10-15-59(e)(3) and (e)(4) do not apply. Therefore, the underlying qualifies for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8The arrangement between Entity A and Entity B contains one underlying: the occurrence of a successful litigation outcome. The set…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:345ccc7703b6b841a513ea0691275ed4500a6bfe0a8f4336457dfbf8ba778606","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143I","para":"55-143I","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity C, a law firm, has been engaged to represent a litigant whereby legal fees are calculated as 30 percent of the final judgment (the settlement amount). Entity C separately enters into a funding arrangement with Entity B. Under the arrangement, Entity B provides funding of $1 million so that Entity C may hire additional staff to perform research related to the litigant’s legal proceeding. The arrangement has no clawback feature. Upon a successful litigation outcome, Entity C will pay Entity B 50 percent of the legal fees received from the litigant.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8Entity C, a law firm, has been engaged to represent a litigant whereby legal fees are calculated as 30 percent of the final judgm…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7312ecff16b0f6345f7d2325bb317917f8efd100f48b66d3abd4befd96c0f7a3","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143J","para":"55-143J","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The evaluation of the scope exception in this Example focuses on the arrangement between Entity C and Entity B. That arrangement contains one underlying: the occurrence of a successful litigation outcome related to the litigant that Entity C is representing. The settlement amount (and the percentage of this amount) received by the litigant is a payment provision. Because Entity C is engaged to represent the litigant in the legal proceeding, the underlying is based on the operations or activities of Entity C. The underlying is not based on a market rate, market price, market index, or the price or performance (including default) of a financial asset or financial liability of one of the parties to the contract as described in paragraph 815-10-15-59(e)(1) and (e)(2). Also, the exclusions related to contracts involving an entity’s own equity or call options and put options on debt instruments as described in paragraph 815-10-15-59(e)(3) and (e)(4) do not apply. Therefore, the underlying qualifies for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8The evaluation of the scope exception in this Example focuses on the arrangement between Entity C and Entity B. That arrangement …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9c29a8be36ecac4ac08783a650d05ced6ed0eb8ff18c4f2cb02621261a6fd74","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143K","para":"55-143K","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity A buys and sells gold as part of its operations. Entity A enters into a contract with Entity B whereby Entity A receives an upfront payment in exchange for a specified percentage of a price increase in the market price of gold. The arrangement contains one underlying: the market price of gold. The underlying is based on a market price as described in paragraph 815-10-15-59(e)(1). Therefore, the underlying does not qualify for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8Entity A buys and sells gold as part of its operations. Entity A enters into a contract with Entity B whereby Entity A receives a…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d9b08fd8afc3df672e8d8cbd30a7f9fb29cff28d6451fe06ac879d287ba9e3f3","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143L","para":"55-143L","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity A, a pharmaceutical company, acquires Entity B, a biotechnology start-up company that does not meet the definition of a business. As part of the transaction, Entity A and the sellers of Entity B enter into a variable payment arrangement whereby Entity A will pay the sellers of Entity B an additional $2 million upon regulatory approval of a drug compound that Entity B is developing.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8Entity A, a pharmaceutical company, acquires Entity B, a biotechnology start-up company that does not meet the definition of a bu…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:608d975d67614d5e0973b2eae6ecdfd35da9fdc672354a49cf16acffbe96bcc5","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143M","para":"55-143M","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The arrangement contains one underlying: the occurrence of regulatory approval. The occurrence of regulatory approval relates to the drug that Entity B is developing as part of its operations. The underlying is not based on a market rate, market price, market index, or the price or performance (including default) of a financial asset or financial liability of one of the parties to the contract as described in paragraph 815-10-15-59(e)(1) and (e)(2). Also, the exclusions related to contracts involving an entity’s own equity or call options and put options on debt instruments as described in paragraph 815-10-15-59(e)(3) and (e)(4) do not apply. Therefore, the underlying qualifies for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8The arrangement contains one underlying: the occurrence of regulatory approval. The occurrence of regulatory approval relates to …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a98511de1b950ce08afeae08654de191e39c40fff5e8d6b19c28e63bcf7a4ed","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143N","para":"55-143N","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity A acquires a patent from Entity B. As part of the transaction, Entity A and Entity B enter into an earnout arrangement whereby Entity A will pay Entity B $3 for each $1 that earnings before interest, taxes, depreciation, and amortization (EBITDA) associated with the manufacturing and sale of products that rely on that patent is in excess of $1 million on the 1-year anniversary of the purchase date. If EBITDA associated with the manufacturing and sale of products using the patent does not exceed $1 million, Entity A does not owe Entity B any amounts under the earnout arrangement.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8Entity A acquires a patent from Entity B. As part of the transaction, Entity A and Entity B enter into an earnout arrangement whe…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d344377bc62636f70dfa03b631a9f4850729b1079aabae3ea58a27d767bcee8b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143O","para":"55-143O","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The arrangement contains one underlying: an earnings measure (EBITDA) related to the manufacturing and sale of products that rely on the patent acquired by Entity A. The underlying is not based on a market rate, market price, market index, or the price or performance (including default) of a financial asset or financial liability of one of the parties to the contract as described in paragraph 815-10-15-59(e)(1) and (e)(2). Also, the exclusions related to contracts involving an entity’s own equity or call options and put options on debt instruments as described in paragraph 815-10-15-59(e)(3) and (e)(4) do not apply. Therefore, the underlying qualifies for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8The arrangement contains one underlying: an earnings measure (EBITDA) related to the manufacturing and sale of products that rely…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a3b8e10a7b6f6ec1b5af6ba82f4a0a463a714fd0e818ac7870bc96135c0039ff","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143P","para":"55-143P","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity A acquires Entity B (which does not meet the definition of a business) in exchange for two million shares of Entity A’s common stock. As part of the acquisition agreement, Entity A agrees to pay cash to the sellers of Entity B if the quoted market price of Entity A’s common stock is less than $100 on the 1-year anniversary of the acquisition date. Specifically, if the quoted market price of Entity A’s common stock is less than $100 on the 1-year anniversary of the acquisition date, the total amount paid in cash to the sellers of Entity B is equal to $100 minus Entity A’s common stock price on the 1-year anniversary of the acquisition date multiplied by 2 million shares.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8Entity A acquires Entity B (which does not meet the definition of a business) in exchange for two million shares of Entity A’s co…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:726f294266059822ec90095a6e806fbc1880a78219195f22e5a725affa9e1466","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143Q","para":"55-143Q","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The arrangement contains 1 underlying: the common stock price differential ($100 less Entity A’s common stock price at the 1-year anniversary of the acquisition date). The underlying is based on a market price as described in paragraph 815-10-15-59(e)(1). Therefore, the underlying does not qualify for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8The arrangement contains 1 underlying: the common stock price differential ($100 less Entity A’s common stock price at the 1-year…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e0c17443dea66443b38d445adcbd59d71c26be5a768f479390be519cbac860a1","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143R","para":"55-143R","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity A holds a debt instrument issued by Entity C. Entity A separately enters into a credit default swap arrangement with Entity B to obtain credit protection on its debt investment in Entity C (the reference entity). As part of that arrangement, Entity A makes periodic premium payments to Entity B, and, in exchange, Entity B agrees to make a cash payment to Entity A if the reference entity defaults on the debt instrument.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8Entity A holds a debt instrument issued by Entity C. Entity A separately enters into a credit default swap arrangement with Entit…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fd7e4f2a75a58799497501fba11d843e19919edb2c412fded1df2e02897e4bd0","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-143S","para":"55-143S","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8The arrangement contains one underlying: the occurrence of an event of default by the reference entity. While the underlying is not based on a market rate, market price, or market index as described in paragraph 815-10-15-59(e)(1), the underlying is based on the price or performance (including default) of a financial asset of one of the parties to the contract (the debt instrument held by Entity A) as described in paragraph 815-10-15-59(e)(2). Therefore, the underlying does not qualify for the scope exception in paragraph 815-10-15-59(e).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:815-10-65-8The arrangement contains one underlying: the occurrence of an event of default by the reference entity. While the underlying is n…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:916ba3f01a701555c68d9ed7f90b259f97d5e407c9aa0a1638650baae59fa82c","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-144","para":"55-144","html":"
This Example illustrates the application of paragraph 815-10-15-74(a). Assume that Entity A, whose functional currency is the U.S. dollar (USD), and the Counterparty enter into a one-year forward contract that is indexed to Entity A's common share price translated into euros (EUR) at spot rates and that will be settled in net shares of Entity A. If the value of Entity A's common stock in EUR appreciates, then Entity A will receive from the Counterparty a number of shares of Entity A stock equal to the appreciation. If the value of Entity A's stock in EUR depreciates, then Entity A will pay Counterparty a number of shares of Entity A stock equal to the depreciation. Thus, the forward contract is indexed both to Entity A's common stock and the USD/EUR currency exchange rates.
","snippet":"This Example illustrates the application of paragraph 815-10-15-74(a). Assume that Entity A, whose functional currency is the U.S. dollar (USD), and the Counterparty enter into a one-year forward contract that is indexed…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5b570ff6c3876418f45b397c419890b17b610cbb05d940ae9be50a945eac5e5d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-145","para":"55-145","html":"
Assume further that Entity A's common stock price at inception is USD 100 per share, and the forward exchange rate of USD to EUR is 1:1.2. The strike price of the forward contract is then set at EUR 120. One year later, the share price of Entity A rises to USD 150, and the spot exchange rate of USD to EUR is 1:1. Then, the share price of Entity A translated is EUR 150. At settlement, Entity A will receive from the Counterparty 20 shares of its own common stock according to the following calculation:
","snippet":"Assume further that Entity A's common stock price at inception is USD 100 per share, and the forward exchange rate of USD to EUR is 1:1.2. The strike price of the forward contract is then set at EUR 120. One year later, …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2c08f92045bfa985158788edc671fd97b238297d75eff87277ec8103e9274f6f","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-146","para":"55-146","html":"
A forward contract that is indexed to both an entity's own stock and currency exchange rates should be accounted for as a derivative instrument in its entirety by both parties to the contract if the contract in its entirety meets the definition of a derivative instrument in paragraphs
815-10-15-83 through 15-139
.
","snippet":"A forward contract that is indexed to both an entity's own stock and currency exchange rates should be accounted for as a derivative instrument in its entirety by both parties to the contract if the contract in its entir…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a59bcb557063f6c17024b07b652d511fa6423bf16cf522df64d9eeb4cc0b4043","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-147","para":"55-147","html":"
Paragraph 815-20-25-71(a)(2) prohibits separating a derivative instrument into components based on different risks. Consequently, it would be inappropriate to bifurcate the forward contract described in this Example according to its differing exposures to changes in Entity A's stock price and changes in the USD/EUR exchange rate and then attempt to apply paragraph 815-10-15-74(a) only to the exposure to changes in Entity A's stock price. That paragraph must be applied to an entire contract.
","snippet":"Paragraph 815-20-25-71(a)(2) prohibits separating a derivative instrument into components based on different risks. Consequently, it would be inappropriate to bifurcate the forward contract described in this Example acco…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:01521e2b439b00cc7f4dcf1dce8b55bfbb7859caf72272bcfb8459dd307bfd10","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-148","para":"55-148","html":"
The following Cases illustrate the accounting for a prepaid interest rate swap:
  1. a
    Prepaid interest rate swap (Case A)
  2. b
    Prepaid interest rate swap that must be bifurcated (Case B)
  3. c
    Prepaid interest rate swap variation (Case C).
","snippet":"The following Cases illustrate the accounting for a prepaid interest rate swap:\n(a) Prepaid interest rate swap (Case A)\n(b) Prepaid interest rate swap that must be bifurcated (Case B)\n(c) Prepaid interest rate swap varia…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c71fb0cd7c352a729eb3c792f8adf296cb759998b9c6f0df76fb02c2563cae17","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-149","para":"55-149","html":"
Cases A, B, and C assume both parties to the contract have the same AA credit rating. If the party that is obligated to make the variable payments has a different credit rating (such as BBB), the effect of that different creditworthiness should be reflected in the discount rate used to determine the present value of the amounts payable by that party under the contract.
","snippet":"Cases A, B, and C assume both parties to the contract have the same AA credit rating. If the party that is obligated to make the variable payments has a different credit rating (such as BBB), the effect of that different…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e9af005fa6152fc0714b929ed5a7810c3db9d6d4a56638ad1064d8e1868251c3","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-149A","para":"55-149A","html":"
Case A illustrates the application of paragraph 815-10-15-97.
","snippet":"Case A illustrates the application of paragraph 815-10-15-97.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50664d762a623ca8f3e982838ecd696018017667ba0654365f0e3bcc6426b182","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-150","para":"55-150","html":"
Entity A pays $1,228,179 to enter into a prepaid interest rate swap contract that requires the counterparty to make quarterly payments based on a $10,000,000 effective notional amount and a variable interest rate equal to 3-month U.S. dollar- (USD-) denominated London Interbank Offered Rate (LIBOR). The prepaid interest rate swap contract is characterized as an at-the-money 2-year interest rate swap with a $10,000,000 notional amount, a fixed interest rate of 6.65 percent, and a variable interest rate of the 3-month USD LIBOR (that is, the same terms as the swap in Example 6 [see paragraph 815-30-55-24], which has a zero fair value at inception), for which the fixed leg has been fully prepaid. The amount of $1,228,179 is the present value of the 8 quarterly fixed payments of $166,250—that is, $10,000,000 x LIBOR swap rate of 6.65 percent / 4). The present value is based on the implied spot rate for each of the 8 payment dates under the assumed initial yield curve in that Example.
","snippet":"Entity A pays $1,228,179 to enter into a prepaid interest rate swap contract that requires the counterparty to make quarterly payments based on a $10,000,000 effective notional amount and a variable interest rate equal t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5d9d884805f4be374f854d1ae487ef709fdcc169f7ad8aa3a34465526a08b979","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-151","para":"55-151","html":"
The prepaid interest rate swap contract could also be characterized as a 2-year, structured note (contract) with a principal amount of $1,228,179 and loan payments based on a formula equal to 8.142 times 3-month USD LIBOR. (Note that 8.142 = 10,000,000 / 1,228,179.) The terms of the structured note specify no repayment of the principal amount either over the two-year term of the structured note or at the end of its term. The 8.142 leverage factor causes the effective notional amount of the structured note also to be $10,000,000.
","snippet":"The prepaid interest rate swap contract could also be characterized as a 2-year, structured note (contract) with a principal amount of $1,228,179 and loan payments based on a formula equal to 8.142 times 3-month USD LIBO…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:23ee331e4b2f6e22054419831999f0adf1896bcdd92d5c128050e99ffa6194f5","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-152","para":"55-152","html":"
The prepaid interest rate swap contract meets the characteristic of a derivative instrument in paragraph 815-10-15-83(a) because it has an underlying and an effective notional amount. It also meets the characteristic of a derivative instrument in paragraph 815-10-15-83(c) because neither party is required to deliver an asset that is associated with the underlying and that has a principal amount, stated amount, face value, number of shares, or other denomination that is equal to the notional amount (see paragraph 815-10-15-100). At issue is whether the prepaid interest rate swap contract meets the characteristic of a derivative instrument described in paragraph 815-10-15-83(b) related to the initial net investment in a contract.
","snippet":"The prepaid interest rate swap contract meets the characteristic of a derivative instrument in paragraph 815-10-15-83(a) because it has an underlying and an effective notional amount. It also meets the characteristic of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2c74f493f9d62bf516c2784c55706e6afd8406a64b00058df4eb51ff54654626","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-153","para":"55-153","html":"
The prepaid interest rate swap contract does not meet the definition of a derivative instrument because it does not satisfy the characteristic of a derivative instrument described in paragraph 815-10-15-83(b) related to the initial net investment in the contract. Specifically, the prepaid interest rate swap contract is excluded from the definition of a derivative instrument by the clarifying guidance on initial net investment beginning in paragraph 815-10-15-94. The prepaid interest rate swap contract in this Case requires an initial net investment that is determined by applying the effective notional amount of $10,000,000 to the underlying (3-month USD LIBOR) for each of the 8 payment dates specified by the terms of the contract. The initial net investment of $1,228,179 required to enter into the contract is the present value of the 8 quarterly fixed-leg swap payments of $166,250—that is, $10,000,000 × 6.65 percent / 4. Because the LIBOR swap rate reflects the applicable portions of the forward three-month USD LIBOR rate curve for the settlement dates that relate to the specific payments under the swap, the initial net investment is considered to have been determined by applying the effective notional amount to the underlying and then adjusted for the time value of money.
","snippet":"The prepaid interest rate swap contract does not meet the definition of a derivative instrument because it does not satisfy the characteristic of a derivative instrument described in paragraph 815-10-15-83(b) related to …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:14f7bae0a83b85b59fb14bf61bbd0c67ee2233b018f58ecd1c6a975a90169801","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-154","para":"55-154","html":"
That is, as stated in paragraph 815-10-15-97, a contract that requires an initial net investment in the contract that is in excess of the amount determined by applying the effective notional amount to the underlying is also not a derivative instrument in its entirety.
","snippet":"That is, as stated in paragraph 815-10-15-97, a contract that requires an initial net investment in the contract that is in excess of the amount determined by applying the effective notional amount to the underlying is a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5f809179e7cdf30378d9a6c3751555d48f81309aa94287fa20116878d90eb988","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-155","para":"55-155","html":"
See related analysis in Case B.
","snippet":"See related analysis in Case B.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c4dbfc426bf2a78d9cbc89eea04240d0356331d63a73c05b7a7bed7d918b9593","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-156","para":"55-156","html":"
Entity B pays $1,782,245 to enter into a prepaid interest rate swap contract that requires the counterparty to make quarterly payments based on a $10,000,000 effective notional amount and a variable interest rate equal to the sum of 3-month USD LIBOR and 300 basis points. The prepaid interest rate swap contract is characterized as an at-the-money 2-year interest rate swap with a $10,000,000 notional amount, a fixed interest rate of 9.65 percent, and a variable interest rate of 3-month USD LIBOR plus 300 basis points, for which the fixed leg has been fully prepaid. The amount of $1,782,245 is the present value of the 8 quarterly fixed payments of $241,250—that is, $10,000,000 x the fixed rate of 9.65 percent / 4. The present value is based on the implied spot rate for each of the 8 payment dates under the assumed initial yield curve in Example 6 (see paragraph 815-30-55-24).
","snippet":"Entity B pays $1,782,245 to enter into a prepaid interest rate swap contract that requires the counterparty to make quarterly payments based on a $10,000,000 effective notional amount and a variable interest rate equal t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5fe4aa082b9428c4a4e94a23501c25b9dc5ad929e0a1a93dd1f268b0f68a2320","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-157","para":"55-157","html":"
In this Case, the underlying is 3-month USD LIBOR (even though the variable rate is 3-month USD LIBOR plus 300 basis points) and the amount determined by applying the effective notional amount to the underlying (and then adjusted for the time value of money) is $1,228,179, the same as in Case A. The initial net investment for the prepaid interest rate swap in this Case is $1,782,245, an amount that is in excess of $1,228,179—the amount referred to in paragraph 815-10-15-95 as being determined by applying the effective notional amount to the underlying. Consequently, the prepaid interest rate swap in this Case is not a derivative instrument in its entirety.
","snippet":"In this Case, the underlying is 3-month USD LIBOR (even though the variable rate is 3-month USD LIBOR plus 300 basis points) and the amount determined by applying the effective notional amount to the underlying (and then…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6b4753a87ffe8741e0567eeff242c9688e7f0e3fecd54c147d50ff7fa820eeb4","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-158","para":"55-158","html":"
Because the prepaid interest rate swap contract is not a derivative instrument in its entirety, it should be evaluated to determine whether the contract contains an embedded derivative that, pursuant to paragraph 815-15-25-1, requires separate accounting as a derivative instrument.
","snippet":"Because the prepaid interest rate swap contract is not a derivative instrument in its entirety, it should be evaluated to determine whether the contract contains an embedded derivative that, pursuant to paragraph 815-15-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9a3875e0c8262bdf16eba337bc8350b5f4870e3bc3896d45dcd384b8fd8cc538","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-159","para":"55-159","html":"
The prepaid interest rate swap contracts in Cases A and B are hybrid instruments that are composed of a debt instrument (the host contract) and an embedded derivative based on three-month USD LIBOR.
","snippet":"The prepaid interest rate swap contracts in Cases A and B are hybrid instruments that are composed of a debt instrument (the host contract) and an embedded derivative based on three-month USD LIBOR.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6987b68f0e4455878ca5b4380a4a16c3bfb9d27b24b30934d59f4e9b1470c0d1","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-160","para":"55-160","html":"
The embedded derivative contains a provision that could result in the investor (that is, the entity receiving the variable payments) not recovering substantially all of its initial recorded investment in the hybrid instrument under its contractual terms. That is, LIBOR may possibly decrease to such a level that the investor may not recover its initial net investment.
","snippet":"The embedded derivative contains a provision that could result in the investor (that is, the entity receiving the variable payments) not recovering substantially all of its initial recorded investment in the hybrid instr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7de8ca8677759d8717a79dd468b9e9cf2858d7e3edbe0a5ef0562a40272b287e","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-161","para":"55-161","html":"
Therefore, the embedded interest rate swap is not considered clearly and closely related to the host contract under paragraph 815-15-25-26(a) with respect to the accounting by both parties to the contract.
","snippet":"Therefore, the embedded interest rate swap is not considered clearly and closely related to the host contract under paragraph 815-15-25-26(a) with respect to the accounting by both parties to the contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:81c8a1543f72399a10b6591eca068bf0e53d7222d46bfd45ecfb0ed846589ebe","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-162","para":"55-162","html":"
That paragraph states that if an embedded interest rate derivative contains a provision that permits any possibility whatsoever that the investor's (or creditor's) undiscounted net cash inflows over the life of the instrument would not enable the investor to recover substantially all of its initial recorded investment in the hybrid instrument under its contractual terms, the embedded derivative and the debt host contract are not clearly and closely related.
","snippet":"That paragraph states that if an embedded interest rate derivative contains a provision that permits any possibility whatsoever that the investor's (or creditor's) undiscounted net cash inflows over the life of the instr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:19c9bba174c77bbc5678325059ee7dc80c591f59103f848957e8980436485f18","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-163","para":"55-163","html":"
Therefore, unless the contracts described in Cases A and B are remeasured at fair value with changes in value recorded in earnings as they occur, both prepaid interest rate swap contracts should be bifurcated by both parties to the contract into a debt host contract whose initial carrying amount is equal to the fair value of the prepaid interest rate swap contracts ($1,228,179 and $1,782,245, respectively) and an interest rate swap whose fair value is zero at inception of the hybrid instrument, consistent with the guidance in paragraph 815-15-30-4.
","snippet":"Therefore, unless the contracts described in Cases A and B are remeasured at fair value with changes in value recorded in earnings as they occur, both prepaid interest rate swap contracts should be bifurcated by both par…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f7e3c75ef65be42fa8ad1e6b1f45b53b5b9bf16aa6cd72aac65bdb869bc82c07","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-164","para":"55-164","html":"
The bifurcated interest rate swap contains no financing element that would require special cash flow reporting under paragraphs
815-10-45-11 through 45-15
.
","snippet":"The bifurcated interest rate swap contains no financing element that would require special cash flow reporting under paragraphs 815-10-45-11 through 45-15.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fae510ac35525270631a0b116ebb5eb8e54d3da62a049ae92b97f2ab597d71f9","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-165","para":"55-165","html":"
The reporting of the cash flows for the related debt host contract would be subject to the provisions of Topic 230.
","snippet":"The reporting of the cash flows for the related debt host contract would be subject to the provisions of Topic 230.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1f3742cc32528fca51d402f7ac006e31d147e0cc0214b1f95d1d7abf75adb9bf","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-166","para":"55-166","html":"
Entity C pays $1,043,490 to enter into a contract that requires the counterparty to make quarterly payments based on a $10,000,000 effective notional amount and a variable interest rate equal to the 3-month USD LIBOR minus 100 basis points. In the event that 3-month USD LIBOR is less than 100 basis points, Entity C is obligated to make payments to the counterparty. The prepaid interest rate swap contract is characterized as an at-the-money 2-year interest rate swap with a $10,000,000 notional amount, a fixed interest rate of 5.65 percent, and a variable interest rate of 3-month USD LIBOR minus 100 basis points, for which the fixed leg has been fully prepaid. The amount of $1,043,490 is the present value of the 8 quarterly fixed payments of $141,250—that is, $10,000,000 x the fixed rate of 5.65 percent / 4. The present value is based on the implied spot rate for each of the 8 payment dates under the assumed initial yield curve in Example 6 (see paragraph 815-30-55-24).
","snippet":"Entity C pays $1,043,490 to enter into a contract that requires the counterparty to make quarterly payments based on a $10,000,000 effective notional amount and a variable interest rate equal to the 3-month USD LIBOR min…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:927aa219281d87f1a3333e22b9ee662f26a07cf24a76453550c0a36b4a3561cc","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-167","para":"55-167","html":"
In this Case, the underlying is 3-month USD LIBOR (even though the variable rate is 3-month USD LIBOR minus 100 basis points) and the amount determined by applying the effective notional amount to the underlying (and then adjusted for the time value of money) is $1,228,179, the same as in Case A. The initial net investment for the contract in this Case is $1,043,490, an amount that is less than $1,228,179. (The contract is considered not to be fully prepaid because Entity C has not prepaid all obligations imposed on it by the contract; Entity C is obligated to make future payments under certain conditions, as noted in the preceding paragraph.) The difference of $184,689 (about 15 percent) is more than a nominal amount if compared to $1,228,179. Consequently, the contract in this Case is a derivative instrument in its entirety.
","snippet":"In this Case, the underlying is 3-month USD LIBOR (even though the variable rate is 3-month USD LIBOR minus 100 basis points) and the amount determined by applying the effective notional amount to the underlying (and the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8cce12eeff7e8b8812aee5db9bd3eebf49cb56e7cc00939afcf09453ba593e0","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-168","para":"55-168","html":"
The amounts in this Case are not intended to provide quantitative guidance for distinguishing between being less by more than a nominal amount and being less by only a nominal amount. The initial net investment for a contract could be less than the amount determined by applying the effective notional amount to the underlying by a percentage lower than 15 percent and still be considered to be less, by more than a nominal amount under paragraph 815-10-15-96.
","snippet":"The amounts in this Case are not intended to provide quantitative guidance for distinguishing between being less by more than a nominal amount and being less by only a nominal amount. The initial net investment for a con…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f12fbc40f7a28a47ff20f66baa19e971390d0dcff465c20d54cf3621bfd3db7c","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-169","para":"55-169","html":"
Paragraph 815-10-55-63 explains that, from the perspective of the issuer of the contract, synthetic guaranteed investment contracts are derivative instruments as defined in this Subtopic. For a background discussion of synthetic guaranteed investment contracts, including a comparison with traditional and benefit-responsive guaranteed investment contracts, see paragraph 815-10-05-8. This Example illustrates the contractual terms of a synthetic guaranteed investment contract.
","snippet":"Paragraph 815-10-55-63 explains that, from the perspective of the issuer of the contract, synthetic guaranteed investment contracts are derivative instruments as defined in this Subtopic. For a background discussion of s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d436319a8b358f8875b77b2294e77c96645aac8bcba68c966c523e433bc66417","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-170","para":"55-170","html":"
On January 1, 2000, ABC issues a synthetic guaranteed investment contract to the XYZ Pension Fund. XYZ has a fixed return plan option that provides participants with a guaranteed 6 percent return for a 3-year period. The plan's invested assets consist of one public, $50 million par value, 6.50 percent, AA-rated, fixed-rate, noncallable, semiannual payment bond that matures at par on December 31, 2002. (A simplistic assumption that is unrealistic because the plan would diversify its exposure by owning various bonds.) XYZ acquired the bond at par on January 1, 2000. ABC is charging XYZ 12 basis points per year on the $50 million plan balance, or $60,000 per year. Assume that the market yield applicable to this bond immediately increased to 8 percent and caused the following events to occur:
  1. a
    The bond price decreased to $48,342,000.
  2. b
    All plan participants requested that their funds be transferred to another plan fund.
  3. c
    XYZ exercised its put option to transfer the bond to ABC in exchange for a $50 million cash payment.
  4. d
    ABC honored its synthetic guaranteed investment contract obligation and acquired the bond for $50 million.
  5. e
    XYZ used the $50 million proceeds to make the transfer of participant funds to the newly selected fund.
","snippet":"On January 1, 2000, ABC issues a synthetic guaranteed investment contract to the XYZ Pension Fund. XYZ has a fixed return plan option that provides participants with a guaranteed 6 percent return for a 3-year period. The…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:878ae51f87f9d805f8f17188b462d5eeb7337f8754640a7102368002e4f5565f","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-171","para":"55-171","html":"
The following Cases illustrate when separate transactions should be viewed as a unit:
  1. a
    Swaps that should be viewed as a unit (Case A)
  2. b
    Swaps that should not be viewed as a unit (Case B).
","snippet":"The following Cases illustrate when separate transactions should be viewed as a unit:\n(a) Swaps that should be viewed as a unit (Case A)\n(b) Swaps that should not be viewed as a unit (Case B).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8036562b4c8d27b98f356cd59045393bf9936dd85c9e2647a8038c38f7cc69f9","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-172","para":"55-172","html":"
In Cases A and B, an entity that is the issuer of fixed-rate debt enters into an interest rate swap (Swap 1) and designates it as a hedge of the fair value exposure of the debt to interest rate risk. The fair value hedge of the fixed-rate debt involving Swap 1 meets the required criteria in Section 815-20-25 to qualify for hedge accounting. The entity simultaneously enters into a second interest rate swap (Swap 2) with the same counterparty with the exact mirror terms as Swap 1 and does not designate Swap 2 as part of that hedging relationship.
","snippet":"In Cases A and B, an entity that is the issuer of fixed-rate debt enters into an interest rate swap (Swap 1) and designates it as a hedge of the fair value exposure of the debt to interest rate risk. The fair value hedge…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f2a65a49a280c38d097eb9c46851286599147a8fb7c9568aae1f7b5db02cbfde","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-173","para":"55-173","html":"
If Swap 2 was entered into in contemplation of Swap 1 and the overall transaction was executed for the sole purpose of obtaining fair value accounting treatment for the debt, it should be concluded that the purpose of the transaction was not to enter into a bona fide hedging relationship involving Swap 1. In that instance, the two swaps should be viewed as a unit and the entity would not be permitted to adjust the carrying value of the debt to reflect changes in fair value attributable to interest rate risk.
","snippet":"If Swap 2 was entered into in contemplation of Swap 1 and the overall transaction was executed for the sole purpose of obtaining fair value accounting treatment for the debt, it should be concluded that the purpose of th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e5e900fc9c1750adef8676069e5726ac4377477a98d1ffcc2138055c7921ac3b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-174","para":"55-174","html":"
If Swap 2 was not entered into in contemplation of Swap 1 or there is a substantive business purpose for structuring the transactions separately, and if both Swap 1 and Swap 2 were entered into in arm's-length transactions (that is, at market rates), then the swaps should not be viewed as a unit. For example, some entities have a policy that requires a centralized dealer subsidiary to enter into third-party derivative contracts on behalf of other subsidiaries within the entity to hedge the subsidiaries' interest rate risk exposures. The dealer subsidiary also enters into internal derivative contracts with those subsidiaries to operationally track those hedges within the entity. (As discussed beginning in paragraph 815-20-25-61, internal derivatives do not qualify in consolidated financial statements as hedging instruments for risks other than foreign exchange risk.)
","snippet":"If Swap 2 was not entered into in contemplation of Swap 1 or there is a substantive business purpose for structuring the transactions separately, and if both Swap 1 and Swap 2 were entered into in arm's-length transactio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b77a2398a9728f5e9080e696237731d0bc0e62a208dbe429e1e7117f7b56a13b","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-175","para":"55-175","html":"
The following Cases illustrate the guidance in paragraphs
815-10-15-8 through 15-9
on whether separate transactions should be viewed as a unit for purposes of evaluating the characteristic of net settlement:
  1. a
    Two forward contracts viewed as a unit (Case A)
  2. b
    Borrowing and lending transactions viewed as a unit (Case B).
","snippet":"The following Cases illustrate the guidance in paragraphs 815-10-15-8 through 15-9 on whether separate transactions should be viewed as a unit for purposes of evaluating the characteristic of net settlement:\n(a) Two forw…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:88066c475cc5a47e4c9b57697f4c22ef1751096dadcdd3de559aa602b5b65c0f","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-176","para":"55-176","html":"
In Cases A and B, the transactions were entered into with the same counterparty, were executed simultaneously, and relate to the same risk.
","snippet":"In Cases A and B, the transactions were entered into with the same counterparty, were executed simultaneously, and relate to the same risk.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d93107261de2c0b8d06797554850e22d0213bf34f25f47923d8b6f8dfd378a12","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-177","para":"55-177","html":"
Entity A enters into a forward contract to purchase 1,500,000 units of a particular commodity in 3 months for $10 per unit. Simultaneously, Entity A enters into a forward contract to sell 1,400,000 units of the same commodity in 3 months for $10 per unit. The purchase and sale contracts are with the same counterparty. There is no market mechanism to facilitate net settlement of the contracts, and both contracts require physical delivery of the commodity at the same location in exchange for the forward price. On a gross basis, neither contract is readily convertible to cash because the market cannot rapidly absorb the specified quantities without significantly affecting the price. However, on a net basis, Entity A has a forward purchase contract for 100,000 units of the commodity, a quantity that can be rapidly absorbed by the market and thus is readily convertible to cash.
","snippet":"Entity A enters into a forward contract to purchase 1,500,000 units of a particular commodity in 3 months for $10 per unit. Simultaneously, Entity A enters into a forward contract to sell 1,400,000 units of the same comm…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a7a60ce8dd9bf6bd783d8942c7b35a873863ca3821b2b9cc36d637fb54a67534","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-178","para":"55-178","html":"
In this Case, it appears that there is no clear business purpose for structuring the transactions separately. Therefore, the facts point to the conclusion that the purchase and sale were done as a structured transaction with one counterparty to circumvent the definition of a derivative instrument under this Subtopic. However, if the facts indicated that both contracts required physical delivery of the commodity at different locations that are significantly distant from one another and each counterparty is expected to deliver the gross amount of the commodity to the other, those facts may reflect a valid substantive business purpose for the transaction.
","snippet":"In this Case, it appears that there is no clear business purpose for structuring the transactions separately. Therefore, the facts point to the conclusion that the purchase and sale were done as a structured transaction …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e58922193ff48dac82a2db688e2c6abbef10f4759508d7e38dda7b14e5091fc4","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-179","para":"55-179","html":"
Entity C loans $100 to Entity B. The loan has a 5-year bullet maturity and an 8 percent fixed interest rate, payable semiannually. Entity B simultaneously loans $100 to Entity C. The loan has a five-year bullet maturity and a variable interest of LIBOR, payable semiannually and reset semiannually. Entity B and Entity C enter into a netting arrangement that permits each party to offset its rights and obligations under the agreements. The netting arrangement meets the criteria for offsetting in Subtopic 210-20. The net effect of offsetting the contracts for both Entity B and Entity C is the economic equivalent of an interest rate swap arrangement, that is, one party receives a fixed interest rate from, and pays a variable interest rate to, the other.
","snippet":"Entity C loans $100 to Entity B. The loan has a 5-year bullet maturity and an 8 percent fixed interest rate, payable semiannually. Entity B simultaneously loans $100 to Entity C. The loan has a five-year bullet maturity …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6cf4243e1f5701619aec8014fdaca03373a0090c22366f6e4baf30f73a921051","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-180","para":"55-180","html":"
In this Case, based on the facts presented, there is no clear business purpose for the separate transactions, and they should be accounted for as an interest rate swap under this Subtopic. However, in other instances, a clear substantive business purpose for entering into two separate loan transactions may exist (for example, as a means to overcome foreign currency expatriation restrictions).
","snippet":"In this Case, based on the facts presented, there is no clear business purpose for the separate transactions, and they should be accounted for as an interest rate swap under this Subtopic. However, in other instances, a …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a93617f20761570ffd07a0d5ecccb080114f591c6c75232dca5ac67962544d13","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-181","para":"55-181","html":"
This Example illustrates the disclosure of objectives and strategies for using derivative instruments by underlying risk, including volume of activity (see paragraph 815-10-50-1A(d)). It also illustrates the hedge basis adjustment disclosures in paragraphs 815-10-50-4EE through 50-4EEE.
","snippet":"This Example illustrates the disclosure of objectives and strategies for using derivative instruments by underlying risk, including volume of activity (see paragraph 815-10-50-1A(d)). It also illustrates the hedge basis …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:083eb73435f372ba6cc84170997ff9dc7f0b41c9ca2339ddf012a14c459123da","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-182","para":"55-182","html":"
This Example illustrates the disclosure in tabular format of fair value amounts of derivative instruments and gains and losses on derivative instruments as required by paragraphs
815-10-50-4A through 50-4E
:
","snippet":"This Example illustrates the disclosure in tabular format of fair value amounts of derivative instruments and gains and losses on derivative instruments as required by paragraphs 815-10-50-4A through 50-4E:","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8aa309ed93692667f2df14dbdb4a06e916222a5a920fca9f8e833345438ebdfc","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-183","para":"55-183","html":"
The illustrative disclosure tables in the preceding paragraph provide quantitative information about derivative instruments. However, in many instances, the use of derivative instruments in an entity's risk management strategies represents only a portion of the instruments used for that purpose. As permitted in paragraph 815-10-50-4F, an entity can elect to disclose information about certain derivatives included in an entity's trading activities in separate disclosures outside the required tabular format. That paragraph states that, if that disclosure option is elected, the entity shall include a footnote in the required tables referencing the use of alternative disclosures for trading activities.
","snippet":"The illustrative disclosure tables in the preceding paragraph provide quantitative information about derivative instruments. However, in many instances, the use of derivative instruments in an entity's risk management st…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:207601f38b83729b8885a96cd07d87aef2d9949dfa50b17d7e81d79856c1527f","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-184","para":"55-184","html":"
This Example illustrates one approach for presenting the quantitative information required under paragraph 815-10-50-4F when an entity elects the alternative disclosure for gains and losses on derivative instruments included in its trading activities. The Example does not address all possible ways of complying with the alternative disclosure requirements under that paragraph. Many entities already include the required information about their trading activities in other disclosures within the financial statements. Paragraph 815-10-50-4I states that, if information on derivative instruments (or nonderivative instruments that are designated and qualify as hedging instruments pursuant to paragraphs 815-20-25-58 and 815-20-25-66) is disclosed in more than a single note to financial statements, an entity shall cross-reference from the derivative instruments (or nonderivative instruments) note to other notes in which derivative-instrument-related information is disclosed.
","snippet":"This Example illustrates one approach for presenting the quantitative information required under paragraph 815-10-50-4F when an entity elects the alternative disclosure for gains and losses on derivative instruments incl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f9dd5243b5a27bc8af3f3489d903e0459de5c0ca71977575654a75ac282f642d","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"citation":"815-10-55-185","para":"55-185","html":"
This Example illustrates the disclosure of credit-risk-related contingent features in derivative instruments as required by paragraph 815-10-50-4H.
","snippet":"This Example illustrates the disclosure of credit-risk-related contingent features in derivative instruments as required by paragraph 815-10-50-4H.\nContingent Features\nCertain of the Entity's derivative instruments conta…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7ebff30c6fd8ccfac92ab661a36c29316d6f9e9453f36f2292bc94e9674ea6a9","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5b6a42c2fb8d05cf985dc1459c728b670b3db3c5199f0519c287b17f3cce986f","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:083fc7a3b5da5d241674cfe4c815114e324dff63e545c84625e55a88e5f92807","downloaded_from":"2026-09-10T01:35:18.840Z","last_downloaded_at":"2026-09-10T01:35:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480401","source_sha256":"056fb10a84bf36dbe9cd12bb71dcbf274c076b0cec661e994ea0e2f649dafc1d"}},{"number":"60","label":"60 Relationships","anchor":"60-relationships","is_sec":false,"groups":[{"block":null,"heading":"Statement of Cash Flows","paragraphs":[{"citation":"815-10-60-1","para":"60-1","html":"
For circumstances in which cash receipts and payments include more than one class of cash flows, see paragraphs
230-10-45-22 through 45-23
.
","snippet":"For circumstances in which cash receipts and payments include more than one class of cash flows, see paragraphs 230-10-45-22 through 45-23.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:13573789a0cf54d69286096ab1962921f9795d9ee18f1612751dcc5803861ba2","downloaded_from":"2026-09-10T01:35:21.910Z","last_downloaded_at":"2026-09-10T01:35:21.910Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480370","source_sha256":"c603e4b34c3896b58217d959b6e258e5092f628f1408c8bc154f63d74fe85fce"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fb1474db43dba7521fc63e2db12ea30e6563adebf77baf43603aa3dd0d7bae3b","downloaded_from":"2026-09-10T01:35:21.910Z","last_downloaded_at":"2026-09-10T01:35:21.910Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480370","source_sha256":"c603e4b34c3896b58217d959b6e258e5092f628f1408c8bc154f63d74fe85fce"}},{"block":null,"heading":"Compensation—Stock Compensation","paragraphs":[{"citation":"815-10-60-2","para":"60-2","html":"
For circumstances in which an instrument ceases to be subject to the requirements of Topic 718 and may become subject to the scope of this Subtopic, see paragraphs
718-10-35-9 through 35-14
.
","snippet":"For circumstances in which an instrument ceases to be subject to the requirements of Topic 718 and may become subject to the scope of this Subtopic, see paragraphs 718-10-35-9 through 35-14.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aa846bfcb1ad6a88c8f0aa708cb63365f5720270f81362377495031147f22ecd","downloaded_from":"2026-09-10T01:35:21.910Z","last_downloaded_at":"2026-09-10T01:35:21.910Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480370","source_sha256":"c603e4b34c3896b58217d959b6e258e5092f628f1408c8bc154f63d74fe85fce"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2247f92542e990b6bcb5241b1ef7d194c7af0af3eaa4958b46d033c03b7664ca","downloaded_from":"2026-09-10T01:35:21.910Z","last_downloaded_at":"2026-09-10T01:35:21.910Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480370","source_sha256":"c603e4b34c3896b58217d959b6e258e5092f628f1408c8bc154f63d74fe85fce"}},{"block":null,"heading":"Fair Value Measurements and Disclosures","paragraphs":[{"citation":"815-10-60-3","para":"60-3","html":"
For an illustration of situations in which the price in a transaction involving a derivative instrument might (and might not) represent the fair value of the derivative instrument, see Example 5 (paragraph 820-10-55-46).
","snippet":"For an illustration of situations in which the price in a transaction involving a derivative instrument might (and might not) represent the fair value of the derivative instrument, see Example 5 (paragraph 820-10-55-46).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f755baff30a01e892323e49238da362b085999c0a8d326d30781be2e2696f2be","downloaded_from":"2026-09-10T01:35:21.910Z","last_downloaded_at":"2026-09-10T01:35:21.910Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480370","source_sha256":"c603e4b34c3896b58217d959b6e258e5092f628f1408c8bc154f63d74fe85fce"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c861963c162a15edb8962462dc1fcec7cc56ea02414167cf79c4f0d5d4e9f4fb","downloaded_from":"2026-09-10T01:35:21.910Z","last_downloaded_at":"2026-09-10T01:35:21.910Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480370","source_sha256":"c603e4b34c3896b58217d959b6e258e5092f628f1408c8bc154f63d74fe85fce"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0652d0a69f5026012bf2d91742decc1e4d821ab9fe5431b3f2d7ef82c8df66c2","downloaded_from":"2026-09-10T01:35:21.910Z","last_downloaded_at":"2026-09-10T01:35:21.910Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480370","source_sha256":"c603e4b34c3896b58217d959b6e258e5092f628f1408c8bc154f63d74fe85fce"}},{"number":"65","label":"65 Transition and Open Effective Date Information","anchor":"65-transition-and-open-effective-date-information","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-65-1","para":"65-1","html":"
Paragraph superseded on 04/13/2010 after the end of the transition period stated in FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.
","snippet":"Paragraph superseded on 04/13/2010 after the end of the transition period stated in FASB Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b057bb65facb9c392155424fd243ff2b3c7193f1aef023c14292c522b6c6e35c","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}},{"citation":"815-10-65-2","para":"65-2","html":"
Paragraph superseded on 03/23/2010 after the end of the transition period stated in FASB Staff Position No. FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161.
","snippet":"Paragraph superseded on 03/23/2010 after the end of the transition period stated in FASB Staff Position No. FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statem…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b914f6a1ada793a7be57369c9188f5fc406fa1b644a539ca350c7b7c261f8d0d","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}},{"citation":"815-10-65-3","para":"65-3","html":"
Paragraph superseded on 07/01/2010 after the end of the transition period stated in EITF Issue No. 07-5, \"Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock.\"
","snippet":"Paragraph superseded on 07/01/2010 after the end of the transition period stated in EITF Issue No. 07-5, \"Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock.\"","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:11e77d057d330b62f4db80af89e4f52fd8c14537dc18184851703fc960cab4b5","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}},{"citation":"815-10-65-4","para":"65-4","html":"
Paragraph superseded on 07/01/2010 after the end of the transition period stated in EITF Issue No. 08-8, \"Accounting for an Instrument (or an Embedded Feature) with a Settlement Amount That Is Based on the Stock of an Entity's Consolidated Subsidiary.\"
","snippet":"Paragraph superseded on 07/01/2010 after the end of the transition period stated in EITF Issue No. 08-8, \"Accounting for an Instrument (or an Embedded Feature) with a Settlement Amount That Is Based on the Stock of an En…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8f2791f41139ca951aef6e8da13c60e2cdc1fcc76b86df8262d4193553bcde55","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}},{"citation":"815-10-65-5","para":"65-5","html":"
Paragraph superseded on 03/15/2011 after the end of the transition period stated in Accounting Standards Update No. 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.
","snippet":"Paragraph superseded on 03/15/2011 after the end of the transition period stated in Accounting Standards Update No. 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:88c6c9cec375dfc1bb5d154660967326f98e9c104111c12695a00c368d52add7","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:778c8cbf26a3c975841f46b9b1475e51b452ffc1fa00548e70b078864ef24fef","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}},{"block":null,"heading":"Transition Related to Accounting Standards Update No. 2014-03, Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach","paragraphs":[{"citation":"815-10-65-6","para":"65-6","html":"
The following represents the transition information related to Accounting Standards Update No. 2014-03, Derivatives and Hedging (Topic 815): Accounting for Certain Receive-Variable, Pay-Fixed Interest Rate Swaps—Simplified Hedge Accounting Approach, referenced in paragraph 815-20-25-131AA:
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2016-03.
  2. b
    Upon adoption of the simplified hedge accounting approach in this Subtopic and adoption of the guidance in paragraphs 825-10-50-3 and 825-10-50-8, that guidance shall be applied as of the beginning of the first fiscal year in which the approach is elected and in either of the following ways:
    1. 1
      Using a modified retrospective approach in which corresponding adjustments shall be made to the assets, liabilities, and opening balance of accumulated other comprehensive income and retained earnings (or other appropriate components of equity) of the current period presented to reflect application of hedge accounting under this Topic from the date the receive-variable, pay-fixed interest rate swap was entered into (or acquired) by the entity.
    2. 2
      Using a full retrospective approach in which:
      1. i
        The financial statements for each individual prior period presented shall be adjusted to reflect the period-specific effects of applying hedge accounting under this Topic from the date the receive-variable, pay-fixed interest rate swap was entered into (or acquired) by the entity.
      2. ii
        Corresponding adjustments shall be made to the assets, liabilities, and opening balance of accumulated other comprehensive income and retained earnings (or other appropriate components of equity) of the earliest period presented to reflect application of hedge accounting under this Topic from the date the receive-variable, pay-fixed interest rate swap was entered into (or acquired) by the entity.
  3. c
    The simplified hedge accounting approach may be elected for any qualifying receive-variable, pay-fixed interest rate swap, whether existing at the date of its adoption or entered into after that date. The election to apply the simplified hedge accounting approach to an existing swap shall be made upon its adoption and can be applied only to existing swaps the first time the election is made. After the initial election is made to apply the simplified hedge accounting approach to existing swaps, no further retrospective applications to existing swaps (full or modified) are permitted. In determining whether an existing swap meets all of the conditions in paragraph 815-20-25-131D to qualify for applying the simplified hedge accounting approach, the condition that the swap's fair value at the time of application of this approach is at or near zero need not be considered. Instead, as long as the swap's fair value was at or near zero at the time the swap was entered into (or acquired) by the entity, the entity may apply the simplified hedge accounting approach. For an existing swap, the documentation required by paragraph 815-20-25-3 to qualify for hedge accounting must be completed in the period of adoption by the date on which the first annual financial statements are available to be issued rather than concurrently at hedge inception.
  4. d
    Subparagraph superseded by Accounting Standards Update No. 2016-03.
  5. e
    An entity shall provide the required disclosures in paragraphs
    250-10-50-1 through 50-3
    in the period that the entity adopts the     simplified hedge accounting approach in this Subtopic.
  6. f
    A private company that makes an accounting policy election to apply the simplified hedge accounting approach for the first time need not justify that the use of that approach is preferable as described in paragraph 250-10-45-2.
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Paragraph superseded on 07/05/2017 after the end of the transition period stated in Accounting Standards Update No. 2015-13, Derivatives and Hedging (Topic 815): Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal Energy Markets.
","snippet":"Paragraph superseded on 07/05/2017 after the end of the transition period stated in Accounting Standards Update No. 2015-13, Derivatives and Hedging (Topic 815): Application of the Normal Purchases and Normal Sales Scope…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e68b23ce40c0008010c01f40a81291837c46d885f3c66c56d1a478ae60e73dc1","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:935b9531c72f7786c31d51b2f1304183ab720a4a52f503b9f557c0a5e99f03a3","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}},{"block":null,"heading":"Transition Related to Accounting Standards Update No. 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract","paragraphs":[{"citation":"815-10-65-8","para":"65-8","html":"
Accounting Standards Update 2025-07
2028-6-13
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
The following represents the transition and effective date information related to Accounting Standards Update No. 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives Scope Refinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract:
Effective date and early adoption
  1. a
    All entities shall apply the pending content that links to this paragraph for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.
  2. b
    Early adoption of the pending content that links to this paragraph is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. If an entity early adopts the pending content that links to this paragraph in an interim reporting period, it shall apply the pending content as of the beginning of the annual reporting period that includes that interim reporting period. If an entity early adopts the pending content that links to this paragraph, it also shall early adopt the pending content that links to paragraph 606-10-65-3 simultaneously.
Transition method
  1. c
    An entity shall apply the pending content that links to this paragraph using one of the following transition methods:
    1. 1
      Prospectively to new contracts entered into on or after the date of adoption.
    2. 2
      On a modified retrospective basis through a cumulative-effect adjustment to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) as of the beginning of the annual reporting period of adoption for contracts existing as of the beginning of the annual reporting period of adoption.
  2. d
    If an entity applies the transition method in (c)(2) and the entity had contracts or embedded features that were accounted for as derivatives but are no longer accounted for as derivatives as a result of applying the pending content that links to this paragraph, the entity has an option as of the beginning of the annual reporting period for which the pending content is adopted to elect to apply the fair value option on an instrument-by-instrument basis and measure the contract in its entirety at fair value with changes in fair value recognized in earnings if that instrument is within the scope of paragraph 825-10-15-4. For financial liabilities, an entity shall present separately in accumulated other comprehensive income the portion of the total change in the fair value of the liability that results from a change in the instrument-specific credit risk. If an entity had previously elected the fair value option for contracts that contained embedded derivatives that otherwise would have been bifurcated but are no longer required to be bifurcated as a result of applying the pending content that links to this paragraph upon adoption, the entity has an option on an instrument-by-instrument basis to revoke the fair value option as of the beginning of the annual reporting period for which the pending content is adopted and measure the contract in accordance with other generally accepted accounting principles. For those instruments for which the entity elects or revokes its election of the fair value option, the effects of initially complying with the pending content that links to this paragraph shall be reported as a cumulative-effect adjustment directly to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) as of the beginning of the annual reporting period in which the pending content is adopted.
Transition disclosures
  1. e
    An entity that applies the transition method in (c)(1) shall disclose the nature of and reason for the change in accounting principle in both the interim reporting period and the annual reporting period in which the entity adopts the pending content that links to this paragraph.
  2. f
    An entity that applies the transition method in (c)(2) shall disclose the following in both the interim reporting period and the annual reporting period in which the entity adopts the pending content that links to this paragraph:
    1. 1
      The nature of and reason for the change in accounting principle
    2. 2
      The cumulative effect of the change on retained earnings or other components of equity or net assets in the statement of financial position as of the beginning of the annual reporting period of adoption and a description of the financial statement line items affected by the adjustment.
","snippet":"Accounting Standards Update 2025-07The following represents the transition and effective date information related to Accounting Standards Update No. 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1cbd194658bdf9e67874ca0a87bf16460963cc8a40be476847f6ef720a9e67f1","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ea8ea5be08334faf12d7dcac7b24635f6a751db94a93168ad85e67261554f2f","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:810f878ef6eef7324c2a550e142f55ef3c403523cc1f3717123d85c96b3f0051","downloaded_from":"2026-09-10T01:35:25.118Z","last_downloaded_at":"2026-09-10T01:35:25.118Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480339","source_sha256":"ed567777727bcfafb06eb1a6c50272f8f5ce1757ad6479bf1c1997cde6e90eab"}},{"number":"S00","label":"SEC 00 Status","anchor":"sec-00-status","is_sec":true,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-10-S00-1","para":"S00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
815-10-S45-1SupersededAccounting Standards Update No. 2010-0401/15/2010
815-10-S55-1SupersededAccounting Standards Update No. 2016-1105/02/2016
815-10-S99-1AmendedAccounting Standards Update No. 2012-0308/27/2012
815-10-S99-2SupersededAccounting Standards Update No. 2010-0401/15/2010
815-10-S99-3SupersededAccounting Standards Update No. 2016-1105/02/2016
815-10-S99-3AmendedAccounting Standards Update No. 2010-0401/15/2010
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\n815-10-S45-1 | Superseded | Accounting Standards Update No. 2010-04 | 01/15/2010 |\n815-1…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:af30d53c3540813c3b3057f8d3e828ca45c3d1b0d9827065107fc763502daec1","downloaded_from":"2026-09-10T01:35:31.799Z","last_downloaded_at":"2026-09-10T01:35:31.799Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479807","source_sha256":"f802f2e6520dfc74e57797963da1dc9c2a3a29a43cc81c133273408cdcead546"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f2673588061ce35d618f7b97e46c13a5fd51b9a30e3b8fae118360fb3ab44ec","downloaded_from":"2026-09-10T01:35:31.799Z","last_downloaded_at":"2026-09-10T01:35:31.799Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479807","source_sha256":"f802f2e6520dfc74e57797963da1dc9c2a3a29a43cc81c133273408cdcead546"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f20840aebceddb2aa772d3da210d70b9eb663362812e440f675400afbc0fe67f","downloaded_from":"2026-09-10T01:35:31.799Z","last_downloaded_at":"2026-09-10T01:35:31.799Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479807","source_sha256":"f802f2e6520dfc74e57797963da1dc9c2a3a29a43cc81c133273408cdcead546"}},{"number":"S30","label":"SEC 30 Initial Measurement","anchor":"sec-30-initial-measurement","is_sec":true,"groups":[{"block":null,"heading":"Written Loan Commitments Recorded at Fair Value through Earnings","paragraphs":[{"citation":"815-10-S30-1","para":"S30-1","html":"
See paragraph 815-10-S99-1, SAB Topic 5.DD, for SEC Staff views regarding written loan commitments that are accounted for at fair value through earnings.
","snippet":"See paragraph 815-10-S99-1, SAB Topic 5.DD, for SEC Staff views regarding written loan commitments that are accounted for at fair value through earnings.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6c9050c231527dce904dc433543f21106e37134e22ad3d14f88fb9ef032befba","downloaded_from":"2026-09-10T01:35:34.961Z","last_downloaded_at":"2026-09-10T01:35:34.961Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479776","source_sha256":"8ee584ce746c6e0ee92b38a959fba5609c3ed0037a244aba47be78d2458a29c8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c82a914189adc39089cb1572c43f070b38238075d7d6ac3b7baa8d078c4dcd0d","downloaded_from":"2026-09-10T01:35:34.961Z","last_downloaded_at":"2026-09-10T01:35:34.961Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479776","source_sha256":"8ee584ce746c6e0ee92b38a959fba5609c3ed0037a244aba47be78d2458a29c8"}},{"block":null,"heading":"Accounting for Written Options","paragraphs":[{"citation":"815-10-S30-2","para":"S30-2","html":"
See paragraph 815-10-S99-4, SEC Observer Comment: Accounting for Written Options
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See paragraph 815-10-S99-4, SEC Observer Comment: Accounting for Written Options.
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A contract is a derivative only if it has (1) one or more underlyings and one or more notional amounts or payment provisions, (2) no or a smaller-than-usual initial net investment, and (3) the ability to be settled net (815-10-15-83). 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Hedging","score":0.7619,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3098dac5da4b2e5ae725fc6fada8c10fbc7fb9071a60a5c74c50c108de804e47","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:36:30.992Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-40","title":"Contracts in Entity's Own Equity","topic_title":"Derivatives and Hedging","score":0.7557,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:52ee38e380ad2ba11f6f2917c8fd92ac9800d6a9fefb82bf506fda8314b3be3b","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"980-10","title":"Overall","topic_title":"Regulated Operations","score":0.7522,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8db1474bd700f11a658e8801a073b3eba2c24b4fb5cda4896ca719f34def0483","downloaded_from":"2026-09-10T02:27:16.483Z","last_downloaded_at":"2026-09-10T02:27:45.235Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-944","title":"Financial Services—Insurance","topic_title":"Derivatives and Hedging","score":0.7209,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a97bc956c0a806becf7fd3ad2594d76705dd7e834a8022deb9a8f583a09bc34f","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-25","title":"Fair Value Hedges","topic_title":"Derivatives and Hedging","score":0.7185,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f6e1921cb5038462fa2bd3f4d337a47d40926de4a9c6b963a38019e87e09a37d","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:31.976Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}}],"prev":{"number":"810-980","title":"Regulated Operations","topic_title":"Consolidation","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fd3f918560d3d71ea0b090f5362cff7cd5078a61e155841ee87c26a3b210bc89","downloaded_from":"2026-09-10T01:34:28.274Z","last_downloaded_at":"2026-09-10T01:34:48.416Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"next":{"number":"815-15","title":"Embedded Derivatives","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a6aed11e6a893807e6034a6052279b844ab530d6b213142daaec63d2ba36707","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:36:30.992Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:57816aad9a5e88fb430f8a3fc4ddf8742f83780ea0007056b82b280d0ecbfc39","downloaded_from":"2026-09-10T01:34:51.547Z","last_downloaded_at":"2026-09-10T01:35:54.090Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-15","topic":"815","title":"Embedded Derivatives","area":"Broad Transactions","paragraphs":354,"summary":"ASC 815-15 governs when a derivative-like feature embedded in a contract that is not itself a derivative in its entirety (a \"hybrid instrument\") must be separated (\"bifurcated\") from the host contract and accounted for as a standalone derivative under Subtopic 815-10. Bifurcation is required if and only if all three criteria in 815-15-25-1 are met: the embedded feature's economic characteristics and risks are not clearly and closely related to the host, the hybrid is not already remeasured at fair value through earnings, and a freestanding instrument with the same terms would be a derivative. As an alternative, an entity may irrevocably elect to measure the entire hybrid financial instrument at fair value through earnings (815-15-25-4), and if it cannot reliably identify and measure the embedded derivative it must measure the whole contract at fair value through earnings (815-15-25-53).","concepts":["embedded derivative","hybrid instrument","host contract","clearly and closely related","bifurcation","fair value election","compound embedded derivative","debt versus equity host"],"categories":["Derivatives and hedging","Financial instruments","Fair value","Debt and equity"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-15-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Benchmark Interest RateAddedAccounting Standards Update No. 2017-1208/28/2017
Commencement Date of the Lease (Commencement Date)AddedAccounting Standards Update No. 2016-0202/25/2016
ContractAddedAccounting Standards Update No. 2016-0202/25/2016
Credit RiskAmendedAccounting Standards Update No. 2017-1208/28/2017
Credit RiskAmendedAccounting Standards Update No. 2010-0802/02/2010
Embedded Credit DerivativeAddedAccounting Standards Update No. 2010-1103/05/2010
Financial InstrumentAmendedAccounting Standards Update No. 2024-0203/29/2024
Financial LiabilityAddedAccounting Standards Update No. 2018-0302/28/2018
Interest Rate RiskAmendedAccounting Standards Update No. 2017-1208/28/2017
LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
LesseeAddedAccounting Standards Update No. 2016-0202/25/2016
LessorAddedAccounting Standards Update No. 2016-0202/25/2016
Market Risk BenefitAddedAccounting Standards Update No. 2018-1208/15/2018
Other Comprehensive IncomeAddedMaintenance Update 2014-20 (PDF)09/29/2014
Payout PhaseAddedAccounting Standards Update No. 2014-0603/14/2014
Public Business EntityAmendedMaintenance Update 2017-06 (PDF)04/07/2017
Public Business EntityAmendedMaintenance Update 2016-11 (PDF)06/27/2016
Public Business EntityAddedAccounting Standards Update No. 2014-1611/03/2014
Readily Convertible to CashAmendedAccounting Standards Update No. 2024-0203/29/2024
Remeasurement EventAmendedAccounting Standards Update No. 2016-1306/16/2016
TransactionAmendedAccounting Standards Update No. 2024-0203/29/2024
Underlying AssetAddedAccounting Standards Update No. 2016-0202/25/2016
Variable Lease PaymentsAddedAccounting Standards Update No. 2016-0202/25/2016
815-15-15-6AmendedAccounting Standards Update No. 2016-0101/05/2016
815-15-15-8SupersededAccounting Standards Update No. 2010-1103/05/2010
815-15-15-9AmendedAccounting Standards Update No. 2010-1103/05/2010
815-15-25-1AmendedAccounting Standards Update No. 2018-0907/16/2018
815-15-25-4AmendedAccounting Standards Update No. 2018-0302/28/2018
815-15-25-5AmendedAccounting Standards Update No. 2016-1306/16/2016
815-15-25-5AmendedAccounting Standards Update No. 2016-0101/05/2016
815-15-25-14AmendedAccounting Standards Update No. 2020-0608/05/2020
815-15-25-15AmendedAccounting Standards Update No. 2020-0608/05/2020
815-15-25-16AmendedAccounting Standards Update No. 2014-1611/03/2014
815-15-25-16AmendedAccounting Standards Update No. 2010-1103/05/2010
815-15-25-17AmendedAccounting Standards Update No. 2014-1611/03/2014
815-15-25-17A through 25-17D
AddedAccounting Standards Update No. 2014-1611/03/2014
815-15-25-18AmendedAccounting Standards Update No. 2010-1103/05/2010
815-15-25-20AmendedAccounting Standards Update No. 2014-1611/03/2014
815-15-25-22AmendedAccounting Standards Update No. 2016-0202/25/2016
815-15-25-26AmendedAccounting Standards Update No. 2010-0802/02/2010
815-15-25-37AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-25-40 through 25-42
AmendedAccounting Standards Update No. 2010-0802/02/2010
815-15-25-40SupersededAccounting Standards Update No. 2016-0603/14/2016
815-15-25-41AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-25-42AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-25-51AAddedAccounting Standards Update No. 2010-1103/05/2010
815-15-30-3AmendedAccounting Standards Update No. 2012-0410/01/2012
815-15-35-3AmendedMaintenance Update 2014-20 (PDF)09/29/2014
815-15-45-2AddedAccounting Standards Update No. 2018-0302/28/2018
815-15-50-2AmendedAccounting Standards Update No. 2025-1112/08/2025
815-15-55-4AmendedAccounting Standards Update No. 2016-0202/25/2016
815-15-55-7AmendedAccounting Standards Update No. 2016-0202/25/2016
815-15-55-8AmendedAccounting Standards Update No. 2012-0410/01/2012
815-15-55-13AmendedAccounting Standards Update No. 2010-0802/02/2010
815-15-55-18AmendedAccounting Standards Update No. 2012-0410/01/2012
815-15-55-35AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-55-37AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-55-39AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-55-43AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-55-45AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-55-47AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-55-54AmendedAccounting Standards Update No. 2018-1208/15/2018
815-15-55-55AmendedAccounting Standards Update No. 2018-1208/15/2018
815-15-55-55AmendedAccounting Standards Update No. 2012-0410/01/2012
815-15-55-57SupersededAccounting Standards Update No. 2018-1208/15/2018
815-15-55-57AmendedAccounting Standards Update No. 2014-0603/14/2014
815-15-55-58AmendedAccounting Standards Update No. 2018-1208/15/2018
815-15-55-59 through 55-61
SupersededAccounting Standards Update No. 2018-1208/15/2018
815-15-55-62AmendedAccounting Standards Update No. 2018-1208/15/2018
815-15-55-67AmendedAccounting Standards Update No. 2018-1208/15/2018
815-15-55-69AmendedAccounting Standards Update No. 2018-1208/15/2018
815-15-55-74AmendedAccounting Standards Update No. 2018-1208/15/2018
815-15-55-75AmendedAccounting Standards Update No. 2018-1208/15/2018
815-15-55-76AAmendedAccounting Standards Update No. 2020-0608/05/2020
815-15-55-76BAddedAccounting Standards Update No. 2020-0608/05/2020
815-15-55-99AmendedAccounting Standards Update No. 2012-0410/01/2012
815-15-55-124AmendedAccounting Standards Update No. 2016-0603/14/2016
815-15-55-165AmendedAccounting Standards Update No. 2010-1103/05/2010
815-15-55-166AmendedAccounting Standards Update No. 2010-1103/05/2010
815-15-55-169AmendedAccounting Standards Update No. 2010-1103/05/2010
815-15-55-210AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-15-55-212AmendedAccounting Standards Update No. 2010-0802/02/2010
815-15-55-216AmendedAccounting Standards Update No. 2016-1912/14/2016
815-15-55-218AmendedAccounting Standards Update No. 2020-0608/05/2020
815-15-55-219AmendedAccounting Standards Update No. 2020-0608/05/2020
815-15-55-224 through 55-226
AmendedAccounting Standards Update No. 2010-1103/05/2010
815-15-55-226A through 55-226D
AddedAccounting Standards Update No. 2010-1103/05/2010
815-15-65-1AddedAccounting Standards Update No. 2010-0802/02/2010
815-15-65-2AddedAccounting Standards Update No. 2014-1611/03/2014
815-15-65-3AddedAccounting Standards Update No. 2016-0603/14/2016
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nBenchmark Interest Rate | Added | Accounting Standards Update No. 2017-12 | 08/28/2017 |…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6cf0227d1a971afad94ca321e9e2df074c3472a24080b64bd5537111f9e4432f","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:35:56.033Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480273","source_sha256":"b38e97b0b366aff92c0a5539c3401864085806af58c3fb4da81e55de24c82e38"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:caf4b80daf6443a23dbab45a0f8d82fec6afe56b85a99f877e79b4eb4757d392","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:35:56.033Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480273","source_sha256":"b38e97b0b366aff92c0a5539c3401864085806af58c3fb4da81e55de24c82e38"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6c11f6117aba0856291e87bcb3b4bb87744304bcc2a5745c0ee8b82991225490","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:35:56.033Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480273","source_sha256":"b38e97b0b366aff92c0a5539c3401864085806af58c3fb4da81e55de24c82e38"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-15-05-1","para":"05-1","html":"
Contracts that do not in their entirety meet the definition of a derivative instrument (see paragraphs
815-10-15-83 through 15-139
), such as bonds, insurance policies, and leases, may contain embedded derivatives. The effect of embedding a derivative instrument in another type of contract (the host contract) is that some or all of the cash flows or other exchanges that otherwise would be required by the host contract, whether unconditional or contingent on the occurrence of a specified event, will be modified based on one or more underlyings.
","snippet":"Contracts that do not in their entirety meet the definition of a derivative instrument (see paragraphs 815-10-15-83 through 15-139), such as bonds, insurance policies, and leases, may contain embedded derivatives. The ef…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4316f61cff3486466dd2c319d006fc3ee191be80855578c54dc321f9ec9a1e86","downloaded_from":"2026-09-10T01:35:59.276Z","last_downloaded_at":"2026-09-10T01:35:59.276Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480242","source_sha256":"5356e8f3e6d61ef1c2eda08429c42c89e4222a510f261de839e12ef19e05f68b"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:893c63c6d5a738204f3fd727d2a3584473ee77cee5436c778f3ff01c6188da3b","downloaded_from":"2026-09-10T01:35:59.276Z","last_downloaded_at":"2026-09-10T01:35:59.276Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480242","source_sha256":"5356e8f3e6d61ef1c2eda08429c42c89e4222a510f261de839e12ef19e05f68b"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ddbc2e219fa5d29b3db4ff8cda6adea5aae675aa1bb84562832a6d49ebe9c8c","downloaded_from":"2026-09-10T01:35:59.276Z","last_downloaded_at":"2026-09-10T01:35:59.276Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480242","source_sha256":"5356e8f3e6d61ef1c2eda08429c42c89e4222a510f261de839e12ef19e05f68b"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Entities","paragraphs":[{"citation":"815-15-15-1","para":"15-1","html":"
The guidance in this Subtopic applies to all entities.
","snippet":"The guidance in this Subtopic applies to all entities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ed3cb17d190ef0d244ce793a0e79b1149ca72f0c09a6f9637ad82e5cd4cf5d6","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:beb27178fb48c3bd5c0e40ca876174b54a033d9e0eb03970b4d7cdb3a99c50e8","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"block":null,"heading":"Instruments","paragraphs":[{"citation":"815-15-15-2","para":"15-2","html":"
The guidance in this Subtopic applies only to contracts that do not meet the definition of a derivative instrument in their entirety.
","snippet":"The guidance in this Subtopic applies only to contracts that do not meet the definition of a derivative instrument in their entirety.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a560abd1c82798a750adad4f6789a487ea99992050b29032adf5869789b784c5","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-3","para":"15-3","html":"
The guidance in this Subtopic does not apply to any of the following items, as discussed further in this Section:
  1. a
    Normal purchases and normal sales contracts
  2. b
    Unsettled foreign currency transactions
  3. c
    Plain-vanilla servicing rights
  4. d
    Features involving certain aspects of credit risk
  5. e
    Features involving certain currencies.
","snippet":"The guidance in this Subtopic does not apply to any of the following items, as discussed further in this Section:\n(a) Normal purchases and normal sales contracts\n(b) Unsettled foreign currency transactions\n(c) Plain-vani…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dec326062543471b3b0f7a65cdf701bfdeb1bde924866035f7629bb899dd9d2f","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-4","para":"15-4","html":"
A contract that meets the definition of a derivative instrument in its entirety but qualifies for the normal purchases and normal sales scope exception as discussed beginning in paragraph 815-10-15-22 shall not also be assessed under paragraph 815-15-25-1.
","snippet":"A contract that meets the definition of a derivative instrument in its entirety but qualifies for the normal purchases and normal sales scope exception as discussed beginning in paragraph 815-10-15-22 shall not also be a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b71cf5ea88e737d33718b03232e753f4205af1f3fce071370e09227ac9f8af36","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-5","para":"15-5","html":"
Unsettled foreign currency transactions, including financial instruments, shall not be considered to contain embedded foreign currency derivatives under this Subtopic if the transactions meet all of the following criteria:
  1. a
    They are monetary items.
  2. b
    They have their principal payments, interest payments, or both denominated in a foreign currency.
  3. c
    They are subject to the requirement in Subtopic 830-20 to recognize any foreign currency transaction gain or loss in earnings.
","snippet":"Unsettled foreign currency transactions, including financial instruments, shall not be considered to contain embedded foreign currency derivatives under this Subtopic if the transactions meet all of the following criteri…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:33f6a422023bc037d8a1b649fdaa6892bb6fa4a6f43478a734957de12d447f60","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-6","para":"15-6","html":"
The proscription in paragraph 815-15-15-5 applies to available-for-sale or trading debt securities that have cash flows denominated in a foreign currency.
","snippet":"The proscription in paragraph 815-15-15-5 applies to available-for-sale or trading debt securities that have cash flows denominated in a foreign currency.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f2f53ae8c334226ef2a8456b6134524eab97380be9f1a40b37c36f4553305c4a","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-7","para":"15-7","html":"
Plain-vanilla servicing rights, which involve an obligation to perform servicing and the right to receive fees for performing that servicing, do not contain an embedded derivative that would be separated from those servicing rights and accounted for as a derivative instrument.
","snippet":"Plain-vanilla servicing rights, which involve an obligation to perform servicing and the right to receive fees for performing that servicing, do not contain an embedded derivative that would be separated from those servi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:475c394b722b0c2b2ee6b1ed18bf419c1e20ab58c12e64d11fa07f552a1e8010","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-8","para":"15-8","html":"
Paragraph superseded by Accounting Standards Update No. 2010-11.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2010-11.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1b6d5bd822c9be853fd4d33c8a416ca007daeb619f3f5b5593ac534f278bdd3a","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-9","para":"15-9","html":"
The transfer of credit risk that is only in the form of subordination of one financial instrument to another (such as the subordination of one beneficial interest to another tranche of a securitization, thereby redistributing credit risk) is an embedded derivative feature that shall not be subject to the application of paragraph 815-10-15-11 and Section 815-15-25. Only the embedded credit derivative feature created by subordination between the financial instruments is not subject to the application of paragraph 815-10-15-11 and Section 815-15-25. However, other embedded credit derivative features (for example, those related to credit default swaps on a referenced credit) would be subject to the application of paragraph 815-10-15-11 and Section 815-15-25 even if their effects are allocated to interests in tranches of securitized financial instruments in accordance with those subordination provisions. Consequently, the following circumstances (among others) would not qualify for the scope exception and are subject to the application of paragraph 815-10-15-11 and Section 815-15-25 for potential bifurcation:
  1. a
    An embedded derivative feature relating to another type of risk (including another type of credit risk) is present in the securitized financial instruments.
  2. b
    The holder of an interest in a tranche of that securitized financial instrument is exposed to the possibility (however remote) of being required to make potential future payments (not merely receive reduced cash inflows) because the possibility of those future payments is not created by subordination. (Note, however, that the securitized financial instrument may involve other tranches that are not exposed to potential future payments and, thus, those other tranches might qualify for the scope exception.)
  3. c
    The holder owns an interest in a single-tranche securitization vehicle; therefore, the subordination of one tranche to another is not relevant.
","snippet":"The transfer of credit risk that is only in the form of subordination of one financial instrument to another (such as the subordination of one beneficial interest to another tranche of a securitization, thereby redistrib…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:048b0249a2752d9ee43aaeaa4eb12af1dff06f8f36a74b9c91a70a11caea4f86","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-10","para":"15-10","html":"
An embedded foreign currency derivative shall not be separated from the host contract and considered a derivative instrument under paragraph 815-15-25-1 if all of the following criteria are met:
  1. a
    The host contract is not a financial instrument.
  2. b
    The host contract requires payment(s) denominated in any of the following currencies:
    1. 1
      The functional currency of any substantial party to that contract
    2. 2
      The currency in which the price of the related good or service that is acquired or delivered is routinely denominated in international commerce (for example, the U.S. dollar for crude oil transactions)
    3. 3
      The local currency of any substantial party to the contract
    4. 4
      The currency used by a substantial party to the contract as if it were the functional currency because the primary economic environment in which the party operates is highly inflationary (as discussed in paragraph 830-10-45-11).
  3. c
    Other aspects of the embedded foreign currency derivative are clearly and closely related to the host contract.
The evaluation of whether a contract qualifies for the scope exception in this paragraph shall be performed only at inception of the contract.
","snippet":"An embedded foreign currency derivative shall not be separated from the host contract and considered a derivative instrument under paragraph 815-15-25-1 if all of the following criteria are met:\n(a) The host contract is …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:689aad1254f4a256422d69151130c7576972481c7a59f7d9ae072ce52c8f9136","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-11","para":"15-11","html":"
The decision about the currency of the primary economic environment in which a counterparty to a contract operates can be based on available information and reasonable assumptions about the counterparty; representations from the counterparty are not required.
","snippet":"The decision about the currency of the primary economic environment in which a counterparty to a contract operates can be based on available information and reasonable assumptions about the counterparty; representations …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d18cd0da66b17d337c7a2f736a104234c27deffe65bfc2b0890f3324ad178a7f","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-12","para":"15-12","html":"
When determining who is a substantial party to the contract for purposes of applying paragraph 815-15-15-10(b)(1), the entity shall do both of the following:
  1. a
    Consider all facts and circumstances pertaining to that contract (including whether the contracting party possesses the requisite knowledge, resources, and technology to fulfill the contract without relying on related parties)
  2. b
    Look through the legal form to evaluate the substance of the underlying relationships.
","snippet":"When determining who is a substantial party to the contract for purposes of applying paragraph 815-15-15-10(b)(1), the entity shall do both of the following:\n(a) Consider all facts and circumstances pertaining to that co…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b0e45de58a14684f4d298f60f7cead3e91e89d17d255236c130b1a55ff709bb9","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-13","para":"15-13","html":"
Example 1 (see paragraph 815-15-55-83) illustrates the application of this guidance.
","snippet":"Example 1 (see paragraph 815-15-55-83) illustrates the application of this guidance.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:78c7c0a9529dbc6967ead832968a102c4f5a8ead58dc829753885a2ed28eac00","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-14","para":"15-14","html":"
The application of the phrase routinely denominated in international commerce in paragraph 815-15-15-10(b)(2) shall be based on how similar transactions for a certain product or service are routinely structured around the world, not just in one local area. If similar transactions for a certain product or service are routinely denominated in international commerce in various different currencies, the scope exception in that paragraph shall not apply to any of those similar transactions.
","snippet":"The application of the phrase routinely denominated in international commerce in paragraph 815-15-15-10(b)(2) shall be based on how similar transactions for a certain product or service are routinely structured around th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e0d7f388d71572df0f6aaa5cd394306bd4394c897b40e563b3013e42cb792ea1","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-15","para":"15-15","html":"
The guidance in paragraph 815-15-15-10 relating to embedded foreign currency derivatives within nonfinancial contracts relates to all embedded foreign currency caps or floors within such contracts. That guidance does not relate to all embedded foreign currency options within such contracts (such as an embedded foreign currency option that merely introduces a cap or floor on the functional currency equivalent price under a purchase contract). The embedded foreign currency cap or floor (or combination thereof) within a nonfinancial contract shall be considered clearly and closely related to the host nonfinancial contract, and thus not be accounted for separately as a derivative instrument, only if all of the following criteria are met:
  1. a
    The nonfinancial contract requires payment(s) denominated in any of the currencies permitted by paragraphs 815-15-15-10(b).
  2. b
    The embedded cap or floor (or combination thereof) does not contain leverage features.
  3. c
    The embedded cap or floor (or combination thereof) does not represent a written or net written option.
","snippet":"The guidance in paragraph 815-15-15-10 relating to embedded foreign currency derivatives within nonfinancial contracts relates to all embedded foreign currency caps or floors within such contracts. That guidance does not…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ddfd4f29b3ee9df172bf5f4889f341719a0914ebb397e263009ff8957a43fad7","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-16","para":"15-16","html":"
When an embedded cap or floor (or combination thereof) represents a purchased or net purchased option to one party to the contract, it represents a written or net written option to the counterparty to that contract. In that circumstance, that counterparty does not qualify for the paragraph 815-15-15-10 exclusion because the criterion in (c) in the preceding paragraph would not be met (due to the embedded foreign currency cap or floor [or combination thereof] representing a written or net written option).
","snippet":"When an embedded cap or floor (or combination thereof) represents a purchased or net purchased option to one party to the contract, it represents a written or net written option to the counterparty to that contract. In t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:78db6f26dce4e03c5473eb93f9e81444abf1fe30e503084ff82694c722a7e3f6","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-17","para":"15-17","html":"
If the embedded derivative represented a zero-cost collar (as described beginning in paragraph 815-20-25-88), both parties to the contract would meet the criterion in paragraph 815-15-15-15(c) and be eligible to qualify for the exclusion in paragraph 815-15-15-10.
","snippet":"If the embedded derivative represented a zero-cost collar (as described beginning in paragraph 815-20-25-88), both parties to the contract would meet the criterion in paragraph 815-15-15-15(c) and be eligible to qualify …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:25afbad91c75aa3e164c01d4fd4a2f57abca1dae75c0a87ee70c5c00a4ccc26f","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-18","para":"15-18","html":"
If a financial or nonfinancial contract contained an option that allowed the payer to remit funds in an equivalent amount of a currency other than the functional currency of a substantial party to the contract at the payment date, that option shall not be separated from the host contract because the option merely allows the payer to make an equivalent payment in a choice of currencies (based on current spot prices).
","snippet":"If a financial or nonfinancial contract contained an option that allowed the payer to remit funds in an equivalent amount of a currency other than the functional currency of a substantial party to the contract at the pay…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f3b06266c384a21626139e39c2f05568ad8ade78e81d277b05883e12c16aef99","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-19","para":"15-19","html":"
The guidance in paragraphs
815-15-15-15 through 15-18
is not meant to address every possible type of foreign currency option that may be embedded in a nonfinancial contract, and an analogy to that guidance may not be appropriate for such foreign currency options.
","snippet":"The guidance in paragraphs 815-15-15-15 through 15-18 is not meant to address every possible type of foreign currency option that may be embedded in a nonfinancial contract, and an analogy to that guidance may not be app…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:85d4bc4091a26666fddf9cd1a8f554eb67be6e0046c79392350e9cbf9898ff00","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-20","para":"15-20","html":"
Although the scope exception in paragraph 815-15-15-10 does not apply to financial instruments, that paragraph applies if a normal insurance contract involves payment in the functional currency of either of the two parties to the contract.
","snippet":"Although the scope exception in paragraph 815-15-15-10 does not apply to financial instruments, that paragraph applies if a normal insurance contract involves payment in the functional currency of either of the two parti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50bb056821962b9223f725e9a619a01a86fc7decfffea2ef0b27c90971b4ff82","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"citation":"815-15-15-21","para":"15-21","html":"
Paragraph 815-15-15-10 applies also to a normal insurance contract if it involves payment in the local currency of the country in which the loss is incurred, irrespective of the functional currencies of the parties to the transaction.
","snippet":"Paragraph 815-15-15-10 applies also to a normal insurance contract if it involves payment in the local currency of the country in which the loss is incurred, irrespective of the functional currencies of the parties to th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d39e7b41641a3adfd685dcfa34c07a4153a92562fa3933758ac29522097ed6c4","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f09fe54c4c03382d0090daaa5501fc7807edee1eb1a6154c6dc99d015db57d05","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bdd0d3a84db781ed5451507cb6e3eb427e38014e22bd0315bafb3b59a7649b37","downloaded_from":"2026-09-10T01:36:03.191Z","last_downloaded_at":"2026-09-10T01:36:03.191Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480212","source_sha256":"0df0259bf409b556901b778093540df13d11b9d4bf439f8623ce5cc99f7c5b6f"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-15-25-1","para":"25-1","html":"
An embedded derivative shall be separated from the host contract and accounted for as a derivative instrument pursuant to Subtopic 815-10 if and only if all of the following criteria are met:
  1. a
    The economic characteristics and risks of the embedded derivative are not clearly and closely related to the economic characteristics and risks of the host contract.
  2. b
    The hybrid instrument is not remeasured at fair value under otherwise applicable generally accepted accounting principles (GAAP) with changes in fair value reported in earnings as they occur.
  3. c
    A separate instrument with the same terms as the embedded derivative would, pursuant to Section 815-10-15, be a derivative instrument subject to the requirements of Subtopic 815-10 and this Subtopic. (The initial net investment for the hybrid instrument shall not be considered to be the initial net investment for the embedded derivative.)
","snippet":"An embedded derivative shall be separated from the host contract and accounted for as a derivative instrument pursuant to Subtopic 815-10 if and only if all of the following criteria are met:\n(a) The economic characteris…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2b5f7ab930b1624f8ca08e647cde59d6d7b5925e34311411b054e5fe1b58cbbf","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-2","para":"25-2","html":"
The notion of an embedded derivative in a hybrid instrument refers to provisions incorporated into a single contract, and not to provisions in separate contracts between different counterparties. Paragraph 815-10-15-6 states that an option that is added or attached to an existing debt instrument by another party results in the investor having different counterparties for the option and the debt instrument and, thus, the option shall not be considered an embedded derivative.
","snippet":"The notion of an embedded derivative in a hybrid instrument refers to provisions incorporated into a single contract, and not to provisions in separate contracts between different counterparties. Paragraph 815-10-15-6 st…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:49d5782474393de6127411cd11d369ae87242bdf667461ac3bdb2e48b90d0141","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-3","para":"25-3","html":"
The remainder of the guidance in this Section is organized as follows:
  1. a
    Fair value election for hybrid financial instruments
  2. b
    Compound embedded derivative
  3. c
    Interests in securitized financial assets—holder's accounting
  4. d
    Applying the separate instrument criterion
  5. e
    Applying the clearly and closely related criterion
  6. f
    Entity unable to reliably identify and measure embedded derivative
  7. g
    Host contract after separation.
","snippet":"The remainder of the guidance in this Section is organized as follows:\n(a) Fair value election for hybrid financial instruments\n(b) Compound embedded derivative\n(c) Interests in securitized financial assets—holder's acco…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b8eeb91f8043ef1a87b760b4cbdb636a749e3207936b7fe83235da6496b3d1ff","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ac61e7fc08366c839ea286fa1736c4cb231f824f73cc35b0bffad92beed5c30c","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"block":null,"heading":"Fair Value Election for Hybrid Financial Instruments","paragraphs":[{"citation":"815-15-25-4","para":"25-4","html":"
An entity that initially recognizes a hybrid financial instrument that under paragraph 815-15-25-1 would be required to be separated into a host contract and a derivative instrument may irrevocably elect to initially and subsequently measure that hybrid financial instrument in its entirety at fair value (with changes in fair value recognized in earnings and, if paragraph 825-10-45-5 is applicable, other comprehensive income). A financial instrument shall be evaluated to determine that it has an embedded derivative requiring bifurcation before the instrument can become a candidate for the fair value election.
","snippet":"An entity that initially recognizes a hybrid financial instrument that under paragraph 815-15-25-1 would be required to be separated into a host contract and a derivative instrument may irrevocably elect to initially and…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c6168bec9c3583995c8b5cc5a46b582b8d8955cd524d86bcd6a63b4928d36777","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-5","para":"25-5","html":"
The fair value election shall be supported by concurrent documentation or a preexisting documented policy for automatic election. That recognized hybrid financial instrument could be an asset or a liability and it could be acquired or issued by the entity. The fair value election is also available when a previously recognized financial instrument is subject to a remeasurement event (new basis event) and the separate recognition of an embedded derivative. The fair value election may be made instrument by instrument. For purposes of this paragraph, a remeasurement event (new basis event) is an event identified in generally accepted accounting principles, other than the recording of a credit loss under Topic 326, or measurement of an impairment loss through earnings under Topic 321 on equity investments, that requires a financial instrument to be remeasured to its fair value at the time of the event but does not require that instrument to be reported at fair value on a continuous basis with the change in fair value recognized in earnings. Examples of remeasurement events are business combinations and significant modifications of debt as defined in Subtopic 470-50.
","snippet":"The fair value election shall be supported by concurrent documentation or a preexisting documented policy for automatic election. That recognized hybrid financial instrument could be an asset or a liability and it could …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8d31f8caaa9d2260fe58bc03bade788bbfe098c04e563db39ad26c111f326194","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-6","para":"25-6","html":"
The fair value election shall not be applied to the hybrid instruments described in paragraph 825-10-50-8.
","snippet":"The fair value election shall not be applied to the hybrid instruments described in paragraph 825-10-50-8.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:88955b29bb752cf23d67c9f0841bb2d41adca8ddf9dd770faefac4a981c15620","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4eb88adc6764b334837e8cf1ff5c773ea6576080237fbafcc3f357328a09e036","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"block":null,"heading":"Compound Embedded Derivative","paragraphs":[{"citation":"815-15-25-7","para":"25-7","html":"
If a hybrid instrument contains more than one embedded derivative feature that would individually warrant separate accounting as a derivative instrument under paragraph 815-15-25-1, those embedded derivative features shall be bundled together as a single, compound embedded derivative that shall then be bifurcated and accounted for separately from the host contract under this Subtopic unless a fair value election is made pursuant to paragraph 815-15-25-4.
","snippet":"If a hybrid instrument contains more than one embedded derivative feature that would individually warrant separate accounting as a derivative instrument under paragraph 815-15-25-1, those embedded derivative features sha…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:78455ed53ba7bcf5c3fad7565b36b8920be0c905bd3b4c53a0dfbddd4739989b","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-8","para":"25-8","html":"
An entity shall not separate a compound embedded derivative into components representing different risks (for example, based on the risks discussed in paragraphs 815-20-25-12[f] and 815-20-25-15[i]) and then account for those components separately.
","snippet":"An entity shall not separate a compound embedded derivative into components representing different risks (for example, based on the risks discussed in paragraphs 815-20-25-12[f] and 815-20-25-15[i]) and then account for …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9b93e99e88059653c8a3a1a3d1460c78577d724e1ba8886e3dac2d692c44119","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-9","para":"25-9","html":"
If a compound embedded derivative comprises multiple embedded derivative features that all involve the same risk exposure (for example, the risk of changes in market interest rates, the creditworthiness of the obligor, or foreign currency exchange rates), but those embedded derivative features differ from one another by including or excluding optionality or by including a different optionality exposure, an entity shall not separate that compound embedded derivative into components that would be accounted for separately.
","snippet":"If a compound embedded derivative comprises multiple embedded derivative features that all involve the same risk exposure (for example, the risk of changes in market interest rates, the creditworthiness of the obligor, o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:481615c32a5946af4d8dee86314bfa0b594c66ac082b4062d2d4e77dbb3854a2","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-10","para":"25-10","html":"
If some of the embedded derivative features in a hybrid instrument are clearly and closely related to the economic characteristics and risks of the host contract, those embedded derivative features shall not be included in the compound embedded derivative that is bifurcated from the host contract and separately accounted for.
","snippet":"If some of the embedded derivative features in a hybrid instrument are clearly and closely related to the economic characteristics and risks of the host contract, those embedded derivative features shall not be included …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3f31460b8c84d74156dd36c3918cdbd8a678198454ffb0b6426a2d668f38cc0a","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f9144ad50a9a5fa13bda598d3a392b7ba0a8de8222efa6101593136ae559b32f","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"block":null,"heading":"Interests in Securitized Financial Assets—Holder's Accounting","paragraphs":[{"citation":"815-15-25-11","para":"25-11","html":"
Paragraph 815-10-15-11 explains that the holder of an interest in securitized financial assets (other than those identified in paragraphs
815-10-15-72 through 15-73
) shall determine whether the interest is a freestanding derivative instrument or contains an embedded derivative that under this Section would be required to be separated from the host contract and accounted for separately.
","snippet":"Paragraph 815-10-15-11 explains that the holder of an interest in securitized financial assets (other than those identified in paragraphs 815-10-15-72 through 15-73) shall determine whether the interest is a freestanding…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:da62c82061ec1d9559c9fd550f247a3abbf75818c8ff33611edc869bb1a17b16","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-12","para":"25-12","html":"
That determination shall be based on an analysis of the contractual terms of the interest in securitized financial assets, which requires understanding the nature and amount of assets, liabilities, and other financial instruments that compose the entire securitization transaction.
","snippet":"That determination shall be based on an analysis of the contractual terms of the interest in securitized financial assets, which requires understanding the nature and amount of assets, liabilities, and other financial in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:053b74221de56fc4d8ff6aa300f382cb480d0994c506ac35888bd8d4e1d12580","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-13","para":"25-13","html":"
A holder of an interest in securitized financial assets shall obtain sufficient information about the payoff structure and the payment priority of the interest to determine whether an embedded derivative exists.
","snippet":"A holder of an interest in securitized financial assets shall obtain sufficient information about the payoff structure and the payment priority of the interest to determine whether an embedded derivative exists.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6e26271e97d45d083427347ecf5ac9f354ea7c60841f657fc886d5bd7541bb66","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:87a03b4d278ffdfa70efbbacf0fe806b9c01c60c2b5847f5e8792e1e866baf98","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"block":null,"heading":"Applying the Separate Instrument Criterion","paragraphs":[{"citation":"815-15-25-14","para":"25-14","html":"
The criterion in paragraph 815-15-25-1(c) is not met if the separate instrument with the same terms as the embedded derivative would be classified as a liability (or an asset in some circumstances) under the provisions of Topic 480 but would be classified in stockholders' equity absent the provisions in that Topic. For purposes of analyzing the application of paragraph 815-10-15-74(a) to an embedded derivative as though it were a separate instrument, paragraphs
480-10-25-4 through 25-14
shall be disregarded. Those embedded features are analyzed by applying other applicable guidance (such as the guidance in Subtopic 815-40 on contracts in entity's own equity).
","snippet":"The criterion in paragraph 815-15-25-1(c) is not met if the separate instrument with the same terms as the embedded derivative would be classified as a liability (or an asset in some circumstances) under the provisions o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:078a77f9c7052d74aa8d5e2eb3a9d0b46235e80eee8dad0855db998586ba5549","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-15","para":"25-15","html":"
Paragraph 815-40-25-39 states that, for purposes of evaluating under paragraph 815-15-25-1 whether an embedded derivative indexed to an entity's own stock would be classified in stockholders' equity if freestanding, the additional considerations necessary for equity classification beginning in paragraph 815-40-25-7 do not apply if the hybrid contract is a convertible debt instrument (see paragraph 815-40-25-41) in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash (at the discretion of the issuer). However, paragraph 815-40-25-40 states that those additional considerations do apply when an issuer is evaluating whether any embedded derivative other than those discussed in paragraph 815-40-25-39 is an equity instrument and thereby excluded from the scope of this Subtopic.
","snippet":"Paragraph 815-40-25-39 states that, for purposes of evaluating under paragraph 815-15-25-1 whether an embedded derivative indexed to an entity's own stock would be classified in stockholders' equity if freestanding, the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7fcfdaaa24672ace2e74d1ad327b274f52ac8efeb61f3dba9d3dd751b3ae5f19","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eaa9c25358c50c61b8a2ace24f6f373cb2b72110ac875973a739dadf208e4707","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"block":null,"heading":"Applying the Clearly-and-Closely Related Criterion","paragraphs":[{"citation":"815-15-25-16","para":"25-16","html":"
If the host contract encompasses a residual interest in an entity, then its economic characteristics and risks shall be considered that of an equity instrument and an embedded derivative would need to possess principally equity characteristics (related to the same entity) to be considered clearly and closely related to the host contract.
","snippet":"If the host contract encompasses a residual interest in an entity, then its economic characteristics and risks shall be considered that of an equity instrument and an embedded derivative would need to possess principally…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:73e5f8d32cac91a5f5c79bfdd84fa8b9dcc291f704711833b7e40c77024203c3","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-17","para":"25-17","html":"
Because the changes in fair value of an equity interest and interest rates on a debt instrument are not clearly and closely related, the terms of convertible preferred stock shall be analyzed to determine whether the preferred stock (and thus the potential host contract) is more akin to an equity instrument or a debt instrument.
","snippet":"Because the changes in fair value of an equity interest and interest rates on a debt instrument are not clearly and closely related, the terms of convertible preferred stock shall be analyzed to determine whether the pre…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8dda15a64b20ad1d6f63e61d3a15257f393d5608a4029f6d2333ada06bb8155b","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-17A","para":"25-17A","html":"
For a hybrid financial instrument issued in the form of a share, an entity shall determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, weighing each term and feature on the basis of the relevant facts and circumstances. That is, in determining the nature of the host contract, an entity shall consider the economic characteristics and risks of the entire hybrid financial instrument including the embedded derivative feature that is being evaluated for potential bifurcation. In evaluating the stated and implied substantive terms and features, the existence or omission of any single term or feature does not necessarily determine the economic characteristics and risks of the host contract. Although an individual term or feature may weigh more heavily in the evaluation on the basis of the facts and circumstances, an entity should use judgment based on an evaluation of all of the relevant terms and features. For example, an entity shall not presume that the presence of a fixed-price, noncontingent redemption option held by the investor in a convertible preferred stock contract, in and of itself, determines whether the nature of the host contract is more akin to a debt instrument or more akin to an equity instrument. Rather, the nature of the host contract depends on the economic characteristics and risks of the entire hybrid financial instrument.
","snippet":"For a hybrid financial instrument issued in the form of a share, an entity shall determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial inst…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f0bdf9844b9b61b9a75cf6ef890fd78b2537515fc3a312bd11236a12d3fae79d","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-17B","para":"25-17B","html":"
The guidance in paragraph 815-15-25-17A relates to determining whether a host contract within a hybrid financial instrument issued in the form of a share is considered to be more akin to a debt instrument or more akin to an equity instrument for the purposes of evaluating one or more embedded derivative features for bifurcation under paragraph 815-15-25-1(a). It is not intended to address when an embedded derivative feature should be bifurcated from the host contract or the accounting when such bifurcation is required. In addition, the guidance in paragraph 815-15-25-17A is not intended to prescribe the method to be used in determining the nature of the host contract in a hybrid financial instrument that is not issued in the form of a share.
","snippet":"The guidance in paragraph 815-15-25-17A relates to determining whether a host contract within a hybrid financial instrument issued in the form of a share is considered to be more akin to a debt instrument or more akin to…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb9a3a220dfbe90db6f7db9e8fd7adc7e6762be3a0503fdd0f34a5e7c64b8480","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-17C","para":"25-17C","html":"
When applying the guidance in paragraph 815-15-25-17A, an entity shall determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, determining whether those terms and features are debt-like versus equity-like, and weighing those terms and features on the basis of the relevant facts and circumstances. That is, an entity shall consider not only whether the relevant terms and features are debt-like versus equity-like, but also the substance of those terms and features (that is, the relative strength of the debt-like or equity-like terms and features given the facts and circumstances). In assessing the substance of the relevant terms and features, each of the following may form part of the overall analysis and may inform an entity's overall consideration of the relative importance (and, therefore, weight) of each term and feature among other terms and features:
  1. a
    The characteristics of the relevant terms and features themselves (for example, contingent versus noncontingent, in-the-money versus out-of-the-money)
  2. b
    The circumstances under which the hybrid financial instrument was issued or acquired (for example, issuer-specific characteristics, such as whether the issuer is thinly capitalized or profitable and well-capitalized)
  3. c
    The potential outcomes of the hybrid financial instrument (for example, the instrument may be settled by the issuer issuing a fixed number of shares, the instrument may be settled by the issuer transferring a specified amount of cash, or the instrument may remain legal-form equity), as well as the likelihood of those potential outcomes. The assessment of the potential outcomes may be qualitative in nature.
","snippet":"When applying the guidance in paragraph 815-15-25-17A, an entity shall determine the nature of the host contract by considering all stated and implied substantive terms and features of the hybrid financial instrument, de…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:36e01095f060726f905c222b515e9761515592c334b01b5159ed50fffd73510d","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-17D","para":"25-17D","html":"
The following are examples (and not an exhaustive list) of common terms and features included within a hybrid financial instrument issued in the form of a share and the types of information and indicators that an entity (an issuer or an investor) may consider when assessing the substance of those terms and features in the context of determining the nature of the host contract, as discussed in paragraph 815-15-25-17C:
  1. a
    Redemption rights. The ability for an issuer or investor to redeem a hybrid financial instrument issued in the form of a share at a fixed or determinable price generally is viewed as a debt-like characteristic. However, not all redemption rights are of equal importance. For example, a noncontingent redemption option may be given more weight in the analysis than a contingent redemption option. The relative importance (and, therefore, weight) of redemption rights among other terms and features in a hybrid financial instrument may be evaluated on the basis of information about the following (among other relevant) facts and circumstances:
    1. 1
      Whether the redemption right is held by the issuer or investors
    2. 2
      Whether the redemption is mandatory
    3. 3
      Whether the redemption right is noncontingent or contingent
    4. 4
      Whether (and the degree to which) the redemption right is in-the-money or out-of-the-money
    5. 5
      Whether there are any laws that would restrict the issuer or investors from exercising the redemption right (for example, if redemption would make the issuer insolvent)
    6. 6
      Issuer-specific considerations (for example, whether the hybrid financial instrument is effectively the residual interest in the issuer [due to the issuer being thinly capitalized or the common equity of the issuer having already incurred losses] or whether the instrument was issued by a well-capitalized, profitable entity)
    7. 7
      If the hybrid financial instrument also contains a conversion right, the extent to which the redemption price (formula) is more or less favorable than the conversion price (formula), that is, a consideration of the economics of the redemption price (formula) and the conversion price (formula), not simply the form of the settlement upon redemption or conversion.
  2. b
    Conversion rights. The ability for an investor to convert, for example, a preferred share into a fixed number of common shares generally is viewed as an equity-like characteristic. However, not all conversion rights are of equal importance. For example, a conversion option that is noncontingent or deeply in-the-money may be given more weight in the analysis than a conversion option that is contingent on a remote event or deeply out-of-the-money. The relative importance (and, therefore, weight) of conversion rights among other terms and features in a hybrid financial instrument may be evaluated on the basis of information about the following (among other relevant) facts and circumstances:
    1. 1
      Whether the conversion right is held by the issuer or investors
    2. 2
      Whether the conversion is mandatory
    3. 3
      Whether the conversion right is noncontingent or contingent
    4. 4
      Whether (and the degree to which) the conversion right is in-the-money or out-of-the-money
    5. 5
      If the hybrid financial instrument also contains a redemption right held by the investors, whether conversion is more likely to occur before redemption (for example, because of an expected initial public offering or change-in-control event before the redemption right becoming exercisable).
  3. c
    Voting rights. The ability for a class of stock to exercise voting rights generally is viewed as an equity-like characteristic. However, not all voting rights are of equal importance. For example, voting rights that allow a class of stock to vote on all significant matters may be given more weight in the analysis than voting rights that are only protective in nature. The relative importance (and, therefore, weight) of voting rights among other terms and features in a hybrid financial instrument may be evaluated on the basis of information about the following (among other relevant) facts and circumstances:
    1. 1
      On which matters the voting rights allow the investor's class of stock to vote (relative to common stock shareholders)
    2. 2
      How much influence the investor's class of stock can exercise as a result of the voting rights.
  4. d
    Dividend rights. The nature of dividends can be viewed as a debt-like or equity-like characteristic. For example, mandatory fixed dividends generally are viewed as a debt-like characteristic, while discretionary dividends based on earnings generally are viewed as an equity-like characteristic. The relative importance (and, therefore, weight) of dividend terms among other terms and features in a hybrid financial instrument may be evaluated on the basis of information about the following (among other relevant) facts and circumstances:
    1. 1
      Whether the dividends are mandatory or discretionary
    2. 2
      The basis on which dividends are determined and whether the dividends are stated or participating
    3. 3
      Whether the dividends are cumulative or noncumulative.
  5. e
    Protective covenants. Protective covenants generally are viewed as a debt-like characteristic. However, not all protective covenants are of equal importance. Covenants that provide substantive protective rights may be given more weight than covenants that provide only limited protective rights. The relative importance (and, therefore, weight) of protective covenants among other terms and features in a hybrid financial instrument may be evaluated on the basis of information about the following (among other relevant) facts and circumstances:
    1. 1
      Whether there are any collateral requirements akin to collateralized debt
    2. 2
      If the hybrid financial instrument contains a redemption option held by the investor, whether the issuer's performance upon redemption is guaranteed by the parent of the issuer
    3. 3
      Whether the instrument provides the investor with certain rights akin to creditor rights (for example, the right to force bankruptcy or a preference in liquidation).
","snippet":"The following are examples (and not an exhaustive list) of common terms and features included within a hybrid financial instrument issued in the form of a share and the types of information and indicators that an entity …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b80c3c327b5ab794eae03c57f05ac55462b661b81acf6ff18c84009ef9909ed6","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-18","para":"25-18","html":"
The following guidance is relevant in deciding whether the economic characteristics and risks of the embedded derivative are clearly and closely related to the economic characteristics and risks of the host contract. The guidance is organized as follows:
  1. a
    Purchase contracts—price cap and price floor
  2. b
    Host contracts with equity characteristics
  3. c
    Host contracts that are leases
  4. d
    Host contracts with debt characteristics
  5. e
    Hybrid instruments that are beneficial interests in securitized financial assets.
","snippet":"The following guidance is relevant in deciding whether the economic characteristics and risks of the embedded derivative are clearly and closely related to the economic characteristics and risks of the host contract. The…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:69622dace07587ec229b8b769cb80c0652ed33eaeba00836c8360aed95256cc0","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-19","para":"25-19","html":"
The economic characteristics and risks of a floor and cap on the price of an asset embedded in a contract to purchase that asset are clearly and closely related to the purchase contract, because the options are indexed to the purchase price of the asset that is the subject of the purchase contract. See Example 6 (paragraph 815-15-55-114) for an illustration of such options.
","snippet":"The economic characteristics and risks of a floor and cap on the price of an asset embedded in a contract to purchase that asset are clearly and closely related to the purchase contract, because the options are indexed t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:570e4ca9814c7e55907cd6a9fd91a90121d127caffc33cb04ffdf37730e0cd19","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-20","para":"25-20","html":"
A put option that enables the holder to require the issuer of an equity instrument (which has been deemed to contain an equity host contract in accordance with paragraphs
815-15-25-17A through 25-17D
) to reacquire that equity instrument for cash or other assets is not clearly and closely related to that equity instrument. Thus, such a put option embedded in a publicly traded equity instrument to which it relates shall be separated from the host contract by the holder of the equity instrument if the criteria in paragraph 815-15-25-1(b) through (c) are also met. That put option also shall be separated from the host contract by the issuer of the equity instrument except in those circumstances in which the put option is not considered to be a derivative instrument pursuant to paragraph 815-10-15-74(a) because it is classified in stockholders' equity. A purchased call option that enables the issuer of an equity instrument (such as common stock) to reacquire that equity instrument would not be considered to be a derivative instrument by the issuer of the equity instrument pursuant to that paragraph. Thus, if the call option were embedded in the related equity instrument, it would not be separated from the host contract by the issuer. However, for the holder of the related equity instrument, the embedded written call option would not be considered to be clearly and closely related to the equity instrument, if the criteria in paragraph 815-15-25-1(b) through (c) were met, and shall be separated from the host contract.
","snippet":"A put option that enables the holder to require the issuer of an equity instrument (which has been deemed to contain an equity host contract in accordance with paragraphs 815-15-25-17A through 25-17D) to reacquire that e…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8053fc2ecd815340b8413ea37f45ae91e16b1ca7b060943335449f2205f24343","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-21","para":"25-21","html":"
Rentals for the use of leased assets and adjustments for inflation on similar property are considered to be clearly and closely related. Thus, unless a significant leverage factor is involved, the inflation-related derivative instrument embedded in an inflation-indexed lease would not be separated from the host contract.
","snippet":"Rentals for the use of leased assets and adjustments for inflation on similar property are considered to be clearly and closely related. Thus, unless a significant leverage factor is involved, the inflation-related deriv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e2c2f397e1ca40382d9abf2c1d22c945ce05ca3261170f9d0b5ebb5f065006a5","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-22","para":"25-22","html":"
The obligation to make future payments for the use of leased assets and the adjustment of those payments to reflect changes in a variable-interest-rate index are considered to be clearly and closely related. Thus, leases that include variable lease payments based on changes in the prime rate would not have the embedded derivative that is related to the variable lease payment separated from the host contract.
","snippet":"The obligation to make future payments for the use of leased assets and the adjustment of those payments to reflect changes in a variable-interest-rate index are considered to be clearly and closely related. Thus, leases…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2840cf316db471e3121e08fe0fe9df0db94193d33d7dccc9227d5d120b39f2e1","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-23","para":"25-23","html":"
This guidance is organized as follows:
  1. a
    Characteristics of a debt host contract
  2. b
    Interest-rate-related underlyings
  3. c
    Call options and put options on debt instruments
  4. d
    Term-extending options
  5. e
    Credit-sensitive payments
  6. f
    Commodity-indexed interest or principal payments
  7. g
    Equity-indexed interest payments
  8. h
    Inflation-indexed principal payments
  9. i
    Convertible debt.
","snippet":"This guidance is organized as follows:\n(a) Characteristics of a debt host contract\n(b) Interest-rate-related underlyings\n(c) Call options and put options on debt instruments\n(d) Term-extending options\n(e) Credit-sensitiv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a25c0ed6aaac32dfe7dc14ae6aca4aa909afd3be376dfcb3bf59bbd4d8bdd2f6","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-24","para":"25-24","html":"
The characteristics of a debt host contract generally shall be based on the stated or implied substantive terms of the hybrid instrument. Those terms may include a fixed-rate, variable-rate, zero-coupon, discount or premium, or some combination thereof.
","snippet":"The characteristics of a debt host contract generally shall be based on the stated or implied substantive terms of the hybrid instrument. Those terms may include a fixed-rate, variable-rate, zero-coupon, discount or prem…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:673fb420d96376414a7c864af1b31e4b50b690ccc0ba1849ffe50da41a3f825c","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-25","para":"25-25","html":"
In the absence of stated or implied terms, an entity may make its own determination of whether to account for the debt host as a fixed-rate, variable-rate, or zero-coupon bond. That determination requires the application of judgment, which is appropriate because the circumstances surrounding each hybrid instrument containing an embedded derivative may be different. That is, in the absence of stated or implied terms, it is appropriate to consider the features of the hybrid instrument, the issuer, and the market in which the instrument is issued, as well as other factors, to determine the characteristics of the debt host contract. However, an entity shall not express the characteristics of the debt host contract in a manner that would result in identifying an embedded derivative that is not already clearly present in a hybrid instrument. For example, it would be inappropriate to do either of the following:
  1. a
    Identify a variable-rate debt host contract and an interest rate swap component that has a comparable variable-rate leg in an embedded compound derivative, in lieu of identifying a fixed-rate debt host contract
  2. b
    Identify a fixed-rate debt host contract and a fixed-to-variable interest rate swap component in an embedded compound derivative in lieu of identifying a variable-rate debt host contract.
","snippet":"In the absence of stated or implied terms, an entity may make its own determination of whether to account for the debt host as a fixed-rate, variable-rate, or zero-coupon bond. That determination requires the application…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2b25880e55fe5746f3505204db2330f31805abdc62d05fe7719dffcb647cb8c2","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-26","para":"25-26","html":"
For purposes of applying the provisions of paragraph 815-15-25-1, an embedded derivative in which the only underlying is an interest rate or interest rate index (such as an interest rate cap or an interest rate collar) that alters net interest payments that otherwise would be paid or received on an interest-bearing host contract that is considered a debt instrument is considered to be clearly and closely related to the host contract unless either of the following conditions exists:
  1. a
    The hybrid instrument can contractually be settled in such a way that the investor (the holder or the creditor) would not recover substantially all of its initial recorded investment (that is, the embedded derivative contains a provision that permits any possibility whatsoever that the investor's [the holder's or the creditor's] undiscounted net cash inflows over the life of the instrument would not recover substantially all of its initial recorded investment in the hybrid instrument under its contractual terms).
  2. b
    The embedded derivative meets both of the following conditions:
    1. 1
      There is a possible future interest rate scenario (even though it may be remote) under which the embedded derivative would at least double the investor's initial rate of return on the host contract (that is, the embedded derivative contains a provision that could under any possibility whatsoever at least double the investor's initial rate of return on the host contract).
    2. 2
      For any of the possible interest rate scenarios under which the investor's initial rate of return on the host contract would be doubled (as discussed in (b)(1)), the embedded derivative would at the same time result in a rate of return that is at least twice what otherwise would be the then-current market return (under the relevant future interest rate scenario) for a contract that has the same terms as the host contract and that involves a debtor with a credit quality similar to the issuer's credit quality at inception.
","snippet":"For purposes of applying the provisions of paragraph 815-15-25-1, an embedded derivative in which the only underlying is an interest rate or interest rate index (such as an interest rate cap or an interest rate collar) t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a43d2fbecaa992fc204533682580e0d4f3af0301447691e10812a8b76893648f","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-27","para":"25-27","html":"
Even though the conditions in (a) and (b) in the preceding paragraph focus on the investor's rate of return and the investor's recovery of its investment, the existence of either of those conditions would result in the embedded derivative not being considered clearly and closely related to the host contract by both parties to the hybrid instrument. Because the existence of those conditions is assessed at the date that the hybrid instrument is acquired (or incurred) by the reporting entity, the acquirer of a hybrid instrument in the secondary market could potentially reach a different conclusion than could the issuer of the hybrid instrument due to applying the conditions in the preceding paragraph at different points in time.
","snippet":"Even though the conditions in (a) and (b) in the preceding paragraph focus on the investor's rate of return and the investor's recovery of its investment, the existence of either of those conditions would result in the e…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:63be73c65f0b0fe769dcd75f34aa6ee1c7df76cb109276f107f616bbada01424","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-28","para":"25-28","html":"
An embedded derivative that alters net interest payments based on changes in a stock price index (or another non-interest-rate index) is not addressed in paragraph 815-15-25-26.
","snippet":"An embedded derivative that alters net interest payments based on changes in a stock price index (or another non-interest-rate index) is not addressed in paragraph 815-15-25-26.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba7db212fc1651f904880b3c19c01ad84b5f19c38dd08407a68c89d81ff9a593","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-29","para":"25-29","html":"
The condition in paragraph 815-15-25-26(a) applies only to those situations in which the investor (creditor) could be forced by the terms of a hybrid instrument to accept settlement at an amount that causes the investor not to recover substantially all of its initial recorded investment. That condition does not apply to a situation in which the terms of a hybrid instrument permit, but do not require, the investor to settle the hybrid instrument in a manner that causes it not to recover substantially all of its initial recorded investment, provided that the issuer does not have the contractual right to demand a settlement that causes the investor not to recover substantially all of its initial net investment.
","snippet":"The condition in paragraph 815-15-25-26(a) applies only to those situations in which the investor (creditor) could be forced by the terms of a hybrid instrument to accept settlement at an amount that causes the investor …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2ca184f768980ba14d7ae88fffba93ab7dbdcb702b52c5179d073bd9bd18abbe","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-30","para":"25-30","html":"
Paragraphs
815-10-15-72 through 15-73
address the scope application of this Subtopic to interest-only strips and principal-only strips.
","snippet":"Paragraphs 815-10-15-72 through 15-73 address the scope application of this Subtopic to interest-only strips and principal-only strips.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f5d8658eee8b9886652a1130a966f6e9c7e593fd2fd8c9267e0c2484088b17ba","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-31","para":"25-31","html":"
The remainder of this guidance on interest-rate-related underlyings is organized as follows:
  1. a
    Interest rate floors, caps, and collars
  2. b
    Exception for certain securitized interest in prepayable financial assets
  3. c
    Exception for call options exercisable only by the debtor.
","snippet":"The remainder of this guidance on interest-rate-related underlyings is organized as follows:\n(a) Interest rate floors, caps, and collars\n(b) Exception for certain securitized interest in prepayable financial assets\n(c) E…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:80f2aeb7d2d4f5884326314d3791e279df4c63649b559acb99b30c111769b7e2","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-32","para":"25-32","html":"
Floors or caps (or collars, which are combinations of caps and floors) on interest rates and the interest rate on a debt instrument are considered to be clearly and closely related unless the conditions in either paragraph 815-15-25-26(a) or 815-15-25-26(b) are met, in which circumstance the floors or the caps are not considered to be clearly and closely related.
","snippet":"Floors or caps (or collars, which are combinations of caps and floors) on interest rates and the interest rate on a debt instrument are considered to be clearly and closely related unless the conditions in either paragra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:db1d88a59b297fa697ddef607aac56d8849e92a626b7b803a5668e12fbf106e7","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-33","para":"25-33","html":"
A securitized interest in prepayable financial assets would not be subject to the conditions in paragraph 815-15-25-26(b) if it meets both of the following criteria:
  1. a
    The right to accelerate the settlement of the securitized interest cannot be controlled by the investor.
  2. b
    The securitized interest itself does not contain an embedded derivative (including an interest-rate-related derivative instrument) for which bifurcation would be required other than an embedded derivative that results solely from the embedded call options in the underlying financial assets.
","snippet":"A securitized interest in prepayable financial assets would not be subject to the conditions in paragraph 815-15-25-26(b) if it meets both of the following criteria:\n(a) The right to accelerate the settlement of the secu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a80b30f85136e61785cacf5481dd16192c33804d2e6b245b9c1e3141d1eaa40a","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-34","para":"25-34","html":"
This exception from paragraph 815-15-25-26(b) is limited to securitized interests that contain only an embedded derivative that is tied to the prepayment risk of the underlying prepayable financial assets and that meet the criteria in the preceding paragraph. If a securitized interest contains any other terms that affect some or all of the cash flows or the value of other exchanges required by the contract in a manner similar to a derivative instrument and those terms create an embedded derivative that requires bifurcation (ignoring the effects of the embedded call options in the underlying financial assets), that securitized interest would be subject to the requirements of paragraph 815-15-25-26(b) (for example, an inverse floater).
","snippet":"This exception from paragraph 815-15-25-26(b) is limited to securitized interests that contain only an embedded derivative that is tied to the prepayment risk of the underlying prepayable financial assets and that meet t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ea1032287723c8e73a9edb258892b6745a8a542b7d5614a822f2baaa02bb4ba","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-35","para":"25-35","html":"
Whether the securitized interest itself contains an embedded derivative (including an interest-rate-related derivative instrument) for which bifurcation would be required, other than an embedded derivative that results solely from the embedded call options in the underlying financial assets, shall be determined in accordance with paragraphs
815-15-25-11 through 25-13
. This assessment is expected to be simple for basic securitized interests but could be more difficult for complex securitized interests (for example, in securitizations involving the resecuritization of tranches from previous transactions, the analysis might require an understanding of each securitization making up the resecuritization transaction).
","snippet":"Whether the securitized interest itself contains an embedded derivative (including an interest-rate-related derivative instrument) for which bifurcation would be required, other than an embedded derivative that results s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:26114b8b151ed5d6539da0fe22c5e9c627381e4b2b386edf0b38a37b85922153","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-36","para":"25-36","html":"
A securitized interest in prepayable financial assets that does not meet both of the criteria in paragraph 815-15-25-33 is subject to the conditions in paragraph 815-15-25-26(b). When assessing the conditions in paragraph 815-15-25-26(b) for those instruments, an entity shall consider the effect of prepayment risk. Example 11 (see paragraph 815-15-55-137) illustrates the application of this guidance to specific securitized interests in prepayable financial assets.
","snippet":"A securitized interest in prepayable financial assets that does not meet both of the criteria in paragraph 815-15-25-33 is subject to the conditions in paragraph 815-15-25-26(b). When assessing the conditions in paragrap…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d2b2c1102ecd7845a28bbf9ecaf2748c46d7881ea8a3e0ce66c30192284cce0a","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-37","para":"25-37","html":"
The conditions in paragraph 815-15-25-26(b) do not apply to an embedded call option in a hybrid instrument containing a debt host contract if the right to accelerate the settlement of the debt can be exercised only by the debtor (the issuer or the borrower). This guidance does not affect the application of the condition in paragraph 815-15-25-26(a) or the application of paragraphs
815-15-25-41 through 25-43
. In addition, this guidance does not apply to other embedded derivative features that may be present in the same hybrid instrument.
","snippet":"The conditions in paragraph 815-15-25-26(b) do not apply to an embedded call option in a hybrid instrument containing a debt host contract if the right to accelerate the settlement of the debt can be exercised only by th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d47815e6e3dccf4959d01bb5afb69c9aa5ac119e557f5cfa8e12b8aaeb34a3d2","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-38","para":"25-38","html":"
The conditions in paragraph 815-15-25-26(b) apply only to situations that meet the two conditions specified in paragraph 815-15-25-26(b)(1) through (b)(2) and for which the investor has the unilateral ability to obtain the right to receive the high rate of return specified in those paragraphs. If the embedded derivative is an option rather than a forward contract, it is important to analyze whether the investor is the holder of that option. For an embedded call option, the issuer or borrower (and not the investor) is the holder, and thus only the issuer (borrower) can exercise the option. Consequently, the investor does not have the unilateral ability to obtain the right to receive the high rate of return, which is contingent on the issuer's exercise of the embedded call option.
","snippet":"The conditions in paragraph 815-15-25-26(b) apply only to situations that meet the two conditions specified in paragraph 815-15-25-26(b)(1) through (b)(2) and for which the investor has the unilateral ability to obtain t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51f8f72f78bac08a2ad32731c2729279eae8ba3d3256ccd8bb5c60f93c5b699d","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-39","para":"25-39","html":"
Paragraph 815-15-55-25 provides implementation guidance on the application of this guidance to specific debt instruments.
","snippet":"Paragraph 815-15-55-25 provides implementation guidance on the application of this guidance to specific debt instruments.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7fbbf22b892e545fdd97dd435a264cd8011e6e1313fefcc2e8d827fde7b816ca","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-40","para":"25-40","html":"
Paragraph superseded by Accounting Standards Update No. 2016-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2016-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f410c093e80f1e01f143d46efe48aead5d91b0d99a391e29e21040cd15e0a32","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-41","para":"25-41","html":"
Call (put) options that do not accelerate the repayment of principal on a debt instrument but instead require a cash settlement that is equal to the price of the option at the date of exercise would not be considered to be clearly and closely related to the debt instrument in which it is embedded.
","snippet":"Call (put) options that do not accelerate the repayment of principal on a debt instrument but instead require a cash settlement that is equal to the price of the option at the date of exercise would not be considered to …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f57c5d71fa9bf47bc1935669c8d10e4ee15d4f400017eb515be1b4ec2c36b5b","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-42","para":"25-42","html":"
The following four-step decision sequence shall be followed in determining whether call (put) options that can accelerate the settlement of debt instruments shall be considered to be clearly and closely related to the debt host contract:
","snippet":"The following four-step decision sequence shall be followed in determining whether call (put) options that can accelerate the settlement of debt instruments shall be considered to be clearly and closely related to the de…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8d6b207c8f1c6cfc49b41a2fb77461f136ce154632f3f0be0238180f95a05a8c","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-43","para":"25-43","html":"
The preceding paragraph is distinct from paragraph 815-15-25-37, which addresses whether the conditions in paragraph 815-15-25-26(b) involving rate of return apply to certain call options exercisable only by the debtor. Paragraph 815-15-55-13 illustrates the application of the guidance in the preceding paragraph to nine illustrative debt instruments.
","snippet":"The preceding paragraph is distinct from paragraph 815-15-25-37, which addresses whether the conditions in paragraph 815-15-25-26(b) involving rate of return apply to certain call options exercisable only by the debtor. …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:18b1039117034323df7418aba60bf9e41e61359ecc0a5f242c095c13de2243f9","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-44","para":"25-44","html":"
An embedded derivative that either (a) unilaterally enables one party to extend significantly the remaining term to maturity or (b) automatically extends significantly the remaining term triggered by specific events or conditions is not clearly and closely related to the interest rate on a debt instrument unless the interest rate is concurrently reset to the approximate current market rate for the extended term and the debt instrument initially involved no significant discount. Thus, if there is no reset of interest rates, the embedded derivative is not clearly and closely related to the host contract. That is, a term-extending option cannot be used to circumvent the restriction in paragraph 815-15-25-26 regarding the investor's not recovering substantially all of its initial recorded investment.
","snippet":"An embedded derivative that either (a) unilaterally enables one party to extend significantly the remaining term to maturity or (b) automatically extends significantly the remaining term triggered by specific events or c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:458760af2ec4c369cbc3f8812a5ef069730c9eb567a451e88516be94c08609be","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-45","para":"25-45","html":"
The preceding paragraph does not provide guidance for determining whether term-extending options in nondebt host contracts are clearly and closely related to the host contract, as discussed in paragraph 815-15-25-1(a). A term-extending option in a nondebt host contract can have a significantly different effect than a term-extending option in a debt host contract. Nondebt contracts (as well as debt contracts) that contain embedded term-extension features shall be evaluated under paragraph 815-15-25-1 to determine whether the term-extension feature is a derivative instrument that shall be accounted for separately.
","snippet":"The preceding paragraph does not provide guidance for determining whether term-extending options in nondebt host contracts are clearly and closely related to the host contract, as discussed in paragraph 815-15-25-1(a). A…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a96311b47ce64a19cdc023ee753ef9abda3f720567f22947b1eb7011ee70135f","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-46","para":"25-46","html":"
The creditworthiness of the debtor and the interest rate on a debt instrument shall be considered to be clearly and closely related. Thus, for debt instruments that have the interest rate reset in the event of any of the following conditions, the related embedded derivative shall not be separated from the host contract:
  1. a
    Default (such as violation of a credit-risk-related covenant)
  2. b
    A change in the debtor's published credit rating
  3. c
    A change in the debtor's creditworthiness indicated by a change in its spread over U.S. Treasury bonds.
","snippet":"The creditworthiness of the debtor and the interest rate on a debt instrument shall be considered to be clearly and closely related. Thus, for debt instruments that have the interest rate reset in the event of any of the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fa94ff57bc6864c8a811039f4effec7d4467c843ea421c25c65ef6f43b285a3d","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-47","para":"25-47","html":"
If an instrument incorporates a credit risk exposure that is different from the risk exposure arising from the creditworthiness of the obligor under that instrument, such that the value of the instrument is affected by an event of default or a change in creditworthiness of a third party (that is, an entity that is not the obligor), then the economic characteristics and risks of the embedded credit derivative are not clearly and closely related to the economic characteristics and risks of the host contract, even though the obligor may own securities issued by that third party. This guidance shall be applied to all other arrangements that incorporate credit risk exposures that are unrelated or only partially related to the creditworthiness of the issuer of that instrument. This guidance does not affect the accounting for a nonrecourse debt arrangement (that is, a debt arrangement in which, in the event that the debtor does not make the payments due under the loan, the creditor has recourse solely to the specified property pledged as collateral).
","snippet":"If an instrument incorporates a credit risk exposure that is different from the risk exposure arising from the creditworthiness of the obligor under that instrument, such that the value of the instrument is affected by a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3e6b9c394f1abf87abc445bc582a2b415fffa47bd381556364a458583ec82906","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-48","para":"25-48","html":"
The changes in fair value of a commodity (or other asset) and the interest yield on a debt instrument are not clearly and closely related. Thus, a commodity-related derivative instrument embedded in a commodity-indexed debt instrument shall be separated from the noncommodity host contract and accounted for as a derivative instrument.
","snippet":"The changes in fair value of a commodity (or other asset) and the interest yield on a debt instrument are not clearly and closely related. Thus, a commodity-related derivative instrument embedded in a commodity-indexed d…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0515ed5494d69df55cb9321a5975fa652803eb70f65018fa1c958bb4f7470d63","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-49","para":"25-49","html":"
The changes in fair value of an equity interest and the interest yield on a debt instrument are not clearly and closely related. Thus, an equity-related derivative instrument embedded in an equity-indexed debt instrument (whether based on the price of a specific common stock or on an index that is based on a basket of equity instruments) shall be separated from the host contract and accounted for as a derivative instrument.
","snippet":"The changes in fair value of an equity interest and the interest yield on a debt instrument are not clearly and closely related. Thus, an equity-related derivative instrument embedded in an equity-indexed debt instrument…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b089df3ce7fb6805cb44937c0bda40981abaace34f84e3c55207693cbe87c953","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-50","para":"25-50","html":"
The interest rate and the rate of inflation in the economic environment for the currency in which a debt instrument is denominated shall be considered to be clearly and closely related. Thus, nonleveraged inflation-indexed contracts (debt instruments, capitalized lease obligations, pension obligations, and so forth) shall not have the inflation-related embedded derivative separated from the host contract.
","snippet":"The interest rate and the rate of inflation in the economic environment for the currency in which a debt instrument is denominated shall be considered to be clearly and closely related. Thus, nonleveraged inflation-index…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3aee5109a62e4b7a5d770123b3897817404d05096b99c0e1193fab126da2f9d7","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-51","para":"25-51","html":"
The changes in fair value of an equity interest and the interest rates on a debt instrument are not clearly and closely related. Thus, for a debt security that is convertible into a specified number of shares of the debtor's common stock or another entity's common stock, the embedded derivative (that is, the conversion option) shall be separated from the debt host contract and accounted for as a derivative instrument provided that the conversion option would, as a freestanding instrument, be a derivative instrument subject to the requirements of this Subtopic. (For example, if the common stock was not readily convertible to cash, a conversion option that requires purchase of the common stock would not be accounted for as a derivative instrument.) That accounting applies only to the holder (investor) if the debt is convertible to the debtor's common stock because, under paragraph 815-10-15-74(a), a separate option with the same terms would not be a derivative instrument for the issuer.
","snippet":"The changes in fair value of an equity interest and the interest rates on a debt instrument are not clearly and closely related. Thus, for a debt security that is convertible into a specified number of shares of the debt…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6dacff1a8881fca9c7fb55573aa99d89aa710d22b5d5460f9682d5130a9657e5","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-51A","para":"25-51A","html":"
An embedded derivative feature that exposes the holder of a beneficial interest in a tranche of a securitized financial instrument to the possibility (however remote) of being required to make potential future payments (not merely receive reduced cash inflows) shall be considered to be not clearly and closely related to the economic characteristics and risks of the host contract and, thus, meet the criterion in paragraph 815-15-25-1(a).
","snippet":"An embedded derivative feature that exposes the holder of a beneficial interest in a tranche of a securitized financial instrument to the possibility (however remote) of being required to make potential future payments (…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:31b7291e3e9eeaabbe4f9ac973b33ff87a3c662dcee3cac4d70f2f09501fa586","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3384844f70d064b6ef8ae3ca27b460fb0267bf2553cb38c2d84d2e7acae691ed","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"block":null,"heading":"Entity Unable to Reliably Identify and Measure Embedded Derivative","paragraphs":[{"citation":"815-15-25-52","para":"25-52","html":"
An entity that enters into sophisticated investment and funding strategies such as structured notes or other contracts with embedded derivatives should be able to obtain the information necessary to reliably identify and measure the separate components. It should be unusual that an entity would conclude that it cannot reliably separate an embedded derivative from its host contract.
","snippet":"An entity that enters into sophisticated investment and funding strategies such as structured notes or other contracts with embedded derivatives should be able to obtain the information necessary to reliably identify and…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:776552b3dcc3b5567adbb7a197afabfd06d3187f055cf19f9ff1a71f138ca529","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"citation":"815-15-25-53","para":"25-53","html":"
If an entity cannot reliably identify and measure the embedded derivative that paragraph 815-15-25-1 requires be separated from the host contract, paragraphs 815-15-30-1(b) and 815-15-35-2 require that the entire contract be measured at fair value with gain or loss recognized in earnings, but that contract may not be designated as a hedging instrument pursuant to Subtopic 815-20.
","snippet":"If an entity cannot reliably identify and measure the embedded derivative that paragraph 815-15-25-1 requires be separated from the host contract, paragraphs 815-15-30-1(b) and 815-15-35-2 require that the entire contrac…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:45c7dc81bc8a318b298a1d00ece9d9f50a57ecfe360c4c6c1b5177e85953402f","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e43add4659bfd1a7315cd5052634c0239ce593e0a45efe47e9d87867becf9c13","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"block":null,"heading":"Host Contract After Separation","paragraphs":[{"citation":"815-15-25-54","para":"25-54","html":"
If an embedded derivative is separated from its host contract, the host contract shall be accounted for based on GAAP applicable to instruments of that type that do not contain embedded derivatives.
","snippet":"If an embedded derivative is separated from its host contract, the host contract shall be accounted for based on GAAP applicable to instruments of that type that do not contain embedded derivatives.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5710e383397526935b827ba2a070efe444e4f0ac31159d23eb1d19dc90fdd7e6","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bcd9e6c2f92692eed43ef66a95db4cc8868a0c9e10b8dc98a290ad5f3ee34eb0","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9a370e03408bc5e48c4a47c8c8293932a4a419674e4feaa9e8b4a8d47f81c2a3","downloaded_from":"2026-09-10T01:36:08.184Z","last_downloaded_at":"2026-09-10T01:36:08.184Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481116","source_sha256":"ad4621833088b7ccd4b00790c5735b7ee9b0ceeddd3a60dbece18502153ef82c"}},{"number":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":null,"heading":"Hybrid Instruments That Are Not Separated","paragraphs":[{"citation":"815-15-30-1","para":"30-1","html":"
An entity shall measure both of the following initially at fair value:
  1. a
    A hybrid financial instrument that under paragraph 815-15-25-1 would be required to be separated into a host contract and a derivative instrument that an entity irrevocably elects to initially and subsequently measure in its entirety at fair value (with changes in fair value recognized in earnings)
  2. b
    An entire hybrid instrument if an entity cannot reliably identify and measure the embedded derivative that paragraph 815-15-25-1 requires be separated from the host contract.
","snippet":"An entity shall measure both of the following initially at fair value:\n(a) A hybrid financial instrument that under paragraph 815-15-25-1 would be required to be separated into a host contract and a derivative instrument…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:db1f733d249341ba31da406acc58f69a4c28e51c0ab44a7a8f0a526a1d6de1bd","downloaded_from":"2026-09-10T01:36:11.044Z","last_downloaded_at":"2026-09-10T01:36:11.044Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481082","source_sha256":"539158f492ac3dfa8df67f2966fd690b8321d481194615617fb8ff3e506afd3a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e687278343f50c5042e38d3338e0e0436d5253718724dd388f47eff459418651","downloaded_from":"2026-09-10T01:36:11.044Z","last_downloaded_at":"2026-09-10T01:36:11.044Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481082","source_sha256":"539158f492ac3dfa8df67f2966fd690b8321d481194615617fb8ff3e506afd3a"}},{"block":null,"heading":"Hybrid Instruments That Are Separated","paragraphs":[{"citation":"815-15-30-2","para":"30-2","html":"
The allocation method that records the embedded derivative at fair value and determines the initial carrying value assigned to the host contract as the difference between the basis of the hybrid instrument and the fair value of the embedded derivative shall be used to determine the carrying values of the host contract component and the embedded derivative component of a hybrid instrument if separate accounting for the embedded derivative is required by this Subtopic. (Note that Section 815-15-25 allows for a fair value election for hybrid financial instruments that otherwise would require bifurcation.)
","snippet":"The allocation method that records the embedded derivative at fair value and determines the initial carrying value assigned to the host contract as the difference between the basis of the hybrid instrument and the fair v…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9a6918ec26add3b4e9a96972d1a140c9f3b48f9d95233f6416d84fa14ba8254a","downloaded_from":"2026-09-10T01:36:11.044Z","last_downloaded_at":"2026-09-10T01:36:11.044Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481082","source_sha256":"539158f492ac3dfa8df67f2966fd690b8321d481194615617fb8ff3e506afd3a"}},{"citation":"815-15-30-3","para":"30-3","html":"
The objective is to estimate the fair value of the derivative features separately from the fair value of the nonderivative portions of the contract. Estimates of fair value shall reflect all relevant features of each component. For example, an embedded purchased option that expires if the contract in which it is embedded is prepaid would have a different value than an option whose term is a specified period that is not subject to truncation.
","snippet":"The objective is to estimate the fair value of the derivative features separately from the fair value of the nonderivative portions of the contract. Estimates of fair value shall reflect all relevant features of each com…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a2e26ac2ddbb092074862e370103ae567a2c3783a8580cfa5b6ebfe1e18bcbc","downloaded_from":"2026-09-10T01:36:11.044Z","last_downloaded_at":"2026-09-10T01:36:11.044Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481082","source_sha256":"539158f492ac3dfa8df67f2966fd690b8321d481194615617fb8ff3e506afd3a"}},{"citation":"815-15-30-4","para":"30-4","html":"
In separating a non-option embedded derivative from the host contract under paragraph 815-15-25-1, the terms of that non-option embedded derivative shall be determined in a manner that results in its fair value generally being equal to zero at the inception of the hybrid instrument. Because a loan and an embedded derivative can be bundled in a structured note that could have almost an infinite variety of stated terms, it is inappropriate to necessarily attribute significance to every one of the note's stated terms in determining the terms of the non-option embedded derivative. If a non-option embedded derivative has stated terms that are off-market at inception, that amount shall be quantified and allocated to the host contract because it effectively represents a borrowing. (This paragraph does not address the bifurcation of the embedded derivative by a holder who has acquired the hybrid instrument from a third party after the inception of that hybrid instrument.) The non-option embedded derivative shall contain a notional amount and an underlying consistent with the terms of the hybrid instrument. Artificial terms shall not be created to introduce leverage, asymmetry, or some other risk exposure not already present in the hybrid instrument. Generally, the appropriate terms for the non-option embedded derivative will be readily apparent. Often, simply adjusting the referenced forward price (pursuant to documented legal terms) to be at the market for the purpose of separately accounting for the embedded derivative will result in that non-option embedded derivative having a fair value of zero at inception of the hybrid instrument.
","snippet":"In separating a non-option embedded derivative from the host contract under paragraph 815-15-25-1, the terms of that non-option embedded derivative shall be determined in a manner that results in its fair value generally…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:65fa3227283fa9e597be83667aa3a1037746589e0468bbadab6760efa543bed1","downloaded_from":"2026-09-10T01:36:11.044Z","last_downloaded_at":"2026-09-10T01:36:11.044Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481082","source_sha256":"539158f492ac3dfa8df67f2966fd690b8321d481194615617fb8ff3e506afd3a"}},{"citation":"815-15-30-5","para":"30-5","html":"
In separating a non-option embedded derivative from the host contract under paragraph 815-15-25-1 if the holder has acquired the hybrid instrument in a secondary market after the inception of the hybrid instrument, the terms of the embedded derivative shall be determined by the holder so as to result in the derivative instrument having a fair value generally equal to zero at the date the holder enters into (that is, acquires) the hybrid instrument. The initial accounting by the holder of the hybrid instrument shall not be affected by whether it purchased the hybrid instrument at inception or after inception in a secondary market.
","snippet":"In separating a non-option embedded derivative from the host contract under paragraph 815-15-25-1 if the holder has acquired the hybrid instrument in a secondary market after the inception of the hybrid instrument, the t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b8c0c4e0dbd589459c4bad97a77fcd4600b14a264de7a47d5000e5e54e49ef29","downloaded_from":"2026-09-10T01:36:11.044Z","last_downloaded_at":"2026-09-10T01:36:11.044Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481082","source_sha256":"539158f492ac3dfa8df67f2966fd690b8321d481194615617fb8ff3e506afd3a"}},{"citation":"815-15-30-6","para":"30-6","html":"
The terms of an option-based embedded derivative shall not be adjusted to result in the embedded derivative being at the money at the inception of the hybrid instrument. In separating an option-based embedded derivative from the host contract under paragraph 815-15-25-1, the strike price of the embedded derivative shall be based on the stated terms documented in the hybrid instrument. As a result, the option-based embedded derivative at inception may have a strike price that does not equal the market price of the asset associated with the underlying. The guidance in this paragraph addresses both of the following:
  1. a
    The bifurcation of the option-based embedded derivative by a holder who has acquired the hybrid instrument from a third party either at inception or after inception of that hybrid instrument
  2. b
    The bifurcation of the option-based embedded derivative by the issuer when separate accounting for that embedded derivative is required.
","snippet":"The terms of an option-based embedded derivative shall not be adjusted to result in the embedded derivative being at the money at the inception of the hybrid instrument. In separating an option-based embedded derivative …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:25f3e082e01d780613a399c6dd09695c05c49a3ce7eef3a73637e08480a9b637","downloaded_from":"2026-09-10T01:36:11.044Z","last_downloaded_at":"2026-09-10T01:36:11.044Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481082","source_sha256":"539158f492ac3dfa8df67f2966fd690b8321d481194615617fb8ff3e506afd3a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a66281ca1b4975ebf1aa9082608ced913d54f3175d66d42de5ac39167f892a8","downloaded_from":"2026-09-10T01:36:11.044Z","last_downloaded_at":"2026-09-10T01:36:11.044Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481082","source_sha256":"539158f492ac3dfa8df67f2966fd690b8321d481194615617fb8ff3e506afd3a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e4a95ec3e16bc9cc8e258d6a80c6307927fd2cdcfa15d37894a4bc702bf0c082","downloaded_from":"2026-09-10T01:36:11.044Z","last_downloaded_at":"2026-09-10T01:36:11.044Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481082","source_sha256":"539158f492ac3dfa8df67f2966fd690b8321d481194615617fb8ff3e506afd3a"}},{"number":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":"Hybrid Instruments That Are Not Separated","paragraphs":[{"citation":"815-15-35-1","para":"35-1","html":"
If an entity irrevocably elected to initially and subsequently measure a hybrid financial instrument in its entirety at fair value, changes in fair value for that hybrid financial instrument shall be recognized in earnings. Paragraph 815-20-25-71(a)(3) states that the entire contract shall not be designated as a hedging instrument pursuant to Subtopic 815-20.
","snippet":"If an entity irrevocably elected to initially and subsequently measure a hybrid financial instrument in its entirety at fair value, changes in fair value for that hybrid financial instrument shall be recognized in earnin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:68dcaca915ef06e8e81ae009c163c7406b8d95b357fe0119cb693c73f0df3fa7","downloaded_from":"2026-09-10T01:36:12.754Z","last_downloaded_at":"2026-09-10T01:36:12.754Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481051","source_sha256":"a055fd2af09ee263d74d58aa8fd68374400abf230d5e9034045aa54eddc57cbe"}},{"citation":"815-15-35-2","para":"35-2","html":"
If an entity cannot reliably identify and measure the embedded derivative that paragraph 815-15-25-1 requires be separated from the host contract, the entire contract shall be measured subsequently at fair value with gain or loss recognized in earnings. Paragraph 815-20-25-71(a)(4) states that the entire contract shall not be designated as a hedging instrument pursuant to Subtopic 815-20.
","snippet":"If an entity cannot reliably identify and measure the embedded derivative that paragraph 815-15-25-1 requires be separated from the host contract, the entire contract shall be measured subsequently at fair value with gai…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a6980c22522b3331db5491dd4de921ba37e96b61978bae5f9c29288d8d8a8b3","downloaded_from":"2026-09-10T01:36:12.754Z","last_downloaded_at":"2026-09-10T01:36:12.754Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481051","source_sha256":"a055fd2af09ee263d74d58aa8fd68374400abf230d5e9034045aa54eddc57cbe"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dcf19681b15396c92c46b3706ada650b701bf1c67242a614c6f51deb82e76d01","downloaded_from":"2026-09-10T01:36:12.754Z","last_downloaded_at":"2026-09-10T01:36:12.754Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481051","source_sha256":"a055fd2af09ee263d74d58aa8fd68374400abf230d5e9034045aa54eddc57cbe"}},{"block":null,"heading":"Hybrid Instruments That Are Separated","paragraphs":[{"citation":"815-15-35-2A","para":"35-2A","html":"
Paragraph 815-15-25-1 requires that an embedded derivative be separated from the host contract and accounted for as a derivative instrument pursuant to Subtopic 815-10 if and only if all of the criteria in paragraph 815-15-25-1 are met.
","snippet":"Paragraph 815-15-25-1 requires that an embedded derivative be separated from the host contract and accounted for as a derivative instrument pursuant to Subtopic 815-10 if and only if all of the criteria in paragraph 815-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3d1885f4f98514edc500afdc144521a9ee62f167b76ac7cd2a6fb8861bafb952","downloaded_from":"2026-09-10T01:36:12.754Z","last_downloaded_at":"2026-09-10T01:36:12.754Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481051","source_sha256":"a055fd2af09ee263d74d58aa8fd68374400abf230d5e9034045aa54eddc57cbe"}},{"citation":"815-15-35-3","para":"35-3","html":"
If the host contract component of a hybrid instrument is reported at fair value with changes in fair value recognized in earnings or other comprehensive income, then the sum of the fair values of the host contract component and the embedded derivative shall not exceed the overall fair value of the hybrid instrument.
","snippet":"If the host contract component of a hybrid instrument is reported at fair value with changes in fair value recognized in earnings or other comprehensive income, then the sum of the fair values of the host contract compon…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7e87d01812b8a9eaa8c5f557da83d9b9327bb9cbfb9b5c5a151fb19400044fa0","downloaded_from":"2026-09-10T01:36:12.754Z","last_downloaded_at":"2026-09-10T01:36:12.754Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481051","source_sha256":"a055fd2af09ee263d74d58aa8fd68374400abf230d5e9034045aa54eddc57cbe"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3c46fbb9a4855b6b32954fad1416bdcf9ad3f9576d6bb05f2a5b05cb5ea5abb6","downloaded_from":"2026-09-10T01:36:12.754Z","last_downloaded_at":"2026-09-10T01:36:12.754Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481051","source_sha256":"a055fd2af09ee263d74d58aa8fd68374400abf230d5e9034045aa54eddc57cbe"}},{"block":null,"heading":"Embedded Conversion Option That No Longer Meets Bifurcation Criteria","paragraphs":[{"citation":"815-15-35-4","para":"35-4","html":"
If an embedded conversion option in a convertible debt instrument no longer meets the bifurcation criteria in this Subtopic, an issuer shall account for the previously bifurcated conversion option by reclassifying the carrying amount of the liability for the conversion option (that is, its fair value on the date of reclassification) to shareholders' equity. Any debt discount recognized when the conversion option was bifurcated from the convertible debt instrument shall continue to be amortized.
","snippet":"If an embedded conversion option in a convertible debt instrument no longer meets the bifurcation criteria in this Subtopic, an issuer shall account for the previously bifurcated conversion option by reclassifying the ca…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86cd8f1828ff3c8165c617f0b23c741906973c5cc929eceab2f668217762d1f7","downloaded_from":"2026-09-10T01:36:12.754Z","last_downloaded_at":"2026-09-10T01:36:12.754Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481051","source_sha256":"a055fd2af09ee263d74d58aa8fd68374400abf230d5e9034045aa54eddc57cbe"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5b2f78833f7fa39188854741eb75fdba94e2adcb862b52966d682ae73ba1859e","downloaded_from":"2026-09-10T01:36:12.754Z","last_downloaded_at":"2026-09-10T01:36:12.754Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481051","source_sha256":"a055fd2af09ee263d74d58aa8fd68374400abf230d5e9034045aa54eddc57cbe"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eb28e04c0631104a52cae0819225aefdac81c3c17647ce39bfd84afbc204b0e4","downloaded_from":"2026-09-10T01:36:12.754Z","last_downloaded_at":"2026-09-10T01:36:12.754Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481051","source_sha256":"a055fd2af09ee263d74d58aa8fd68374400abf230d5e9034045aa54eddc57cbe"}},{"number":"40","label":"40 Derecognition","anchor":"40-derecognition","is_sec":false,"groups":[{"block":null,"heading":"Embedded Conversion Option that No Longer Meets Bifurcation Criteria","paragraphs":[{"citation":"815-15-40-1","para":"40-1","html":"
If a holder exercises a conversion option for which the carrying amount has previously been reclassified to shareholders' equity pursuant to paragraph 815-15-35-4, the issuer shall recognize any unamortized discount remaining at the date of conversion immediately as interest expense.
","snippet":"If a holder exercises a conversion option for which the carrying amount has previously been reclassified to shareholders' equity pursuant to paragraph 815-15-35-4, the issuer shall recognize any unamortized discount rema…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:41f1ff9539979e275f65445cad6e61ab092cfc2cb739f8860553a66fd09fc708","downloaded_from":"2026-09-10T01:36:16.615Z","last_downloaded_at":"2026-09-10T01:36:16.615Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481021","source_sha256":"c10f022710e8342042f09f29591ba24760fc9db784baed54c299a9ad0565c80e"}},{"citation":"815-15-40-2","para":"40-2","html":"
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If a convertible debt instrument with a conversion option for which the carrying amount has previously been reclassified to shareholders' equity pursuant to the guidance in paragraph 815-15-35-4 is extinguished for cash (or other assets) before its stated maturity date, the entity shall do both of the following:
  1. a
    The portion of the reacquisition price equal to the fair value of the conversion option at the date of the extinguishment shall be allocated to equity.
  2. b
    The remaining reacquisition price shall be allocated to the extinguishment of the debt to determine the amount of gain or loss.
","snippet":"If a convertible debt instrument with a conversion option for which the carrying amount has previously been reclassified to shareholders' equity pursuant to the guidance in paragraph 815-15-35-4 is extinguished for cash …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:96db5728191e04787c7a429f370618bb3b50db1b2dafdc3b6fd1d561a34a4fd8","downloaded_from":"2026-09-10T01:36:16.615Z","last_downloaded_at":"2026-09-10T01:36:16.615Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481021","source_sha256":"c10f022710e8342042f09f29591ba24760fc9db784baed54c299a9ad0565c80e"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f4b176df3d672c23ade10e8467431f44ef10a0d8665b06afe3e1c4511dcc5ecb","downloaded_from":"2026-09-10T01:36:16.615Z","last_downloaded_at":"2026-09-10T01:36:16.615Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481021","source_sha256":"c10f022710e8342042f09f29591ba24760fc9db784baed54c299a9ad0565c80e"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3fdd112c00d4d6255f47420ea9f471686bed246310b113ab0edf1393d7ce7225","downloaded_from":"2026-09-10T01:36:16.615Z","last_downloaded_at":"2026-09-10T01:36:16.615Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481021","source_sha256":"c10f022710e8342042f09f29591ba24760fc9db784baed54c299a9ad0565c80e"}},{"number":"45","label":"45 Other Presentation Matters","anchor":"45-other-presentation-matters","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-15-45-1","para":"45-1","html":"
In each statement of financial position presented, an entity shall report hybrid financial instruments measured at fair value under the election and under the practicability exception in paragraph 815-15-30-1 in a manner that separates those reported fair values from the carrying amounts of assets and liabilities subsequently measured using another measurement attribute on the face of the statement of financial position. To accomplish that separate reporting, an entity may do either of the following:
  1. a
    Display separate line items for the fair value and non-fair-value carrying amounts
  2. b
    Present the aggregate of the fair value and non-fair-value amounts and parenthetically disclose the amount of fair value included in the aggregate amount.
","snippet":"In each statement of financial position presented, an entity shall report hybrid financial instruments measured at fair value under the election and under the practicability exception in paragraph 815-15-30-1 in a manner…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:147802867f8b2e32d087ea249085a4107fed4a9eedfa3473e253c717d65f636b","downloaded_from":"2026-09-10T01:36:19.646Z","last_downloaded_at":"2026-09-10T01:36:19.646Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480991","source_sha256":"984de688d8eb2b4e5708ead69352ba696be0667a500ba4cadbc64a7227ab9fae"}},{"citation":"815-15-45-2","para":"45-2","html":"
If an entity has designated a financial liability under the fair value election in accordance with paragraphs
815-15-25-4 through 25-6
, the entity shall apply the guidance in paragraph 825-10-45-5 on the presentation of changes in the liability's fair value that result from changes in instrument-specific credit risk.
","snippet":"If an entity has designated a financial liability under the fair value election in accordance with paragraphs 815-15-25-4 through 25-6, the entity shall apply the guidance in paragraph 825-10-45-5 on the presentation of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3abf50fdf610edf2ff7cc2f838db463866ade4be0630bf3b0a8d4bb147dd926e","downloaded_from":"2026-09-10T01:36:19.646Z","last_downloaded_at":"2026-09-10T01:36:19.646Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480991","source_sha256":"984de688d8eb2b4e5708ead69352ba696be0667a500ba4cadbc64a7227ab9fae"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e249bb2f74a2c2e1807d902c2c11058c35d13414308c813fcbcc9b963374aa71","downloaded_from":"2026-09-10T01:36:19.646Z","last_downloaded_at":"2026-09-10T01:36:19.646Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480991","source_sha256":"984de688d8eb2b4e5708ead69352ba696be0667a500ba4cadbc64a7227ab9fae"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:de64176b565479db5be07a91ae179607a92a139f16786e390ce2d457bfb273c9","downloaded_from":"2026-09-10T01:36:19.646Z","last_downloaded_at":"2026-09-10T01:36:19.646Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480991","source_sha256":"984de688d8eb2b4e5708ead69352ba696be0667a500ba4cadbc64a7227ab9fae"}},{"number":"50","label":"50 Disclosure","anchor":"50-disclosure","is_sec":false,"groups":[{"block":null,"heading":"Hybrid Instruments That Are Not Separated","paragraphs":[{"citation":"815-15-50-1","para":"50-1","html":"
For those hybrid financial instruments measured at fair value under the election and under the practicability exception in paragraph 815-15-30-1, an entity shall also disclose the information specified in paragraphs
825-10-50-28 through 50-32
.
","snippet":"For those hybrid financial instruments measured at fair value under the election and under the practicability exception in paragraph 815-15-30-1, an entity shall also disclose the information specified in paragraphs 825-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bed6b9af56942b310d07e95ec267dc35ec53792b5af8fde6e9b646a644c4dd9d","downloaded_from":"2026-09-10T01:36:22.333Z","last_downloaded_at":"2026-09-10T01:36:22.333Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480960","source_sha256":"77a28dc1ee2b1edbe176eafaf74629dadc639339087b9490314efa55ada2a825"}},{"citation":"815-15-50-2","para":"50-2","html":"
An entity shall provide information that will allow users to understand the effect of changes in the fair value of hybrid financial instruments measured at fair value under the election and under the practicability exception in paragraph 815-15-30-1 on earnings (or other performance indicators for entities that do not report earnings).
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, an entity shall provide information that will allow users to understand the effect of changes in the fair value of hybrid financial instruments measured at fair value under the election and under the practicability exception in paragraph 815-15-30-1 on earnings (or other performance indicators for entities that do not report earnings).
","snippet":"An entity shall provide information that will allow users to understand the effect of changes in the fair value of hybrid financial instruments measured at fair value under the election and under the practicability excep…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d0ee7e06258c93bb6763b177f7196f693c10b7848adfcdcb81e4a8765d4dd437","downloaded_from":"2026-09-10T01:36:22.333Z","last_downloaded_at":"2026-09-10T01:36:22.333Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480960","source_sha256":"77a28dc1ee2b1edbe176eafaf74629dadc639339087b9490314efa55ada2a825"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a4a2b0266c271305a06cf69c7ccfdcac50dbca83b3cb5ccc584c835deb3b6237","downloaded_from":"2026-09-10T01:36:22.333Z","last_downloaded_at":"2026-09-10T01:36:22.333Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480960","source_sha256":"77a28dc1ee2b1edbe176eafaf74629dadc639339087b9490314efa55ada2a825"}},{"block":null,"heading":"Embedded Conversion Option that Is No Longer Bifurcated","paragraphs":[{"citation":"815-15-50-3","para":"50-3","html":"
An issuer shall disclose both of the following for the period in which an embedded conversion option previously accounted for as a derivative instrument under this Subtopic no longer meets the separation criteria under this Subtopic:
  1. a
    A description of the principal changes causing the embedded conversion option to no longer require bifurcation under this Subtopic
  2. b
    The amount of the liability for the conversion option reclassified to stockholders' equity.
","snippet":"An issuer shall disclose both of the following for the period in which an embedded conversion option previously accounted for as a derivative instrument under this Subtopic no longer meets the separation criteria under t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f4afe33eff3d6bf581507a558ee43e9ec29690c1f4f8d119066ea6696605419f","downloaded_from":"2026-09-10T01:36:22.333Z","last_downloaded_at":"2026-09-10T01:36:22.333Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480960","source_sha256":"77a28dc1ee2b1edbe176eafaf74629dadc639339087b9490314efa55ada2a825"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b40300b3a420009fc2c2fdccc418780450c61462b75b5ab540e7266da97f8141","downloaded_from":"2026-09-10T01:36:22.333Z","last_downloaded_at":"2026-09-10T01:36:22.333Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480960","source_sha256":"77a28dc1ee2b1edbe176eafaf74629dadc639339087b9490314efa55ada2a825"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:14a1585e26e6480a7c497731041eaeabb1674b25ca787d1a185a3b8f549d3d05","downloaded_from":"2026-09-10T01:36:22.333Z","last_downloaded_at":"2026-09-10T01:36:22.333Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480960","source_sha256":"77a28dc1ee2b1edbe176eafaf74629dadc639339087b9490314efa55ada2a825"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Implementation Guidance","paragraphs":[{"citation":"815-15-55-1","para":"55-1","html":"
Insurance contracts that provide coverage for various types of property and casualty exposure are commonly executed between U.S.-based insurance entities and multinational corporations that have operations in foreign countries. The contracts may be structured to provide for payment of claims in the functional currency of the insurer or in the functional currency of the entity experiencing the loss and will typically specify the exchange rate to be utilized in calculating loss payments.
","snippet":"Insurance contracts that provide coverage for various types of property and casualty exposure are commonly executed between U.S.-based insurance entities and multinational corporations that have operations in foreign cou…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bf17ad9a1bfdf272d5b4452df34bccb60b9ae6b7e852bc42b3e9e10d1903375b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-2","para":"55-2","html":"
Consider a contract that provides for the payment of losses in U.S. dollars (that is, the functional currency of the insurer). Losses are reported to the insurance entity in the functional currency of the entity experiencing the loss, but losses are paid by the insurer in U.S. dollars. From the perspective of the insurer, the contract terms may provide that the rate of exchange to be used to convert the losses from the functional currency of the foreign entity to the U.S. dollar for purposes of claim payments be one of the following:
  1. a
    The rate of exchange as of the settlement date (payment date) of the claim
  2. b
    The rate of exchange as of the loss occurrence date
  3. c
    The rate of exchange at inception of the contract.
The contract described in this guidance does not qualify as traditional insurance under paragraph 815-10-15-53(b) because it contains a foreign currency element.
","snippet":"Consider a contract that provides for the payment of losses in U.S. dollars (that is, the functional currency of the insurer). Losses are reported to the insurance entity in the functional currency of the entity experien…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dd135cba7a03693e4fc964b3419a9ae85ff45c323d46caef2f1615d91ae50632","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-3","para":"55-3","html":"
Because the insurance entity does not record a claim liability in accordance with Subtopic 944-40 until losses are incurred, no foreign-currency-denominated liability exists (that would otherwise be subject to Subtopic 830-20, as contemplated by paragraph 815-15-15-10) during the period between the inception of the insurance contract and the loss occurrence date.
","snippet":"Because the insurance entity does not record a claim liability in accordance with Subtopic 944-40 until losses are incurred, no foreign-currency-denominated liability exists (that would otherwise be subject to Subtopic 8…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50136f49e6c5daeada0a87e6d46dfbe32858d9b18a6d9420439edf832a49b071","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-4","para":"55-4","html":"
Insurance contracts are financial instruments that are not covered by the scope exception in paragraph 815-15-15-10 that applies to nonfinancial contracts; however, that paragraph applies to this situation in which a normal insurance contract involves payment in the functional currency of either of the two parties to the contract. The insurance contracts described in this guidance are covered by the exception in paragraph 815-15-15-10, because the insurance contracts do not give rise to a recognized asset or liability that would be measured under Subtopic 830-20 until an amount becomes receivable or payable under the contract. Therefore, as discussed in paragraph 815-15-15-20, the exception in paragraph 815-15-15-10 also applies to insurance contracts that involve payment of losses in the functional currency of either of the two parties to the contract.
","snippet":"Insurance contracts are financial instruments that are not covered by the scope exception in paragraph 815-15-15-10 that applies to nonfinancial contracts; however, that paragraph applies to this situation in which a nor…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c55a02fe7659254e25ef37ee0652a626669c0a7579e49e5452a9fa97f6af563","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-5","para":"55-5","html":"
The following guidance addresses application of one or more of the bifurcation criteria in paragraph 815-15-25-1.
","snippet":"The following guidance addresses application of one or more of the bifurcation criteria in paragraph 815-15-25-1.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4ffd396e9143582456f70ff7b178f9a2d83c469f26168f252ead250ee2da264e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-6","para":"55-6","html":"
The following guidance addresses application of the separate instrument criterion in paragraph 815-15-25-1(c).
","snippet":"The following guidance addresses application of the separate instrument criterion in paragraph 815-15-25-1(c).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c8c3f80bc9e15e7ae3092025b97485c40e9fd434368cdd54627bb3c7ab534044","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-7","para":"55-7","html":"
Lease contracts that include variable lease payments based on certain sales of the lessee would not have the embedded derivative that is related to the variable lease payment separated from the host contract because, under paragraph 815-10-15-59(d), a non-exchange-traded contract whose underlying is specified volumes of sales by one of the parties to the contract would not be subject to the requirements of Subtopic 815-10.
","snippet":"Lease contracts that include variable lease payments based on certain sales of the lessee would not have the embedded derivative that is related to the variable lease payment separated from the host contract because, und…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7664b12c2007e13ec408aab5599e0e1be68be01b88ab2c4d6c78a88da0cda6ab","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-8","para":"55-8","html":"
Under an example participating mortgage, the investor receives a below-market interest rate and is entitled to participate in the appreciation in the fair value of the project that is financed by the mortgage upon sale of the project, at a deemed sale date, or at the maturity or refinancing of the loan. The mortgagor must continue to own the project over the term of the mortgage.
","snippet":"Under an example participating mortgage, the investor receives a below-market interest rate and is entitled to participate in the appreciation in the fair value of the project that is financed by the mortgage upon sale o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e97618a5801a5f7fb53ceb15d1c61874c9b193531762146a85bd6e7242d723fb","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-9","para":"55-9","html":"
This instrument has a provision that entitles the investor to participate in the appreciation of the referenced real estate (the project). However, a separate contract with the same terms would be excluded by the exception in paragraph 815-10-15-59(b) because settlement is based on the value of a nonfinancial asset of one of the parties that is not readily convertible to cash. (This Subtopic does not modify the guidance in Subtopic 470-30.)
","snippet":"This instrument has a provision that entitles the investor to participate in the appreciation of the referenced real estate (the project). However, a separate contract with the same terms would be excluded by the excepti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e5fe695575494e0f67f85223cd48b396515401e3fb12a68cbf9eb4d8b2498c81","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-10","para":"55-10","html":"
Paragraph 310-10-05-9 explains that loans granted to acquire operating properties sometimes grant the lender a right to participate in expected residual profit from the sale or refinancing of the property. An equity kicker (or expected residual profit) would typically not be separated from the host contract and accounted for as an embedded derivative because paragraph 815-15-25-1(c) exempts a hybrid contract from bifurcation if a separate instrument with the same terms as the embedded equity kicker is not a derivative instrument subject to the requirements of this Subtopic. Under paragraph 815-10-15-59(b), an embedded equity kicker would typically not be subject to the requirements of this Subtopic because the separate instrument with the same terms is not exchange traded and is indexed to nonfinancial assets that are not readily convertible to cash. Similarly, if an equity kicker is based on a share in net earnings or operating cash flows, it would also typically qualify for the scope exception in paragraph 815-10-15-59(d). If the embedded derivative does not need to be accounted for separately under this Subtopic, the Acquisition, Development, and Construction Arrangements Subsections of Subtopic 310-10 shall be applied.
","snippet":"Paragraph 310-10-05-9 explains that loans granted to acquire operating properties sometimes grant the lender a right to participate in expected residual profit from the sale or refinancing of the property. An equity kick…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4f3dd27afc143b116eec4f80d39da9bc4ef452147354562b94bf42871d31aa0c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-11","para":"55-11","html":"
A loan with an equity kicker of more than 50 percent of net earnings that is considered to be an investment in real estate under the Acquisition, Development, and Construction Arrangements Subsections of Subtopic 310-10 would not be analyzed under this Subtopic as a host loan contract and an embedded equity kicker derivative.
","snippet":"A loan with an equity kicker of more than 50 percent of net earnings that is considered to be an investment in real estate under the Acquisition, Development, and Construction Arrangements Subsections of Subtopic 310-10 …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c326e33ce33c018e2dff9f6e93dbbe663e00758ca20404c19391478e96a4055c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-12","para":"55-12","html":"
Paragraphs
815-10-55-37 through 55-39
provide guidance on dual-trigger insurance contracts and whether such a contract, in its entirety, is a derivative instrument subject to the requirements of Subtopic 815-10. If a contract issued by an insurance entity involves essentially assured amounts of cash flows based on insurable events that are highly probable of occurrence (as discussed in paragraph 815-10-15-55(c)), an embedded derivative related to changes in the separate pre-identified variable for that portion of the contract would be required to be separately accounted for as a derivative instrument.
","snippet":"Paragraphs 815-10-55-37 through 55-39 provide guidance on dual-trigger insurance contracts and whether such a contract, in its entirety, is a derivative instrument subject to the requirements of Subtopic 815-10. If a con…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c5f7395eb0a11f59288df9a394c5ddb9279efc6540c350865ac2b44d1c547566","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-13","para":"55-13","html":"
The following table demonstrates the application of the four-step decision sequence in paragraph 815-15-25-42 for determining whether call options and put options that can accelerate the settlement of debt instruments should be considered to be clearly and closely related to the debt host contract under the criterion in paragraph 815-15-25-1(a).
","snippet":"The following table demonstrates the application of the four-step decision sequence in paragraph 815-15-25-42 for determining whether call options and put options that can accelerate the settlement of debt instruments sh…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:443431cacae8d1fe64e2a30055442d054fb08fd7c17f6fc586b4b26b4da271a8","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-14","para":"55-14","html":"
The following guidance addresses application of the bifurcation criteria in paragraph 815-15-25-1 to various transactions and is organized as follows:
  1. a
    Volumetric production payments
  2. b
    Interest-rate-related underlyings—call options that are exercisable only by the debtor
  3. c
    Remarketable put bonds
  4. d
    Variable annuity products in general
  5. e
    Payment alternatives for variable annuity contracts
  6. f
    Equity-indexed annuity contracts
  7. g
    Equity-indexed life insurance contracts.
","snippet":"The following guidance addresses application of the bifurcation criteria in paragraph 815-15-25-1 to various transactions and is organized as follows:\n(a) Volumetric production payments\n(b) Interest-rate-related underlyi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4e28e90ef605a8e70b45906edbe532d0eac74d54e7da7588d61794be76162abd","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-15","para":"55-15","html":"
The embedded derivative provisions of this Subtopic apply to the accounting by all parties for a volumetric production payment (see paragraph 932-360-55-2) for which the quantity of the commodity that will be delivered is reliably determinable.
","snippet":"The embedded derivative provisions of this Subtopic apply to the accounting by all parties for a volumetric production payment (see paragraph 932-360-55-2) for which the quantity of the commodity that will be delivered i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:217911da2c638113e7647b76c99db1fc18bf3a6298a5024b7ae754a919fd7925","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-16","para":"55-16","html":"
A volumetric production payment is not itself a standalone derivative instrument because, like the contract in paragraphs
815-10-55-74 through 55-76
, it does not have the characteristic of a derivative instrument discussed in paragraph 815-10-15-83(b)—that is, a smaller or no initial net investment.
","snippet":"A volumetric production payment is not itself a standalone derivative instrument because, like the contract in paragraphs 815-10-55-74 through 55-76, it does not have the characteristic of a derivative instrument discuss…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:90d4cbfe647de9bec50c8cb8cc6e78fafedee60ddf0fbc041b3e529d4bbf1a35","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-17","para":"55-17","html":"
Although it is not derivative instrument, a volumetric production payment shall be analyzed under paragraph 815-15-25-1. That analysis would typically indicate that such a volumetric production payment effectively is a hybrid instrument composed of a host debt instrument embedded with a commodity forward contract.
","snippet":"Although it is not derivative instrument, a volumetric production payment shall be analyzed under paragraph 815-15-25-1. That analysis would typically indicate that such a volumetric production payment effectively is a h…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f491b10e803933c104e19f01a2fb8dcd82c9a6d5c91c6c884c1173a54c6849fb","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-18","para":"55-18","html":"
The criterion in paragraph 815-15-25-1(b) is met because a volumetric production payment is not remeasured at fair value under otherwise applicable generally accepted accounting principles (GAAP) with changes in fair value reported currently in earnings.
","snippet":"The criterion in paragraph 815-15-25-1(b) is met because a volumetric production payment is not remeasured at fair value under otherwise applicable generally accepted accounting principles (GAAP) with changes in fair val…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c9d958992436e266271394ad616b9f3a5a099d54551ef83a976baf917716e3cc","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-19","para":"55-19","html":"
The embedded commodity forward contract meets the criterion in paragraph 815-15-25-1(a) because commodity prices are not clearly and closely related to interest rates on the debt host contract.
","snippet":"The embedded commodity forward contract meets the criterion in paragraph 815-15-25-1(a) because commodity prices are not clearly and closely related to interest rates on the debt host contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:263f69bb4631fc11b09c90f893b197909e95a64a77d86e20771c58650f5d3c3c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-20","para":"55-20","html":"
Accordingly, if a separate instrument with the same terms as the commodity forward contract would be a derivative instrument subject to the requirements of this Subtopic, the embedded commodity forward contract would meet the criterion in paragraph 815-15-25-1(c) and shall be accounted for separately. (Note that Section 815-15-25 allows for a fair value election for hybrid financial instruments that otherwise would require bifurcation. However, Section 815-15-25 does not apply to hybrid instruments that are not financial instruments, such as nonfinancial instruments that require volumetric production payments.)
","snippet":"Accordingly, if a separate instrument with the same terms as the commodity forward contract would be a derivative instrument subject to the requirements of this Subtopic, the embedded commodity forward contract would mee…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66b47ab4259187e4b2d8fc82f89cb1aa15ef2933a5c4de49c513b16c1bdefe61","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-21","para":"55-21","html":"
However, the embedded commodity forward contract may nevertheless be eligible to qualify for the normal purchases and normal sales exception as discussed beginning in paragraph 815-10-15-22 and, if so, would not be subject to the accounting requirements of Subtopic 815-10 for the party to whom it is a normal purchase or a normal sale. If it were a normal sale for an oil- or gas-producing entity, the entire related volumetric production payment would be accounted for under Topic 932.
","snippet":"However, the embedded commodity forward contract may nevertheless be eligible to qualify for the normal purchases and normal sales exception as discussed beginning in paragraph 815-10-15-22 and, if so, would not be subje…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d9e539bbdddd3e07283acc0363bfbf39aa34b11d8cb8dbd188e5de20244809d4","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-22","para":"55-22","html":"
If the embedded commodity forward contract does not qualify for the normal purchases and normal sales exception, it may qualify for designation as the hedging instrument in an all-in-one hedge, as discussed in paragraph 815-20-25-22.
","snippet":"If the embedded commodity forward contract does not qualify for the normal purchases and normal sales exception, it may qualify for designation as the hedging instrument in an all-in-one hedge, as discussed in paragraph …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:201cda2c58b630f814726f458e86382e992579fbeecd0a5befbd606388fa798e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-23","para":"55-23","html":"
If the quantity of the commodity that will be delivered under a volumetric production payment arrangement is not reliably determinable, the embedded commodity forward contracts in such volumetric production payment arrangements are considered not to contain a notional amount as that term is used in Subtopic 815-10. Such a circumstance can occur when the oil or gas volumetric production payments relate to the production of a single well (or relatively unproven properties) and the volume under the contract is relatively large, and thereby involve significant reserve risk with respect to the receipt of the entire quantity specified in the contract.
","snippet":"If the quantity of the commodity that will be delivered under a volumetric production payment arrangement is not reliably determinable, the embedded commodity forward contracts in such volumetric production payment arran…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0352b972a4e36d0c6533f89aa71d3349e86d39213b4037f41fbe076b23d44831","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-24","para":"55-24","html":"
If the embedded commodity forward contract is not subject to the requirements of Subtopic 815-10, the entire related volumetric production payment would be accounted for under Topic 932.
","snippet":"If the embedded commodity forward contract is not subject to the requirements of Subtopic 815-10, the entire related volumetric production payment would be accounted for under Topic 932.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cd65951cf8c893b833f970992081cf24d3f3c5c6762540bd052dba91747073fc","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-25","para":"55-25","html":"
Application of the guidance in paragraphs
815-15-25-37 through 25-39
to specific debt instruments is provided in the following table.
","snippet":"Application of the guidance in paragraphs 815-15-25-37 through 25-39 to specific debt instruments is provided in the following table.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6dace0ee33c9425c888b116377a433ee8ea7ce88288be7f3f7a8d1ef470c9c11","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-26","para":"55-26","html":"
The following guidance discusses remarketable put bond structures involving three parties—a debtor, an investor (creditor), and an investment bank—and the required accounting by the debtor and the investor for each of the features discussed.
","snippet":"The following guidance discusses remarketable put bond structures involving three parties—a debtor, an investor (creditor), and an investment bank—and the required accounting by the debtor and the investor for each of th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2cd8e4850eb4910c04482a26a7d3bf61a1e6619ee06e85f9197b33bfffdf46da","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-27","para":"55-27","html":"
A standard put bond has all of the following characteristics:
  1. a
    A debtor issues a contract comprising a bond and a written put option.
  2. b
    The option allows the investor to put the bond back to the debtor at a specific date in exchange for the bond's par value.
  3. c
    In exchange for giving the investor the right to redeem the bond at par before maturity, the debtor pays a lower effective interest rate than would be demanded for a nonputtable bond.
","snippet":"A standard put bond has all of the following characteristics:\n(a) A debtor issues a contract comprising a bond and a written put option.\n(b) The option allows the investor to put the bond back to the debtor at a specific…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:31bac78551c99f18f4e82a924310a3c27e35930f6fc6602aba698ec4b43d2ed1","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-28","para":"55-28","html":"
In addition, the rate on the bond may reset at the put date (resettable put bonds), and the bond may also involve a call option (callable, resettable put bonds).
","snippet":"In addition, the rate on the bond may reset at the put date (resettable put bonds), and the bond may also involve a call option (callable, resettable put bonds).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4b1c1d7ab202d1f65e9903bb09fb95bf9c911fb1542c3923b71cef1b47d3eb47","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-29","para":"55-29","html":"
A remarketable put bond is a puttable bond that generally has the following additional features:
  1. a
    An investment bank obtains a call option—a right to buy the bond from the investor on the put date for the par amount.
  2. b
    The investment bank usually is either the underwriter of the bond issuance or an affiliate of the underwriter.
  3. c
    The bond will automatically be put back to the debtor if the investment bank does not exercise its call option to purchase the bond.
  4. d
    The strike prices and the exercise dates of the investor's written call option and purchased put option are the same.
  5. e
    The exercise dates are before the stated maturity of the bond.
  6. f
    The bond has an interest-rate-reset feature under which, if the bond is not put, the bond's contractual interest rate for the remaining term to maturity will reset at the put date based on the sum of the following:
    1. 1
      The yield, at the issuance date of the puttable bond, of U.S. Treasury bonds of the same remaining maturity as the bond
    2. 2
      The debtor's credit spread as of the put date.
  7. g
    The proceeds from issuance exceed the par amount of the bond, net of issuance costs.
","snippet":"A remarketable put bond is a puttable bond that generally has the following additional features:\n(a) An investment bank obtains a call option—a right to buy the bond from the investor on the put date for the par amount.\n…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:63ab76afe7a597b0fb7a4a426121073ff2f4b7563b0a13829ae263f19952cca6","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-30","para":"55-30","html":"
It is assumed for purposes of this discussion that the interest-rate-reset feature does not trigger the condition in paragraph 815-15-25-26(a). The premium over par compensates the debtor for the interest-rate-reset feature. The premium generally is less than 10 percent of the par amount.
","snippet":"It is assumed for purposes of this discussion that the interest-rate-reset feature does not trigger the condition in paragraph 815-15-25-26(a). The premium over par compensates the debtor for the interest-rate-reset feat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b3b70b1d3ca2424aab5162383ba625c4e3c40e2474a71a8add8be38bf0ce9599","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-31","para":"55-31","html":"
Economically, one of two scenarios will occur:
  1. a
    If market interest rates increase, both of the following will occur:
    1. 1
      The fair value of the bond (absent the effect of the put option) will decrease.
    2. 2
      The put option is in the money; therefore, the investors will put the bonds to the debtor.
  2. b
    If market interest rates decrease, both of the following will occur:
    1. 1
      The fair value of the bond (absent the effect of the call option) will increase.
    2. 2
      The call option is in the money; therefore, the investment bank will call the bonds from investors and resell the repriced bonds in the market at a premium.
","snippet":"Economically, one of two scenarios will occur:\n(a) If market interest rates increase, both of the following will occur:\n(1) The fair value of the bond (absent the effect of the put option) will decrease.\n(2) The put opti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5c7ac0d3859056ee786bcfeda4793c73d14330494b63f7613100bbb07c01268d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-32","para":"55-32","html":"
The following guidance describes six remarketable put bond structures and three additional features that may accompany certain structures.
","snippet":"The following guidance describes six remarketable put bond structures and three additional features that may accompany certain structures.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5cfc0f2b804b8d2d84d3e1edff189ba7d9696b524324fe5726f40e8477129f80","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-33","para":"55-33","html":"
Structure 1 has all of the following features:
  1. a
    A debtor issues a resettable, puttable bond to an investment bank.
  2. b
    The investment bank sells to an investor that resettable, puttable bond with an attached call option.
  3. c
    The attached call option is a written option from the perspective of the investor and a purchased option from the perspective of the investment bank.
","snippet":"Structure 1 has all of the following features:\n(a) A debtor issues a resettable, puttable bond to an investment bank.\n(b) The investment bank sells to an investor that resettable, puttable bond with an attached call opti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9edf1766890e2fe5f2b755cb75c457b75d32db5d4ff3bafacb0da6a08a529755","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-34","para":"55-34","html":"
That is, the investor buys a resettable, puttable bond and simultaneously writes a call option giving the investment bank the right to call the bond and take advantage of the interest-rate-reset feature.
","snippet":"That is, the investor buys a resettable, puttable bond and simultaneously writes a call option giving the investment bank the right to call the bond and take advantage of the interest-rate-reset feature.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:374e98845a9446f6e039d8a2d0679a49dd8a8a50dbc04fc9683f53241a010889","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-35","para":"55-35","html":"
Structure 1 is analyzed as follows:
  1. a
    Investment bank's held call option. The debtor should not account for the call option purchased by the investment bank from the investor. The debtor is not a party to the call option. The investor's accounting for Structure 1 is addressed in Example 1, Case A (see paragraph 815-10-55-67), which requires that an option that is added to a debt instrument by a third party contemporaneously with or after the issuance of the debt instrument be separately accounted for as a derivative instrument by the investor. That is, it shall be reported at fair value with changes in value recognized currently in earnings. The investment bank shall also account for a freestanding purchased call option.
  2. b
    Investor's written call option. The carrying value of the investor's attached freestanding written call option to the investment bank should be its fair value in accordance with paragraphs 815-10-30-1 and 815-10-35-1. The remaining proceeds would be allocated to the carrying amount of the puttable bond.
  3. c
    Investor's held put option. Neither the debtor nor the investor is required to account separately for the embedded put option written by the debtor to the investor. Under paragraphs
    815-15-25-41 through 25-43
    , the put option is considered clearly and closely related to the economic characteristics of the bond because it simply accelerates the repayment of principal, involves no substantial premium or discount, and is not contingent.
","snippet":"Structure 1 is analyzed as follows:\n(a) Investment bank's held call option. The debtor should not account for the call option purchased by the investment bank from the investor. The debtor is not a party to the call opti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:934c55239eb94229dfde1f765a8623863d75b503fb90b17ef3064514069a32b6","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-36","para":"55-36","html":"
Structure 2 has all of the following features:
  1. a
    A debtor issues a resettable, puttable bond to an investor.
  2. b
    Contemporaneously, the investor writes a freestanding call option that permits the debtor to call the bond on the put date.
  3. c
    The debtor immediately sells the purchased call option to an investment bank.
","snippet":"Structure 2 has all of the following features:\n(a) A debtor issues a resettable, puttable bond to an investor.\n(b) Contemporaneously, the investor writes a freestanding call option that permits the debtor to call the bon…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c618c0507bf5b2a7b5d24aa0a4750b5066d9b2627cefd084dd122925624c83a0","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-37","para":"55-37","html":"
Structure 2 is analyzed as follows:
  1. a
    Investment bank's held call option. The debtor should not account separately for the call option that is purchased from the investor after it is transferred to the investment bank. The debtor is no longer a party to the call option. The investor's accounting for Structure 2 is addressed in Example 1, Case B (see paragraph 815-10-55-70), which indicates that the investor's written call option is a separate freestanding derivative instrument that shall be reported at fair value with changes in value recognized currently in earnings. The investment bank shall also account for a freestanding purchased call option.
  2. b
    Investor's written call option. The carrying value of the investor's freestanding written call option to the investment bank should be its fair value in accordance with paragraphs 815-10-30-1 and 815-10-35-1. The remaining proceeds would be allocated to the carrying amount of the puttable bond.
  3. c
    Investor's held put option. Neither the debtor nor the investor is required to account separately for the embedded put option written by the debtor to the investor. Under paragraphs
    815-15-25-41 through 25-43
    , the put option is considered clearly and closely related to the economic characteristics of the bond because it simply accelerates the repayment of principal, involves no substantial premium or discount, and is not contingent.
","snippet":"Structure 2 is analyzed as follows:\n(a) Investment bank's held call option. The debtor should not account separately for the call option that is purchased from the investor after it is transferred to the investment bank.…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a6a92d56a2ba7428c12625beb162828a1f4ae272c93418f8d6cbe56bd846f4b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-38","para":"55-38","html":"
Structure 3 has all of the following features:
  1. a
    A debtor issues a resettable bond to an investor.
  2. b
    The bond is puttable by the investor and callable by the debtor.
  3. c
    The terms of the agreement stipulate that if the debtor does not exercise its purchased call option, the investor's purchased put option is automatically exercised.
  4. d
    Contemporaneously, the debtor writes a separate, freestanding call option to an investment bank giving the investment bank the right to require the debtor to call the bond from the investor and deliver the bond to the investment bank.
  5. e
    To deliver the bond to the investment bank, the debtor must obtain the bond from the investor pursuant to either its purchased call option or its written put option.
  6. f
    The debtor has a resulting obligation to make the investment bank whole if it fails to deliver the bond, and the investment bank has no right to pursue the investor if the investor fails to deliver the bond to the debtor.
","snippet":"Structure 3 has all of the following features:\n(a) A debtor issues a resettable bond to an investor.\n(b) The bond is puttable by the investor and callable by the debtor.\n(c) The terms of the agreement stipulate that if t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4570606175e102e8e86be60ba4e3ecf644fa9e50481dc0027f72cdf9924b4eaa","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-39","para":"55-39","html":"
Structure 3 is analyzed as follows:
  1. a
    Investment bank's held call option. The debtor shall account separately for the freestanding call option written to the investment bank, and the investment bank shall account for a freestanding purchased call option, in accordance with the guidance for a derivative instrument in Subtopic 815-10. The investor is not a party to that freestanding written call option and therefore should not account for that option. In addition to the freestanding call option held by the investment bank, Structure 3 also involves an embedded call option written by the investor to the debtor. That embedded call option is not required to be accounted for separately by either the debtor or the investor. Under paragraphs
    815-15-25-41 through 25-43
    , that embedded call option is considered clearly and closely related to the economic characteristics of the bond.     Consistent with the guidance in paragraph 815-20-25-43(c)(7), the debtor may not designate its freestanding call option written to the investment bank as a hedge of its embedded call option purchased from the investor. Because the terms of the contractual agreement require the debtor to settle its obligation to the investor on the embedded options' exercise date, that exercise date is essentially the bond's actual maturity date. Thus, in this structure, there is no embedded option in the bond that would qualify as the hedged item in a fair value hedge in which the hedging instrument is the debtor's freestanding written call option to the investment bank. However, the debtor may designate its freestanding written call option as a hedge of another asset or liability provided that all applicable requirements, including those in paragraph 815-20-25-94, are met.
  2. b
    Investor's held put option. Neither the debtor nor the investor is required to account separately for the embedded put option written by the debtor to the investor. Under paragraphs
    815-15-25-41 through 25-43
    , the put option is considered clearly and closely related to the economic characteristics of the bond because it simply accelerates the repayment of principal, involves no substantial premium or discount, and is not contingent.
","snippet":"Structure 3 is analyzed as follows:\n(a) Investment bank's held call option. The debtor shall account separately for the freestanding call option written to the investment bank, and the investment bank shall account for a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fe4611f38a61d0ae09d62c84aaf39f13a337851e65a06d51535bb909e18c5d51","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-40","para":"55-40","html":"
Structure 4 has all of the following features:
  1. a
    A debtor issues resettable, puttable bonds to a trust.
  2. b
    The trust issues beneficial interests that mature on the put date.
  3. c
    The trust also writes a call option to an investment bank giving the investment bank the right to call the bonds on the put date.
","snippet":"Structure 4 has all of the following features:\n(a) A debtor issues resettable, puttable bonds to a trust.\n(b) The trust issues beneficial interests that mature on the put date.\n(c) The trust also writes a call option to …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5638f97adcfecd84e6e84e6e1eaa40ae1d9eedd7e1f4a0bf2e0706a8fdbc034b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-41","para":"55-41","html":"
If market interest rates fall, the investment bank will call the bonds and the trust will pay the call option proceeds (the par amount) to investors to settle the maturing beneficial interests.
","snippet":"If market interest rates fall, the investment bank will call the bonds and the trust will pay the call option proceeds (the par amount) to investors to settle the maturing beneficial interests.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1476c0ff3159f88d8712aedf430c4009db6d21a8d992f5ba1061001855d2a1d8","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-42","para":"55-42","html":"
If market interest rates increase, the trust will put the bonds back to the debtor and will pay the put option proceeds (the par amount) to investors to settle the maturing beneficial interests.
","snippet":"If market interest rates increase, the trust will put the bonds back to the debtor and will pay the put option proceeds (the par amount) to investors to settle the maturing beneficial interests.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:df155b86e34f6f73c6c48bdbee731551c6f2cbf2eda58154aab1106af239f059","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-43","para":"55-43","html":"
Structure 4 is analyzed as follows:
  1. a
    Investment bank's held call option. Neither the debtor nor the investor should account for the call option purchased by the investment bank from the trust because neither is a party to that call option. (However, if either the debtor or the investor is required to consolidate the trust, that consolidation will require recognition of the call option written by the trust to the investment bank.) The investment bank shall account for a freestanding purchased call option.
  2. b
    Investor's held put option. Neither the debtor nor the investor should account separately for the embedded put option written by the debtor to the trust. From the debtor's perspective, the put option is considered clearly and closely related to the economic characteristics of the bond under paragraphs
    815-15-25-41 through 25-43
    because it simply accelerates the repayment of principal, involves no substantial premium or discount, and is not contingent. The investor is not a party to the embedded put option; rather, the investor simply purchased beneficial interests that mature on the put date.
","snippet":"Structure 4 is analyzed as follows:\n(a) Investment bank's held call option. Neither the debtor nor the investor should account for the call option purchased by the investment bank from the trust because neither is a part…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a10756c15ccdfa4d376d9ed4440b967631817059639b0cafcc467417e39c7a32","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-44","para":"55-44","html":"
Structure 5 has all of the following characteristics:
  1. a
    A debtor issues to an investor a bond that is both puttable (by the investor) and callable (by the holder of the option).
  2. b
    As part of the transaction, the investment bank acquires the exclusive right to purchase the bond from the investor in the future and to remarket the repriced bond.
  3. c
    The investment bank's right to purchase the bond from the investor is set forth in the note or the indenture itself and in a separate document (a remarketing agreement) that is not part of the indenture, and is also described in the prospectus supplement.
  4. d
    The explicit inclusion in the indenture of the investment bank's right to purchase the bond is designed to obligate initial and future investors to deliver the bond in response to the investment bank's exercise of its right.
  5. e
    When the bond is issued, the trustee, in conformity with the transaction documents, shall view the investment bank as the only party with a right to call the bond from the investor at the call-put date. Thus, the trustee does not require any involvement by the debtor when enforcing the investment bank's right to purchase the bond from the investor.
  6. f
    The debtor's only remaining obligation is to pay interest at the reset rate if the bond remains outstanding.
","snippet":"Structure 5 has all of the following characteristics:\n(a) A debtor issues to an investor a bond that is both puttable (by the investor) and callable (by the holder of the option).\n(b) As part of the transaction, the inve…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c8a29521d3a6a85dc8ed2a9f66bc3db69b3f2bea7a06bde2d0ad044a80d79154","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-45","para":"55-45","html":"
Structure 5 is analyzed as follows:
  1. a
    Investment bank's held call option. The debtor should not account separately for the call option held by the investment bank. For accounting purposes, the transaction should be viewed as a purchase of a transferable, freestanding call option by the debtor from the investor and a concurrent transfer by the debtor of that option to the investment bank. Upon that transfer, the debtor is no longer a party to the call option and has surrendered its right to prepay the debt. The investment bank acquired the debtor's right to call the bond and relieved the debtor of the obligation to pay the investor the par amount of the bond upon exercise of the call option. The call option is a contract between the investment bank and the investor that permits the investment bank to purchase the bonds from the investor at par. From the investor's perspective, that contract is a freestanding written call option that shall be accounted for in accordance with paragraphs 815-10-25-1, 815-10-30-1, and
    815-10-35-1 through 35-2
    . That is consistent with the guidance in paragraph 815-10-15-7—an option on a bond incorporated into the terms of the bond at inception that, by the terms of the agreement, is exercisable by a party other than either the debtor or the investor should be considered an attached freestanding derivative instrument. The investment bank shall also account for a freestanding purchased call option.
  2. b
    Investor's written call option. The carrying value of the investor's freestanding written call option to the investment bank should be its fair value in accordance with paragraphs 815-10-30-1 and 815-10-35-1. In the remarketing format, the transfer of the purchased call option is concurrent with the issuance of the bond. The remaining proceeds would be allocated to the carrying amount of the puttable bond. The debtor recognizes no gain or loss upon the transfer of the option to the investment bank.
  3. c
    Investor's held put option. Neither the debtor nor the investor should account separately for the embedded put option written by the debtor to the investor. Under paragraphs
    815-15-25-41 through 25-43
    , the put option is considered clearly and closely related to the economic characteristics of the bond because it simply accelerates the repayment of principal, involves no substantial premium or discount, and is not contingent.
","snippet":"Structure 5 is analyzed as follows:\n(a) Investment bank's held call option. The debtor should not account separately for the call option held by the investment bank. For accounting purposes, the transaction should be vie…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a59cde9f0151882b5974e0b98831d0a54d43cc09387a48741eaed13d3ddf9b95","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-46","para":"55-46","html":"
Structure 6 has all of the following features:
  1. a
    A debtor issues to an investor a bond that is both puttable (by the investor) and callable (by the holder of the option).
  2. b
    The indenture and the note itself create an assignable right to purchase the bond from the investor and remarket the repriced bond.
  3. c
    A legal assignment of that right by the debtor to an investment bank, in exchange for a payment to the debtor, is executed as part of the underwriting process as an amendment to the note. The assignment typically occurs at the time the bond is issued.
  4. d
    Upon receipt of the notice of assignment (which typically occurs upon issuance of the bonds), the indenture trustee must view the assignee (that is, the investment bank) as the call option holder and does not require any involvement of the debtor when enforcing the assignee's right to call the bond from the investor.
  5. e
    The debtor's only remaining obligation is to pay interest at the reset rate.
","snippet":"Structure 6 has all of the following features:\n(a) A debtor issues to an investor a bond that is both puttable (by the investor) and callable (by the holder of the option).\n(b) The indenture and the note itself create an…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4390630b00a3cbcf76d1a7aaadfd4ef9b7e8499005568ee5f622253e5706297c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-47","para":"55-47","html":"
Structure 6 is analyzed as follows:
  1. a
    Investment bank's held call option. The debtor is not required to account separately for the call option after its transfer to the investment bank. The debtor purchased a transferable freestanding call option from the investor and transferred that option to the investment bank. Therefore, after the transfer, the debtor is no longer a party to the call option and has surrendered its right to prepay the debt. The investment bank acquired the debtor's right to call the bond and relieved the debtor of the obligation to pay the investor the par amount of the bond upon exercise of the call option. Ultimately, the call option is a contract between the investment bank and the investor that permits the investment bank to purchase the bond from the investor at par. From the investor's perspective, that contract is a freestanding written call option that shall be accounted for in accordance with the guidance for a derivative instrument in Subtopic 815-10. That is consistent with the guidance in paragraph 815-10-15-7 that an option on a bond incorporated into the terms of the bond at inception that is explicitly transferable should be considered an attached, freestanding derivative instrument. The investment bank shall also account for a freestanding purchased call option.
  2. b
    Investor's written call option. The carrying value of the investor's freestanding written call option to the investment bank should be its fair value in accordance with paragraphs 815-10-30-1 and 815-10-35-1 with the remaining proceeds allocated to the carrying amount of the puttable bond. In the assignment format, the transfer of the purchased call option by the debtor to the investment bank may not be concurrent with the issuance of the bond. The debtor recognizes no gain or loss upon the transfer of the call option. In transactions involving a delay between the issuance of the bond and the transfer of the assignable call option to the investment bank, the allocation of the initial proceeds to the carrying value of the option would be equal to the fair value of the option. The remaining proceeds would be allocated to the carrying amount of the puttable bond. During any period of time between the initial issuance of the bond and the transfer of the call option to the investment bank, the call option shall be measured at fair value with changes in value recognized in earnings as required by paragraph 815-20-35-1. As a result of the requirement to measure the call option at fair value during the time period before it is assigned to the investment bank, the debtor would not recognize a gain or loss upon the assignment because the proceeds paid by the investment bank would be the option's current fair value on the date of the assignment, which would be the option's carrying amount at that point in time. Any change in the fair value of the option during the time period before it is assigned to the investment bank would be attributable to the passage of time and changes in market conditions.
  3. c
    Investor's held put option. Neither the debtor nor the investor should account separately for the embedded put option written by the debtor to the investor. Under paragraphs
    815-15-25-41 through 25-43
    , the put option is considered clearly and closely related to the economic characteristics of the bond because it simply accelerates the repayment of principal, involves no substantial premium or discount, and is not contingent.
","snippet":"Structure 6 is analyzed as follows:\n(a) Investment bank's held call option. The debtor is not required to account separately for the call option after its transfer to the investment bank. The debtor purchased a transfera…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c955e4c8e3d0928c11a487cb22c6808f1410439b35d9166d025c73950254d95","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-48","para":"55-48","html":"
A separate agreement may exist that allows the debtor to avoid the remarketing of the bond. That agreement permits the debtor, as of the reset date, to purchase either of the following:
  1. a
    The repriced bond from the investment bank at its then fair value
  2. b
    The unexercised call option held by the investment bank at its then fair value, which in turn would permit the debtor to purchase the bond at par from the investor.
","snippet":"A separate agreement may exist that allows the debtor to avoid the remarketing of the bond. That agreement permits the debtor, as of the reset date, to purchase either of the following:\n(a) The repriced bond from the inv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:31f5a1cab875fe06f9f74097fe03fa5af3f01f4342102df2b4117d595e9858ea","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-49","para":"55-49","html":"
The additional feature is a separate contract between the debtor and the investment bank. Specifically, it is a freestanding call option purchased by the debtor from the investment bank that permits the debtor to purchase either the repriced bond or the unexercised call option from the investment bank at its then fair value. The guidance for a derivative instrument in Subtopic 815-10 requires that all freestanding derivatives be measured at fair value with changes in value recognized in earnings. However, because the exercise price of the debtor's call option is the then fair value of the repriced bonds or the unexercised call option at the date of exercise, the option itself has a zero fair value. As a result, the asset or liability related to the derivative that would be recognized by the debtor as a result of applying the requirements of that Subtopic has a value of zero.
","snippet":"The additional feature is a separate contract between the debtor and the investment bank. Specifically, it is a freestanding call option purchased by the debtor from the investment bank that permits the debtor to purchas…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4f48dd0a882772b033feffcad4a171348b269f1ac8eaacd11d1d91e212d03a5d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-50","para":"55-50","html":"
A separate agreement may exist under which the debtor writes an option to the investment bank that permits the investment bank to put its call option to the debtor at fair value if a specified contingency occurs (for example, a failed remarketing). That feature provides loss protection to the investment bank.
","snippet":"A separate agreement may exist under which the debtor writes an option to the investment bank that permits the investment bank to put its call option to the debtor at fair value if a specified contingency occurs (for exa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:23fee060b80dd72e9ed45ddfb36af10a75fc5e79e186556b2bc46f32c65ff712","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-51","para":"55-51","html":"
The additional feature is a separate contract between the debtor and the investment bank. Specifically, it is a freestanding put option written by the debtor to the investment bank. Accordingly, the feature should be accounted for as a freestanding derivative measured at fair value with changes in value recognized in earnings in accordance with the guidance for a derivative instrument in Subtopic 815-10. However, because the exercise price of the debtor's put option is the then fair value of the unexercised call option at the exercise date, the option itself has a zero fair value. As a result, the asset or liability related to the derivative that would be recognized by the debtor as a result of applying the requirements of that Subtopic has a value of zero.
","snippet":"The additional feature is a separate contract between the debtor and the investment bank. Specifically, it is a freestanding put option written by the debtor to the investment bank. Accordingly, the feature should be acc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b3574ead3d0862266ee890ad47617168203ed935b6ef8631e5f985676acc4b12","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-52","para":"55-52","html":"
Some arrangements provide recourse to the investment bank against the debtor for the fair value of the call option if the investor fails to deliver the bonds to the investment bank upon exercise of its call option. That feature provides loss protection to the investment bank.
","snippet":"Some arrangements provide recourse to the investment bank against the debtor for the fair value of the call option if the investor fails to deliver the bonds to the investment bank upon exercise of its call option. That …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86cd911b9b09ed270ad3079bab1eff8ea0f480665174f0a097288fdad7b05349","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-53","para":"55-53","html":"
The additional feature is a separate contract between the debtor and the investment bank. Although it is structured as a recourse agreement, the substance of the feature is similar to additional feature 2 in that it is a put option written by the debtor to the investment bank. Accordingly, the feature should be accounted for as a freestanding written put option measured at fair value with changes in value recognized in earnings in accordance with the guidance for a derivative instrument in Subtopic 815-10. However, because the exercise price of the debtor's put option is the then fair value of the unexercised call option at the date of exercise, the option itself has a zero fair value. As a result, the asset or liability related to the derivative that would be recognized by the debtor as a result of applying the requirements of that Subtopic has a value of zero.
","snippet":"The additional feature is a separate contract between the debtor and the investment bank. Although it is structured as a recourse agreement, the substance of the feature is similar to additional feature 2 in that it is a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f0357dbb86fb00a4675299d26547c9a0dfe12da23652e4b35a6bd81df201381","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-54","para":"55-54","html":"
Variable annuity products are investment contracts as discussed in Subtopic 944-20. Similar to variable life insurance products, policyholders direct their investment account asset mix among a variety of mutual funds composed of equities, bonds, or both, and assume the risks and rewards of investment performance. The funds are generally maintained in separate accounts by the insurance entity. Contract terms generally provide that if the policyholder dies, the greater of the account market value or a minimum death benefit guarantee will be paid. The minimum death benefit guarantee is generally limited to a return of premium plus a minimum return (such as 3 or 4 percent); this life insurance feature represents the fundamental difference from the life insurance contracts that include significant (rather than minimal) levels of life insurance. Over time, these minimum death benefit guarantees have become increasingly sophisticated. The investment account may have various payment alternatives at the end of the accumulation period. One alternative is the right to purchase a life annuity at a fixed price determined at the initiation of the contract.
","snippet":"Variable annuity products are investment contracts as discussed in Subtopic 944-20. Similar to variable life insurance products, policyholders direct their investment account asset mix among a variety of mutual funds com…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1d6ae5b26b9347c542c75ea5fdd15a57ee18edf57ece220290b0f4dd601811ff","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-55","para":"55-55","html":"
Variable annuity product structures as discussed in Topic 944 are generally not subject to the scope of this Subtopic, as follows:
  1. a
    Death benefit component. Paragraph 815-10-15-53(a) excludes a death benefit from the scope of Subtopic 815-10 because the payment of the death benefit is the result of an identifiable insurable event instead of changes in an underlying. Additionally, the death benefit may meet the criteria of a market risk benefit, which is excluded from the scope of this Topic. The death benefit in this example is limited to the floor guarantee of the investment account, calculated as the premiums paid into the investment account plus a guaranteed rate of return, less the account fair value. Topic 944 remains the applicable guidance for the insurance-related accounting.
  2. b
    Investment component. The policyholder directs certain premium investments in the investment account that includes equities, bonds, or both, which are held in separate accounts that are distinct from the insurance entity's general account assets. This component is not considered a derivative instrument because of the unique attributes of traditional variable annuity contracts issued by insurance entities. Furthermore, any embedded derivatives within those investments shall not be separated from the host contract by the insurance entity because the separate account assets are already marked to fair value under Topic 944. In contrast, if the product were an equity-index-based interest annuity (rather than a traditional variable annuity), the investment component may contain an embedded derivative (the equity index-based derivative instrument) that meets all the requirements of paragraph 815-15-25-1 for separate accounting. Before concluding that the investment component contains an embedded derivative, the insurance entity should first evaluate whether the equity-index-based interest annuity contains a market risk benefit (see paragraph 944-40-25-25C).
  3. c
    Investment account surrender right at fair value. Because this right is exercised only at the fund fair value (without the insurance entity's floor guarantee) and relates to a traditional variable annuity contract issued by an insurance entity, this right is not within the scope of Subtopic 815-10.
  4. d
    Payment alternatives at the end of the accumulation period. Payment alternatives that are market risk benefits accounted for under Topic 944 on insurance are not within the scope of this Topic.
","snippet":"Variable annuity product structures as discussed in Topic 944 are generally not subject to the scope of this Subtopic, as follows:\n(a) Death benefit component. Paragraph 815-10-15-53(a) excludes a death benefit from the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:719f80a1dcfa74374d3194305e3761e97c2aca0a6bc4eb181ae238b95638ee7e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-56","para":"55-56","html":"
The guidance in (b) and (c) in the preceding paragraph is an exception for traditional variable annuity contracts issued by insurance entities. In determining the accounting for other seemingly similar structures, it would be inappropriate to analogize to that guidance due to the unique attributes of traditional variable annuity contracts.
","snippet":"The guidance in (b) and (c) in the preceding paragraph is an exception for traditional variable annuity contracts issued by insurance entities. In determining the accounting for other seemingly similar structures, it wou…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:427d6ed29e589e5d56b525e00f21205747312344f45d3cd4bc6f2d2ab0a0f9de","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-57","para":"55-57","html":"
Paragraph superseded by Accounting Standards Update No. 2018-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:445497c281b6ce8e32945dda6cb32ed8beecf0f986be2d620cdc34807f35bf85","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-58","para":"55-58","html":"
During the accumulation phase of a deferred annuity contract, a guarantee of a minimum interest rate to be used in computing periodic annuity payments if and when a policyholder elects to annuitize does not require separate accounting under paragraph 815-15-25-1 because the criterion in paragraph 815-15-25-1(c) is not met. The embedded option does not meet the definition of a derivative instrument because it does not meet the net settlement criteria as discussed beginning in paragraph 815-10-15-99. Settlement of the option can be achieved only by an investment of the account balance in a payout annuity contract in lieu of electing an immediate payment of the account value. If an additional provision existed whereby the policyholder could withdraw all or a portion of its account balance during the payout phase, an embedded derivative would still not exist because the economic benefit of the guaranteed minimum interest rate would be obtainable only if an entity were to maintain the annuity contract through its specified maturity date. However, the embedded option may be considered a market risk benefit (see paragraph 944-40-25-25C).
","snippet":"During the accumulation phase of a deferred annuity contract, a guarantee of a minimum interest rate to be used in computing periodic annuity payments if and when a policyholder elects to annuitize does not require separ…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fffc959fc1554708681a4c0df9edcae12e801d5605ef2743c4e3bced3ba99c94","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-59","para":"55-59","html":"
Paragraph superseded by Accounting Standards Update No. 2018-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b89f8b32f63c08ccb73763d42d66245b3b952f6cb262a5377a0c93ab05dfb3f5","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-60","para":"55-60","html":"
Paragraph superseded by Accounting Standards Update No. 2018-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0c624be3c6f1cdfdc74e8801ee0bb553f342d28b6626aa76d29a67f5072486f2","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-61","para":"55-61","html":"
Paragraph superseded by Accounting Standards Update No. 2018-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a3591593fce466e4575a393a64b1e135bf8e0ca292f163338930074841464d17","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-62","para":"55-62","html":"
This Subtopic defines an equity-indexed annuity as a deferred fixed annuity contract with a guaranteed minimum interest rate plus a contingent return based on some internal or external equity index, such as the Standard & Poor's S&P 500 Index. The guaranteed contract value is generally designed to meet certain regulatory requirements such that the contract holder receives no less than 90 percent of the initial deposit, compounded annually at 3 percent, which establishes a floor value for the contract. Equity-indexed annuities typically have minimal mortality risk and are therefore classified as investment contracts under Topic 944. Equity-indexed annuities often do not have specified maturity dates; therefore, the contracts remain in the deferral (accumulation) phase until the customer either surrenders the contract or elects annuitization. Customers typically can surrender the contract at any point in time, at which time they receive their account value, as specified in the contract, less any applicable surrender charges. The account value is defined in the policy as generally the greater of the policyholder's initial investment plus the equity-indexed return or a guaranteed floor amount (calculated as the policyholder's initial investment plus a specified annual percentage return).
","snippet":"This Subtopic defines an equity-indexed annuity as a deferred fixed annuity contract with a guaranteed minimum interest rate plus a contingent return based on some internal or external equity index, such as the Standard …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0a36d53045eff8a7ab70ccfbd86a70eb3cfcdc2760992f21730336095799381c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-63","para":"55-63","html":"
There are two basic designs for equity-indexed annuities:
  1. a
    The periodic ratchet design, where in the annual version, the customer receives the greater of the appreciation in the equity index during a series of one-year periods (ending on each policy anniversary date) or the guaranteed minimum fixed rate of return over that period
  2. b
    The point-to-point design, where the customer receives the greater of the appreciation in the equity index during a specified period (for example, five or seven years, starting on the policy issue date) or the guaranteed minimum fixed rate of return over that period.
","snippet":"There are two basic designs for equity-indexed annuities:\n(a) The periodic ratchet design, where in the annual version, the customer receives the greater of the appreciation in the equity index during a series of one-yea…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4dfa2dbb49f11da54ca5529415cb91e39d79abd262b1b3f387eff480155579f2","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-64","para":"55-64","html":"
For many products of either design, the contract has any of the following characteristics:
  1. a
    The contract holder receives only a portion of the appreciation in the S&P 500 Index (or other index, as applicable) during the specified period (a participation rate).
  2. b
    The contract has an upper limit on the amount of appreciation that will be credited during any period (a cap rate).
","snippet":"For many products of either design, the contract has any of the following characteristics:\n(a) The contract holder receives only a portion of the appreciation in the S&P 500 Index (or other index, as applicable) during t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3355ddfa01acada46f0fac9643450eddbed92351104d706ce9e6790cdbe8abd7","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-65","para":"55-65","html":"
For the annual ratchet design, the prospective participation and cap rates for each one-year period are often at the discretion of the issuer, and may be reset on future policy anniversary dates, subject to contractual guarantees. Flexibility on the part of the issuer to establish new cap and participation rates, coupled with uncertainty around the customer's account value (which establishes the notional amount of the option) and strike price (which is determined by the level of the index on subsequent anniversary dates) make several of the terms of the forward-starting options unknown at the annuity contract's inception. However, those flexible terms can be viewed as a bundle of options.
","snippet":"For the annual ratchet design, the prospective participation and cap rates for each one-year period are often at the discretion of the issuer, and may be reset on future policy anniversary dates, subject to contractual g…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3b297b6d99461dd315769f7ed07bff623b6e8c85861f2600abcf5df933ebd26d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-66","para":"55-66","html":"
Therefore, holders of equity-indexed annuities that are preparing financial statements shall separate the equity-indexed return portion of the contract, apply this Subtopic, including the guidance in the following paragraph through paragraph 815-15-55-72.
","snippet":"Therefore, holders of equity-indexed annuities that are preparing financial statements shall separate the equity-indexed return portion of the contract, apply this Subtopic, including the guidance in the following paragr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:58f966b0d22a0614174d787d6c44ebcfbca482829ea72cd42844afcc855face2","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-67","para":"55-67","html":"
Before evaluating whether an equity-indexed annuity contains an embedded derivative, an insurance entity should first evaluate whether the contract contains a market risk benefit (see paragraph 944-40-25-25C). Generally, the equity index feature represents a periodic crediting rate mechanism that affects the amounts credited to the contract holder's account balance, rather than representing a benefit in addition to the account balance that protects the contract holder from other-than-nominal capital market risk and exposes the insurance entity to other-than-nominal capital market risk. Periodic crediting rate mechanisms are required to be evaluated for possible bifurcation under this Topic. However, an equity-indexed annuity also may contain one or more market risk benefits (see paragraphs
944-40-55-29A through 55-29D
). From an insurance entity's perspective, the option component of an equity-indexed annuity that specifies a point-to-point design meets the definition of a derivative instrument and requires separate accounting under paragraph 815-15-25-1 unless a fair value election is made pursuant to paragraph 815-15-25-4. (Note that Section 815-15-25 allows for a fair value election for hybrid financial instruments that otherwise would require bifurcation. However, Section 815-15-25 does not apply to hybrid financial instruments that are described in paragraph 825-10-50-8, which include insurance contracts as discussed in Subtopic 944-20, other than financial guarantees and investment contracts.)
","snippet":"Before evaluating whether an equity-indexed annuity contains an embedded derivative, an insurance entity should first evaluate whether the contract contains a market risk benefit (see paragraph 944-40-25-25C). Generally,…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2b491053859b76fb00f77afd9b27013964aa52c0df57dd3564f1977e48dd23df","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-68","para":"55-68","html":"
This guidance also applies to the policyholder because the policyholder does not qualify for a scope exclusion.
","snippet":"This guidance also applies to the policyholder because the policyholder does not qualify for a scope exclusion.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f31f2c36e3fa4085c4af69cdacc2561b135258429051478e52167c2ea17f79aa","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-69","para":"55-69","html":"
For the periodic ratchet design product, the insurance entity has committed to issue a series of options on the index over the duration of the contract. All of those forward-starting options meet the definition of a derivative instrument and require separate accounting under paragraph 815-15-25-1 from the perspective of the insurance entity unless a fair value election is made pursuant to paragraph 815-15-25-4. Paragraph 815-15-25-7 requires that the embedded feature with multiple components be separately accounted for as one compound embedded derivative.
","snippet":"For the periodic ratchet design product, the insurance entity has committed to issue a series of options on the index over the duration of the contract. All of those forward-starting options meet the definition of a deri…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b42e22ed014401658abad2f0d9600c51fd36af3e705f646cc6b56fbf21c2576e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-70","para":"55-70","html":"
In valuing those options, there are three main components to be considered:
  1. a
    Future S&P 500 Index (or other index, as applicable) values will need to be estimated to determine both the future notional amounts at each ratchet date and the future strike prices of the future forward starting options.
  2. b
    Future annual cap and participation rates, which are often at the discretion of the contract issuer, subject to contractually specified minimums and maximums, will need to be estimated.
  3. c
    Noneconomic factors related to policyholder-driven developments such as policy surrenders or mortality.
","snippet":"In valuing those options, there are three main components to be considered:\n(a) Future S&P 500 Index (or other index, as applicable) values will need to be estimated to determine both the future notional amounts at each …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d48078bb15cb045f2f31eb70ae7267ba9c299dae9bb4a066945a59e61ef3097c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-71","para":"55-71","html":"
Given the three components, the forward starting options should be valued using the expected future terms (that is, index values and cap and participation rates), but in no event should the value be less than the minimum amounts contractually agreed on in the contract. Expected terms represent management's estimates of cap and participation rates, rather than contractually guaranteed amounts. The estimated value reflects the notion that the contract provides for a level of equity-indexed return that can be estimated even when considering the issuer's options to adjust the policyholder's participation and cap rates. In subsequent periods when the terms of the forward-starting options become known, the actual terms should be substituted for the expected terms for purposes of valuation.
","snippet":"Given the three components, the forward starting options should be valued using the expected future terms (that is, index values and cap and participation rates), but in no event should the value be less than the minimum…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bca5bd7861060743bec26d80f4b506359397bcf9f0c9da3e7bcad529da603fe7","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-72","para":"55-72","html":"
This guidance also applies to the policyholder (provided it prepares GAAP-based financial statements) because the contracts do not qualify for a scope exception.
","snippet":"This guidance also applies to the policyholder (provided it prepares GAAP-based financial statements) because the contracts do not qualify for a scope exception.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:49107a148494e197e77f1936e171a04fcdf79fe6dff71995af43995182f1b55b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-73","para":"55-73","html":"
Equity-indexed life insurance contracts combine term life insurance coverage with an investment feature, similar to universal life contracts. Death benefit amounts are based on the amount selected by the policyholder plus the account value. Charges for the cost of insurance and administrative costs are assessed periodically against the account. The policyholder's account value, maintained in the insurance entity's general account (not a separate account), is based on the cumulative deposits credited with positive returns based on the S&P 500 Index or some other equity index. An essential component of the contract is that the cash surrender value is also linked to the index. Accordingly, the policy's cash surrender value is also linked to an equity index. The death benefit amount may also be dependent on the cumulative return on the index.
","snippet":"Equity-indexed life insurance contracts combine term life insurance coverage with an investment feature, similar to universal life contracts. Death benefit amounts are based on the amount selected by the policyholder plu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:42db6d7d87c79830c0f8ffa41a1a2b7b8344543f2f04f32c6a74405e4a7bca14","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-74","para":"55-74","html":"
Equity-indexed life insurance contracts are accounted for as universal life insurance contracts under Topic 944. For those contracts, the customer's account value (the investment component of a universal life contract) is credited with a return indexed to an equity index (for example, the S&P 500) rather than an interest rate established by the insurance entity, as is done with typical universal life contracts. The existence of the death benefit provision does not exclude the entire equity-indexed life insurance contract from being subject to Subtopic 815-10 for either the issuer or the policyholder because the policyholder can obtain an equity-linked return by exercising the surrender option before death. Before evaluating whether the equity-indexed life insurance contract contains an embedded derivative, an insurance entity should first evaluate whether the contract contains a market risk benefit (see paragraph 944-40-25-25C).
","snippet":"Equity-indexed life insurance contracts are accounted for as universal life insurance contracts under Topic 944. For those contracts, the customer's account value (the investment component of a universal life contract) i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:193b4c1cf3149fbdcdf4f8a0c05636b1e40c38d248297a6b2825e24651fb1f12","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-75","para":"55-75","html":"
If the investment component of the equity-indexed life insurance contract does not contain a market risk benefit, then the investment component of the equity-indexed life insurance contract would contain an embedded derivative (the equity index-based derivative) that meets all of the requirements of paragraph 815-15-25-1 for separate accounting. (Note that Section 815-15-25 allows for a fair value election for hybrid financial instruments that otherwise would require bifurcation. However, Section 815-15-25 does not apply to hybrid instruments that are described in paragraph 825-10-50-8, which include insurance contracts as discussed in Subtopic 944-20, other than financial guarantees and investment contracts.)
","snippet":"If the investment component of the equity-indexed life insurance contract does not contain a market risk benefit, then the investment component of the equity-indexed life insurance contract would contain an embedded deri…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51ece013641eee87b666380877b25c497289f15fc83227b14a12b767a9e1c4a3","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-76","para":"55-76","html":"
In contrast, if the contract contained an equity-indexed death benefit component that was over and above the cash surrender value that is payable to the policyholder upon surrender of the policy, that death benefit component would not meet the criterion in paragraph 815-15-25-1(c) for separate accounting. As a separate instrument, that death benefit component would not be a derivative instrument subject to the requirements of Subtopic 815-10 due to the paragraph 815-10-15-53 exclusion for benefits payable only upon death, as illustrated in paragraphs
815-15-55-55 through 55-56
.
","snippet":"In contrast, if the contract contained an equity-indexed death benefit component that was over and above the cash surrender value that is payable to the policyholder upon surrender of the policy, that death benefit compo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:15b119ac0462fa61a49d9a3e14c4935db3fc96fc8a36a032690b6f60e3459906","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-76A","para":"55-76A","html":"
The following steps specify how an issuer shall apply the guidance on accounting for embedded derivatives in this Subtopic to a convertible debt instrument within the scope of Subtopic 470-20.
  1. a
    Step 1. Identify embedded features, including the embedded conversion option that must be evaluated under Subtopic 815-15.
  2. b
    Step 2. Apply the guidance in Subtopic 815-15 to determine whether any of the embedded features identified in Step 1 must be separately accounted for as derivative instruments.
  3. c
    Step 3. Apply the guidance in Subtopic 470-20 to account for the convertible debt instrument (including the embedded conversion option and any other embedded features, which are not separately accounted for as a derivative instrument in Step 2) as a liability.
  4. d
    Step 4. If one or more embedded features are required to be separately accounted for as a derivative instrument based on the analysis performed in Step 2, that embedded derivative shall be separated from the host contract in accordance with the guidance in this Subtopic.
","snippet":"The following steps specify how an issuer shall apply the guidance on accounting for embedded derivatives in this Subtopic to a convertible debt instrument within the scope of Subtopic 470-20.\n(a) Step 1. Identify embedd…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0236b694454dffce675aaf11e3cde768c8dea82f25fc8e0ddf7c3c625867731a","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-76B","para":"55-76B","html":"
An issuer should follow steps similar to those in paragraph 815-15-55-76A to apply the accounting guidance for embedded derivatives in this Subtopic to convertible preferred stock within the scope of Subtopic 505-10, except that in Step 3 the convertible preferred stock (including the conversion option and any other embedded features, which are not separately accounted for as a derivative instrument in Step 2) should be accounted for as equity in accordance with Subtopic 505-10.
","snippet":"An issuer should follow steps similar to those in paragraph 815-15-55-76A to apply the accounting guidance for embedded derivatives in this Subtopic to convertible preferred stock within the scope of Subtopic 505-10, exc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4b6fa043cd4a7ea416cfc5275dcad206ae5a8bc3c6c168a7edbc37baad8b4246","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-77","para":"55-77","html":"
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From the investor's perspective, the purchase of common stock with an embedded purchased put option that requires physical settlement is a hybrid instrument that shall be evaluated to determine whether it has an embedded derivative that shall be accounted for separately. The embedded purchased put option shall be separated from the equity host because the common stock and the embedded put option are not clearly and closely related (see paragraph 815-15-25-20). For guidance related to an issuer's accounting, see paragraph 815-10-15-76.
","snippet":"From the investor's perspective, the purchase of common stock with an embedded purchased put option that requires physical settlement is a hybrid instrument that shall be evaluated to determine whether it has an embedded…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba10031f3ed5b57857426aa32c5e1cfd4ca3064fb066e809b9d5c51f8bc1956d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9d72895cba1e0847ac8ca06c3ce607598e19aaa4cdfd656dbc5a8441ee3cad7f","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"815-15-55-83","para":"55-83","html":"
The following Cases illustrate the application of paragraph 815-15-15-10(b)(1):
  1. a
    Guarantor not a substantial party to a two-party lease (Case A)
  2. b
    Requisite knowledge, resources, and technology (Case B)
  3. c
    Highly inflationary environment (Case C).
","snippet":"The following Cases illustrate the application of paragraph 815-15-15-10(b)(1):\n(a) Guarantor not a substantial party to a two-party lease (Case A)\n(b) Requisite knowledge, resources, and technology (Case B)\n(c) Highly i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f776b5999e0339170c36a873a5ee6215424af1c211222d06af601d6a14c37893","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-84","para":"55-84","html":"
A U.S. parent entity for which the U.S. dollar is the functional currency has a French subsidiary with a Euro functional currency. The subsidiary enters into a lease with a Canadian entity for which the Canadian dollar is the functional currency that requires lease payments denominated in U.S. dollars. The parent entity guarantees the lease.
","snippet":"A U.S. parent entity for which the U.S. dollar is the functional currency has a French subsidiary with a Euro functional currency. The subsidiary enters into a lease with a Canadian entity for which the Canadian dollar i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:581048ef102eb59e573c2ebceba82543137fbfa357efc133619bfb03e6b6544a","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-85","para":"55-85","html":"
The exception in paragraph 815-15-15-10(b)(1) does not apply to the contract. The substantial parties to a lease contract are the lessor and the lessee; a third-party guarantor is not a substantial party to a two-party lease, even if it is a related party (such as a parent entity). Thus, the functional currency of a guarantor is not relevant to the application of that paragraph.
","snippet":"The exception in paragraph 815-15-15-10(b)(1) does not apply to the contract. The substantial parties to a lease contract are the lessor and the lessee; a third-party guarantor is not a substantial party to a two-party l…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e1c99a91806ebe38755027637ec488af14bb68cec65da201a19079dc5a68bd4f","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-86","para":"55-86","html":"
The requirement in paragraph 815-15-15-10(b)(1) that the payments be denominated in the functional currency of at least one substantial party to the transaction ensures that the foreign currency is integral to the arrangement and thus considered to be clearly and closely related to the terms of the lease.
","snippet":"The requirement in paragraph 815-15-15-10(b)(1) that the payments be denominated in the functional currency of at least one substantial party to the transaction ensures that the foreign currency is integral to the arrang…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c9ae312856da7e4e6cd8294090ac7fd6fd147e4f6054770e785ba6a2cf98f9d8","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-87","para":"55-87","html":"
A U.S.-based construction entity (the Parent) pursues business in a foreign country on a major construction contract. The Parent has an operating subsidiary (the Subsidiary) in that foreign country. The Subsidiary's functional currency is determined to be the local currency (because of business activities unrelated to the construction contract), which is also the functional currency of the customer under the contract. The Parent's functional currency is the U.S. dollar.
","snippet":"A U.S.-based construction entity (the Parent) pursues business in a foreign country on a major construction contract. The Parent has an operating subsidiary (the Subsidiary) in that foreign country. The Subsidiary's func…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2f0b9cbd59bb69b6f9738c40390d24230e03834f35d22c175ec4fe84fc707191","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-88","para":"55-88","html":"
Primarily for tax and political reasons, the Parent causes its Subsidiary to enter into a contract with the customer (that is, the contract is legally between the Subsidiary and the customer). The contract requires payments by the customer in U.S. dollars. The payments are in U.S. dollars to facilitate the compensation of the Parent for its significant involvement in and management of the contract entered into by the Subsidiary.
","snippet":"Primarily for tax and political reasons, the Parent causes its Subsidiary to enter into a contract with the customer (that is, the contract is legally between the Subsidiary and the customer). The contract requires payme…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1b0a93dd54d2a628311611fa61a0bce90d0399a55f2091e48ff49f71b9f2e597","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-89","para":"55-89","html":"
The Subsidiary, by itself, does not possess the requisite financial, human, and other resources, technology, and knowledge to execute the construction contract on its own. The Parent provides the majority of the resources required under the contract, including direct involvement in negotiating the terms of the contract, managing and executing the contract throughout its duration, and maintaining all contract supporting functions, such as legal, tax, insurance, and risk management. Because it is controlled by the Parent, the Subsidiary does not have a choice of subcontractor for these resources and services and will always integrate the Parent into all phases of the contract. Without the Parent, the Subsidiary and the customer would probably never have entered into the construction contract because the Subsidiary could not perform under this contract without the help of the Parent.
","snippet":"The Subsidiary, by itself, does not possess the requisite financial, human, and other resources, technology, and knowledge to execute the construction contract on its own. The Parent provides the majority of the resource…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0c17592cf6450a087e4e74120dceda06af1addc5a18cc1c5e13ea868b0f02405","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-90","para":"55-90","html":"
In this Case, the Parent is a substantial party to the construction contract entered into by the Subsidiary for the purposes of applying paragraph 815-15-15-10(b)(1) because the Parent will be providing the majority of resources required under the contract on behalf of the Subsidiary, which is the legal party to the contract.
","snippet":"In this Case, the Parent is a substantial party to the construction contract entered into by the Subsidiary for the purposes of applying paragraph 815-15-15-10(b)(1) because the Parent will be providing the majority of r…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d0ebd65c5386c092e394d9895ba7e76ebfcb5cb9176a60c9f4eaf7802ef80851","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-91","para":"55-91","html":"
The following Cases illustrate the application of the scope exception in paragraph 815-15-15-10:
  1. a
    The contractual payments are denominated in a currency that, while not the functional currency, is used as if it were the functional currency due to a highly inflationary economy (Case C1).
  2. b
    The economy of the primary economic environment ceases to be highly inflationary after the inception of the contract (Case C2).
","snippet":"The following Cases illustrate the application of the scope exception in paragraph 815-15-15-10:\n(a) The contractual payments are denominated in a currency that, while not the functional currency, is used as if it were t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c38040686251830b54b8079206bdee8b8c39ade9456e0297c3e1bffbc2443844","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-92","para":"55-92","html":"
Cases C1 and C2 share the following assumptions. A U.S. parent entity for which the U.S. dollar (USD) is both the functional currency and the reporting currency has a Venezuelan subsidiary. The subsidiary's sales, expenses, and financing are primarily denominated in the Mexican peso (MXN), and therefore the subsidiary considers MXN to be its functional currency as required by Topic 830. However, assume that the economy in Mexico is highly inflationary, and therefore that Topic requires that the parent entity's reporting currency (that is, USD) be used as if it were the subsidiary's functional currency. The subsidiary enters into a lease with a Canadian entity for property in Venezuela that requires the subsidiary to make lease payments in USD. Further, assume that the Canadian entity's functional currency is the Canadian dollar (CAD). The Venezuelan subsidiary's local currency is VEB (the Venezuelan bolivar).
","snippet":"Cases C1 and C2 share the following assumptions. A U.S. parent entity for which the U.S. dollar (USD) is both the functional currency and the reporting currency has a Venezuelan subsidiary. The subsidiary's sales, expens…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:49727cd46c6a88313904162c3921ed309a7cf9b29a41b7c9996b2999b7d7da62","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-93","para":"55-93","html":"
The exception in paragraph 815-15-15-10 applies to contract because the subsidiary uses USD as if it were the functional currency. The conclusion is not affected by the fact that USD is not the currency of the primary economic environment in which either the Venezuelan subsidiary or the Canadian lessor operates (that is, USD is not the functional currency of either party to the lease). The forward contract to deliver USD embedded in the lease contract should not be bifurcated from the lease host. The exception in paragraph 815-15-15-10 would apply to the lease contract in this Example if the payments under that contract were denominated in any of the following four currencies: USD, MXN, VEB, or CAD. The exception applies to both of the substantial parties to the contract, the lessor and the lessee.
","snippet":"The exception in paragraph 815-15-15-10 applies to contract because the subsidiary uses USD as if it were the functional currency. The conclusion is not affected by the fact that USD is not the currency of the primary ec…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f6f55c536dedb70b6f0e9c41bb55991d9fe634cc9a17831d360426494632d634","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-94","para":"55-94","html":"
Assume that, during the term of the property lease, the Mexican economy ceases to be highly inflationary. Therefore, the Venezuelan subsidiary's financial statements cease to be remeasured as if USD were the functional currency and, instead, those financial statements are remeasured using the subsidiary's functional currency, MXN.
","snippet":"Assume that, during the term of the property lease, the Mexican economy ceases to be highly inflationary. Therefore, the Venezuelan subsidiary's financial statements cease to be remeasured as if USD were the functional c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:171391213df1d396a7b7f06a7578391c6c9ff7b1b4591e99d2737f13692fda45","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-95","para":"55-95","html":"
When the lease was entered into, the subsidiary used USD as if it were the functional currency; therefore, the foreign currency embedded derivative would have qualified for the exception in paragraph 815-15-15-10 for both the lessor and the lessee. The fact that the subsidiary subsequently ceased using USD as if it were the functional currency and, instead, now uses MXN (which was outside the control of management of the entity because it is contingent upon a change in the Mexican economy) does not affect the application of the exception because the subsidiary qualified for the exception at the inception of the contract. However, if the subsidiary would enter into an extension of the lease or a new lease that required payments in USD, the exception would not apply because at the time the new or extended lease was entered into, the subsidiary no longer used USD as if it were the functional currency.
","snippet":"When the lease was entered into, the subsidiary used USD as if it were the functional currency; therefore, the foreign currency embedded derivative would have qualified for the exception in paragraph 815-15-15-10 for bot…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a0bbc8664733227810e0518aa2460b9418420411c285eabc3db0da71c53d15e6","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-96","para":"55-96","html":"
This Example illustrates the application of the phrase routinely denominated in international commerce in paragraph 815-15-15-10(b)(2).
","snippet":"This Example illustrates the application of the phrase routinely denominated in international commerce in paragraph 815-15-15-10(b)(2).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ce784db5312cf3d7594df4689bb784f3e0283843bba1909512173ad3fc29a71f","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-97","para":"55-97","html":"
A real estate lease negotiated privately between entities involved in international commerce in certain South American economies would routinely require U.S. dollar (USD) payments. Real estate leases negotiated privately between entities involved in international commerce in European economies would routinely not require USD payments. The lessee is a Canadian entity that uses the Canadian dollar (CAD) as its functional currency. The lessor is a Venezuelan entity whose functional currency is the Mexican peso (MXN). The lease payments are denominated in USD.
","snippet":"A real estate lease negotiated privately between entities involved in international commerce in certain South American economies would routinely require U.S. dollar (USD) payments. Real estate leases negotiated privately…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:534c3f76a4874655e6193f4ef6a952704ee7e8baa2b46c26c206f96b6cd35094","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-98","para":"55-98","html":"
Because real estate leases around the world are not routinely denominated in USD, the leasing transaction would not qualify for the exception in paragraph 815-15-15-10(b)(2).
","snippet":"Because real estate leases around the world are not routinely denominated in USD, the leasing transaction would not qualify for the exception in paragraph 815-15-15-10(b)(2).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eba49d0c45d6c6170d2ec52463d58f4c08315dc6a7c61d708bbca241060c2c05","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-99","para":"55-99","html":"
This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a). Two entities enter into a long-term service contract whereby Entity A agrees to provide a service to Entity B at market rates over a three-year period. Entity B forecasts it will pay DKK (the Danish kroner) 1,000 to Entity A at the end of the 3-year period for all services rendered under the contract. Entity A's functional currency is DKK and Entity B's is the U.S. dollar (USD). In addition to providing the terms under which the service will be provided, the contract includes a foreign currency exchange provision. The provision requires that over the term of the contract, Entity B will pay or receive an amount equal to the fluctuation in the DKK/USD exchange rate applied to a notional amount of DKK 100,000 (that is, if USD appreciates against DKK, Entity B will pay the appreciation, and if USD depreciates against DKK, Entity B will receive the depreciation). The host contract is not a derivative instrument and will not be recorded in the financial statements at fair value.
","snippet":"This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a). Two entities enter into a long-term service contract whereby Entity A agrees to provide a service to Enti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4fdb8d48e8345367bc3eda74e54720aa54a0574a48d3119fcd7615015cb2959f","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-100","para":"55-100","html":"
The foreign currency derivative embedded in the long-term service contract should be separated from the host long-term service contract and considered a derivative instrument under paragraph 815-15-25-1. (Note that Section 815-15-25 does not apply to hybrid instruments that are not financial instruments, such as contracts that require the delivery of services.) Because the contract is leveraged by requiring the computation of the payment based on a DKK 100,000 notional amount, the contract is a hybrid instrument that contains an embedded derivative—a foreign currency swap with a notional amount of DKK 99,000. That embedded derivative is not clearly and closely related to the host contract and under paragraph 815-15-25-1 shall be recorded separately from the DKK 1,000 contract. Either party to the contract can designate the bifurcated foreign currency derivative instrument as a hedging instrument pursuant to Subtopic 815-20 if applicable qualifying criteria are met.
","snippet":"The foreign currency derivative embedded in the long-term service contract should be separated from the host long-term service contract and considered a derivative instrument under paragraph 815-15-25-1. (Note that Secti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:240b7e18cdff909d6a2291a65be02eb430d83a644339659b6bf56feae418c3da","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-101","para":"55-101","html":"
The following Cases illustrate the application of paragraph 815-15-25-46:
  1. a
    Credit-linked note (Case A)
  2. b
    Reinsurer's receivable arising from a modified coinsurance arrangement (Case B).
","snippet":"The following Cases illustrate the application of paragraph 815-15-25-46:\n(a) Credit-linked note (Case A)\n(b) Reinsurer's receivable arising from a modified coinsurance arrangement (Case B).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c79c2dfab32b4b223e58be958f00494957af76a947b2d2ac9c9c32ade86cffd","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-102","para":"55-102","html":"
In both of these Cases, the embedded derivative generally will require bifurcation. However, the criteria in paragraph 815-15-25-1(b) through (c) shall be considered before concluding that the embedded derivative should be bifurcated and accounted for separately. The nature of the embedded derivative and the host contract in both Cases should be determined based on the facts and circumstances of the individual contract.
","snippet":"In both of these Cases, the embedded derivative generally will require bifurcation. However, the criteria in paragraph 815-15-25-1(b) through (c) shall be considered before concluding that the embedded derivative should …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:20e2f3c1adb9de7207a5fb6566b177e2684982f9bc81ff96a9c6220527f950e6","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-103","para":"55-103","html":"
Entity A issues to an investor a fixed-rate, 10-year, $10 million credit-linked note that provides for periodic interest payments and the repayment of principal at maturity. However, upon default of a specified reference security (an Entity X subordinated debt obligation) the redemption value of the note may be zero or there may be some claim to the recovery value of the reference security (depending on the terms of the specific arrangement). Generally, the term reference security refers to the security whose credit rating or default determines the cash flows under a credit derivative. Usually, the terms of credit-linked notes explicitly reference Committee on Uniform Security Identification Procedures (CUSIP) numbers of securities in the marketplace. In an event of default of the specified reference security, there is no recourse to the general credit of the obligor (Entity A). In exchange for accepting the default risk of the reference security, the note entitles the investor to an enhanced yield. The transaction results in the investor selling credit protection and Entity A buying credit protection.
","snippet":"Entity A issues to an investor a fixed-rate, 10-year, $10 million credit-linked note that provides for periodic interest payments and the repayment of principal at maturity. However, upon default of a specified reference…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3b2b66f3bb9b7e8beb1abb57a2455e19924ddf9bfc38e6727ed689cdccb82055","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-104","para":"55-104","html":"
The credit-linked note includes an embedded credit derivative. The credit risk exposure of the reference security (Entity X) and the risk exposure arising from the creditworthiness of the obligor (Entity A) are not clearly and closely related. Thus, the economic characteristics and risks of the embedded derivative are not clearly and closely related to the economic characteristics and risks of the debt host contract and, accordingly, the criterion in paragraph 815-15-25-1(a) is met.
","snippet":"The credit-linked note includes an embedded credit derivative. The credit risk exposure of the reference security (Entity X) and the risk exposure arising from the creditworthiness of the obligor (Entity A) are not clear…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d340ddad185d32766c2c108b108a07aa4f346902d26f69064e04b333b6ac8796","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-105","para":"55-105","html":"
Paragraph 815-15-25-6 explains that the fair value election for hybrid financial instruments that otherwise would require bifurcation does not apply to hybrid financial instruments that are described in paragraph 825-10-50-8, which include insurance contracts as discussed in Section 944-20-15, other than financial guarantees and investment contracts.
","snippet":"Paragraph 815-15-25-6 explains that the fair value election for hybrid financial instruments that otherwise would require bifurcation does not apply to hybrid financial instruments that are described in paragraph 825-10-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cc445b4dc10bb66febb876ae7c90ad9052c488be276ab68b9ab1ef9d6920cd80","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-106","para":"55-106","html":"
Consideration should be given to whether the embedded derivative could possibly not be subject to this Topic as a financial guarantee under paragraph 815-10-15-58 and, in that circumstance, the embedded derivative would not warrant bifurcation.
","snippet":"Consideration should be given to whether the embedded derivative could possibly not be subject to this Topic as a financial guarantee under paragraph 815-10-15-58 and, in that circumstance, the embedded derivative would …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b182292bc129d02efaf8b1461e7f2ccf6424bf3c9158d4f384587e35be9d88da","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-107","para":"55-107","html":"
Reinsurance Entity B enters into a modified coinsurance arrangement (also referred to as a modco arrangement), which is a reinsurance arrangement in which funds are withheld by the ceding insurer, thereby creating an obligation for the ceding entity to pay the reinsurer at a later date. Concurrently, the reinsurer (Entity B) recognizes a funds-withheld receivable from the ceding insurer as well as a liability representing reserves for the insurance coverage assumed under the modco arrangement. (The amount of Entity B's receivable is the ceding entity's statutory reserve, whereas the amount of Entity B's liability is the reserve under GAAP.) The terms of the ceding entity's payable (and Entity B's funds-withheld receivable) provide for the future payment of a principal amount plus a return (that may be negative) that is based on a specified proportion of the ceding entity's return on either its general account assets or a specified block of those assets (such as a specific portfolio of its investment securities). That portfolio is typically composed primarily of fixed-rate debt securities.
","snippet":"Reinsurance Entity B enters into a modified coinsurance arrangement (also referred to as a modco arrangement), which is a reinsurance arrangement in which funds are withheld by the ceding insurer, thereby creating an obl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9d1b48f51b40bf87dffbdf4f912aaa808087185877cb39add725af145865f6fa","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-108","para":"55-108","html":"
With respect to the modified coinsurance arrangement, the ceding entity's funds-withheld payable and Entity B's funds-withheld receivable include an embedded derivative that is not clearly and closely related to the host contract. The yield on the payable and receivable in the host contract in this Case is based on a specified proportion of the ceding entity's return on either its general account assets or a specified block of those assets (such as a specific portfolio of the ceding entity's investment securities). The risk exposure of the ceding entity's return on its general account assets or its securities portfolio is not clearly and closely related to the risk exposure arising from the overall creditworthiness of the ceding entity, which is also affected by other factors. Consequently, the economic characteristics and risks of the embedded derivative feature are not clearly and closely related to the economic characteristics and risks of the host contract and, accordingly, the criterion in paragraph 815-15-25-1(a) is met. This analysis applies whether the host contract is determined to be a debt host or an insurance contract. For example, if the host contract is determined to be the modified coinsurance arrangement (including the funds-withheld receivable-payable but excluding the embedded derivative), the economic characteristics and risks of the embedded derivative feature are not clearly and closely related to the economic characteristics and risks of the host contract and, accordingly, the criterion in that paragraph is met.
","snippet":"With respect to the modified coinsurance arrangement, the ceding entity's funds-withheld payable and Entity B's funds-withheld receivable include an embedded derivative that is not clearly and closely related to the host…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:37e77d2c0dc104d1b14be6414006acde4e90b0412f350062a781f2f13d42ec4f","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-109","para":"55-109","html":"
The other criteria in paragraph 815-15-25-1 generally would be met, thereby requiring that the embedded derivative be bifurcated and accounted for separately.
","snippet":"The other criteria in paragraph 815-15-25-1 generally would be met, thereby requiring that the embedded derivative be bifurcated and accounted for separately.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7f271f554c169817d96c8ec67ef9f0200ea03da532682382e7a8eccae432dc3a","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-110","para":"55-110","html":"
This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a). A reporting entity issues $100,000 of mandatorily redeemable preferred stock whose preferred dividends are payable in cash but that requires redemption at the end of 1 year for a payment of 312 ounces of gold. Alternatively, the reporting entity issues $100,000 of mandatorily redeemable preferred stock whose redemption at the end of 1 year is payable only in a fixed amount of a specified foreign currency. Topic 480 requires that mandatorily redeemable financial instruments in the form of shares, as defined in that Subtopic, be classified as liabilities, and not as temporary equity (which had been done previously). Consequently, this guidance does not address the application of paragraph 815-10-15-74(a).
","snippet":"This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a). A reporting entity issues $100,000 of mandatorily redeemable preferred stock whose preferred dividends ar…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:11fdcf23beaabd2d7878e52ceb5442fe7384c9ddf628f288c934cf829dc15cb2","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-111","para":"55-111","html":"
The mandatorily redeemable preferred stock payable in gold contains an embedded derivative whose underlying is the price of gold. That embedded derivative should be separated from the host contract and accounted for as a derivative instrument because the embedded derivative is not clearly and closely related to the host contract.
","snippet":"The mandatorily redeemable preferred stock payable in gold contains an embedded derivative whose underlying is the price of gold. That embedded derivative should be separated from the host contract and accounted for as a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d462f66a24355491a286470f8c07fcf961963b85d2cf66c8fefcf2988c1a4933","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-112","para":"55-112","html":"
Mandatorily redeemable preferred stock whose periodic preferred dividend payments, redemption payment, or both are payable only in a stipulated amount of a specified foreign currency contain no embedded foreign currency derivative that warrants separate accounting under this Subtopic. Instead, the reporting entity shall apply the provisions of Topic 830 to the foreign-currency-denominated mandatorily redeemable preferred stock.
","snippet":"Mandatorily redeemable preferred stock whose periodic preferred dividend payments, redemption payment, or both are payable only in a stipulated amount of a specified foreign currency contain no embedded foreign currency …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:392d89edf34a57e78ca590d7cca9f4d51813e954975e7260a537fb548559e7b9","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-113","para":"55-113","html":"
In contrast, if the holder of the mandatorily redeemable preferred stock had the choice of receiving, or the issuer had the choice of making, the redemption payment, the dividend payments, or both in either a stipulated amount of U.S. dollars or a stipulated amount of a specified currency, then that instrument contains an embedded foreign currency option that is subject to this Subtopic. Because the reporting entity has the option to make payments in U.S. dollars or in a specified foreign currency, the provisions of paragraph 815-15-15-10 are not relevant to that instrument. That embedded foreign currency option should be separated from the host contract and accounted for as a derivative instrument because the embedded foreign currency option is not clearly and closely related to issuing preferred stock unless a fair value election is made pursuant to paragraph 815-15-25-4.
","snippet":"In contrast, if the holder of the mandatorily redeemable preferred stock had the choice of receiving, or the issuer had the choice of making, the redemption payment, the dividend payments, or both in either a stipulated …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4805d19d3d9fa54532e8ae1e7b96bc46192ecfbdf1f0a813013b3e76f21b244f","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-114","para":"55-114","html":"
This Example illustrates the application of the clearly and closely related criterion as discussed in paragraphs 815-15-25-1(a) and 815-15-25-19. A manufacturer enters into a long-term contract to purchase a specified quantity of certain raw materials from a supplier. Under the contract, the supplier will provide the manufacturer with the materials at the then-current list price but within a specified range. For example, the purchase price may not exceed a cap of $120 per ton or fall below a floor of $100 per ton, and the current list price at inception of the contract is $110 per ton. The purchase contract in its entirety does not meet the definition of a derivative instrument due to the absence of a net settlement characteristic (that is, the contract requires delivery of a raw material that is not readily convertible to cash). In addition, the purchase contract is not measured at fair value under other applicable GAAP.
","snippet":"This Example illustrates the application of the clearly and closely related criterion as discussed in paragraphs 815-15-25-1(a) and 815-15-25-19. A manufacturer enters into a long-term contract to purchase a specified qu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4553cad7bbb061623a4b771232bb998e06f7af6264466fb153d6713d8b913510","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-115","para":"55-115","html":"
From the manufacturer's perspective, the embedded derivatives contained in the purchase contract are 2 options: a purchased call option with a strike price of $120 per ton and a written put option with a strike price of $100 per ton. Those options would meet the definition of a derivative instrument under Subtopic 815-10 if they were freestanding because they have a notional amount, have an underlying (the price per ton), require a small or no initial net investment, and can be net settled. Those options have the characteristic of net settlement under paragraph 815-10-15-100 because they represent an adjustment (that is, either a premium or rebate) of the current list price in an amount equal to the difference between that current list price and the applicable strike amount (of either $120 per ton or $100 per ton). (Paragraphs
815-10-15-119 through 15-120
do not apply to the options because they have no provision for delivery.) The host contract can be considered a purchase contract that requires delivery of the raw materials at a price equal to the current list price.
","snippet":"From the manufacturer's perspective, the embedded derivatives contained in the purchase contract are 2 options: a purchased call option with a strike price of $120 per ton and a written put option with a strike price of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:70b06f52337d14c08c8ff1efc01e84d2b0cfa90d8ca296ab8ce488d7fa4d09a7","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-116","para":"55-116","html":"
Although the example purchase contract economically contains embedded derivatives, those embedded derivatives should not be accounted for separately because they are clearly and closely related to the host contract.
","snippet":"Although the example purchase contract economically contains embedded derivatives, those embedded derivatives should not be accounted for separately because they are clearly and closely related to the host contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:74a19d6dcd1e5d54b59f15eb4d5eae9410dd7586b77fa1aa5a6262f6988f6161","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-117","para":"55-117","html":"
This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a)to the determination of what is the host contract and what is the embedded derivative composing the illustrative hybrid instrument. This Example has the following assumptions:
  1. a
    An entity (Entity A) issues a 5-year debt instrument with a principal amount of $1,000,000 indexed to the stock of an unrelated publicly traded entity (Entity B).
  2. b
    At maturity, the holder of the instrument will receive the principal amount plus any appreciation or minus any depreciation in the fair value of 10,000 shares of Entity B, with changes in fair value measured from the issuance date of the debt instrument.
  3. c
    No separate interest payments are made.
  4. d
    The market price of Entity B shares to which the debt instrument is indexed is $100 per share at the issuance date.
","snippet":"This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a)to the determination of what is the host contract and what is the embedded derivative composing the illustr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a24ed6a0138086ffac4fab5e20342d9c4aeea8dc3e411290b30de8dfea7b3b61","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-118","para":"55-118","html":"
The instrument is not itself a derivative instrument because it requires an initial net investment equal to the notional amount. The host contract is a debt instrument because the instrument has a stated maturity and because the holder has none of the rights of a shareholder, such as the ability to vote the shares and receive distributions to shareholders. The embedded derivative is an equity-based derivative that has as its underlying the fair value of the stock of Entity B. As a result of the host instrument being a debt instrument and the embedded derivative having an equity-based return, the embedded derivative is not clearly and closely related to the host contract and must be separated from the host contract and accounted for as a derivative by both the issuer and the holder of the hybrid instrument. (Paragraph 815-15-25-4 allows for a fair value election for hybrid financial instruments that otherwise would require bifurcation. Hybrid financial instruments that are elected to be accounted for in their entirety at fair value cannot be used as a hedging instrument in a Topic 815 hedging relationship.)
","snippet":"The instrument is not itself a derivative instrument because it requires an initial net investment equal to the notional amount. The host contract is a debt instrument because the instrument has a stated maturity and bec…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4566b2b2b49bb49e69b78b12524920ae7261a731826adfdf58c3d3675931ee61","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-119","para":"55-119","html":"
This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a). Even though an overall hybrid instrument that provides for repayment of principal may include a return based on the market price (the underlying as defined) of XYZ Corporation common stock, the host contract does not involve any existing or potential residual interest rights (that is, rights of ownership) and thus would not be an equity instrument. The host contract would instead be considered a debt instrument, and the embedded derivative that incorporates the equity-based return would not be clearly and closely related to the host contract.
","snippet":"This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a). Even though an overall hybrid instrument that provides for repayment of principal may include a return ba…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6e64293603bd52f9a3a60afbc419b3f00d976980bad84032325fcece4ee5e365","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-120","para":"55-120","html":"
This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a) to a market value annuity accounted for as an investment contract under Topic 944.
","snippet":"This Example illustrates the application of the clearly and closely related criterion in paragraph 815-15-25-1(a) to a market value annuity accounted for as an investment contract under Topic 944.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f246871c72d4109868a36ff8b21f3960c1c46f48d371fe7a7e2a24cc8b53279a","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-121","para":"55-121","html":"
As an example of how the market-adjusted value is calculated at any period end, the formula typically takes the contractual guaranteed amount payable at the end of the specified term, including the applicable guaranteed interest, and discounts that future cash flow to its present value using rates currently being offered for new market value annuity purchases with terms equal to the remaining term to maturity of the existing market value annuity. As a result, the market value adjustment may be positive or negative, depending on market interest rates at each period end. In a rising interest rate environment, the market adjustment may be such that less than substantially all principal is recovered upon surrender.
","snippet":"As an example of how the market-adjusted value is calculated at any period end, the formula typically takes the contractual guaranteed amount payable at the end of the specified term, including the applicable guaranteed …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:40be298ed7c5824e2204f7431d39a09cf2484135ac3521380d1d3c0113490cf8","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-122","para":"55-122","html":"
Assume all of the following terms of an example annuity with a fixed return if held for a specified period or market-adjusted value if surrendered early:
  1. a
    Single premium deposit: $100,000 on December 31, 1998
  2. b
    Maturity date: December 31, 2007 (9-year term)
  3. c
    Guaranteed fixed rate: 7%
  4. d
    Fixed maturity value: $183,846 ($100,000 at 7% compounded for 9 years)
  5. e
    Market value adjustment formula: discount future fixed maturity value to present value at surrender date using currently offered market value annuity rate for the period of time left until maturity.
","snippet":"Assume all of the following terms of an example annuity with a fixed return if held for a specified period or market-adjusted value if surrendered early:\n(a) Single premium deposit: $100,000 on December 31, 1998\n(b) Matu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ed32d2de0b6a38a6a1bc96a7468284e61f960cee4651c75ff96eee71be0e6865","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-123","para":"55-123","html":"
Assume the following values at December 31, 1999.
","snippet":"Assume the following values at December 31, 1999.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c264b205872d9dd97cd21dcee75b90a0828c98ae0e0b927764648a3b5cf2d27","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-124","para":"55-124","html":"
Because the criteria in paragraphs 815-15-25-26 and
815-15-25-41 through 25-43
are not met, the embedded derivative (prepayment option) is clearly and closely related to the host debt contract.
","snippet":"Because the criteria in paragraphs 815-15-25-26 and 815-15-25-41 through 25-43 are not met, the embedded derivative (prepayment option) is clearly and closely related to the host debt contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a0b0e87600940367299fdac36a6ab80da943cc4736d9f4309c0caa0621f6c74","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-125","para":"55-125","html":"
There is no substantial premium or discount present in these contracts at inception, and the put option is exercisable at any time by the contract holder (that is, the put option is not contingently exercisable). Because the investor always has the option to hold the market value annuity to maturity and receive the fixed rate and the insurance entity cannot force the investor to surrender, the condition in paragraph 815-15-25-26(a) would not be met (that is, the insurance entity does not have the contractual right to demand surrender and put the investor in a situation of not recovering substantially all of its initial recorded investment).
","snippet":"There is no substantial premium or discount present in these contracts at inception, and the put option is exercisable at any time by the contract holder (that is, the put option is not contingently exercisable). Because…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3f9f2f70dc0d6a134d844492a4377a42946269bb574b1ae1fc08dc52ac0b3022","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-126","para":"55-126","html":"
The condition in paragraph 815-15-25-26(b) also would not be met in a typical market value annuity, because there is no leverage feature that would result in twice the initial and current market rate of return.
","snippet":"The condition in paragraph 815-15-25-26(b) also would not be met in a typical market value annuity, because there is no leverage feature that would result in twice the initial and current market rate of return.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8acb5b9ccb71c5809311b4cf180bc853869b681aa406939c7d385b7b2eec67c9","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-127","para":"55-127","html":"
The prepayment option enables the holder simply to cash out of the instrument at fair value at the surrender date. The prepayment option provides only liquidity to the holder. The holder receives only the market-adjusted value, which is equal to the fair value of the investment contract at the surrender date. As such, the prepayment option (the embedded derivative) has a fair value of zero at all times.
","snippet":"The prepayment option enables the holder simply to cash out of the instrument at fair value at the surrender date. The prepayment option provides only liquidity to the holder. The holder receives only the market-adjusted…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fc26162e6e62878ff43bc69382cfe27ea5c6ecad521ae8d73f689f2b60ece999","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-128","para":"55-128","html":"
The following Cases illustrate the application of paragraph 815-15-25-26(a):
  1. a
    Note A (Case A)
  2. b
    Note B (Case B)
  3. c
    Note C (Case C).
","snippet":"The following Cases illustrate the application of paragraph 815-15-25-26(a):\n(a) Note A (Case A)\n(b) Note B (Case B)\n(c) Note C (Case C).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d9b086c087159efdd9903fb94a0b6e53857bfa22dbbccc5f3713b1ddb8ef4ee5","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-129","para":"55-129","html":"
The accompanying analysis does not address the application of the condition in paragraph 815-15-25-26(b).
","snippet":"The accompanying analysis does not address the application of the condition in paragraph 815-15-25-26(b).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c3212667e42cfb11a11e05cfd8555285e6fcaa7559cac764025efca85b37e62e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-130","para":"55-130","html":"
If an investor in a 10-year note has the contingent option at the end of Year 2 to put it back to the issuer at its then fair value (based on its original 10-year term), the condition in paragraph 815-15-25-26(a) would not be met even though the note's fair value could have declined so much that, by exercising the option, the investor ends up not recovering substantially all of its initial recorded investment. See paragraph 815-15-25-29.
","snippet":"If an investor in a 10-year note has the contingent option at the end of Year 2 to put it back to the issuer at its then fair value (based on its original 10-year term), the condition in paragraph 815-15-25-26(a) would n…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:85ea075880f97c0e23501ca2a8fa414d48bb972ec9d11861e95be7e9f651354c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-131","para":"55-131","html":"
An investor purchased from an A-rated issuer for $10 million a structured note with a $10 million principal, a 9.5 percent interest coupon, and a term of 10 years at a time when the current market rate for 10-year A-rated debt is 7 percent. Assume that the terms of the note require that, at the beginning of the third year of its term, the principal on the note be reduced to $7.1 million and the coupon interest rate be reduced to zero for the remaining term to maturity if interest rates for A-rated debt have increased to at least 8 percent by that date. That structured note would meet the condition in paragraph 815-15-25-26(a) for both the issuer and the investor because the investor could be forced to accept settlement that causes the investor not to recover substantially all of its initial recorded investment. That is, if increases in the interest rate for A-rated debt trigger the modification of terms, the investor would receive only $9 million, comprising $1.9 million in interest payments for the first 2 years and $7.1 million in principal repayment, thus not recovering substantially all of its $10 million initial net investment.
","snippet":"An investor purchased from an A-rated issuer for $10 million a structured note with a $10 million principal, a 9.5 percent interest coupon, and a term of 10 years at a time when the current market rate for 10-year A-rate…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0c55b393955b584cd9bc37ab37689e2cd524dc1fa1b23b38b432826b4e1915a6","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-132","para":"55-132","html":"
The investor purchases for $10,000,000 a structured note with a face amount of $10,000,000, a coupon of 8.9 percent, and a term of 10 years. The current market rate for 10-year debt is 7 percent given the A credit quality of the issuer. The terms of the structured note require that if the interest rate for A-rated debt has increased to at least 10 percent at the end of 2 years, the coupon on the note be reduced to zero, and the investor purchase from the issuer for $10,000,000 an additional note with a face amount of $10,000,000, a zero coupon, and a term of 3.5 years.
","snippet":"The investor purchases for $10,000,000 a structured note with a face amount of $10,000,000, a coupon of 8.9 percent, and a term of 10 years. The current market rate for 10-year debt is 7 percent given the A credit qualit…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1bb8ec51e44fa83a4abf5273fa90d0eadbe805538409d8977505f7fb93eca148","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-133","para":"55-133","html":"
The structured note contains an embedded derivative that shall be accounted for separately unless a fair value election is made pursuant to paragraph 815-15-25-4.
","snippet":"The structured note contains an embedded derivative that shall be accounted for separately unless a fair value election is made pursuant to paragraph 815-15-25-4.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:de02e401c838164515ff4c9444d9bbd552076967e4b4fe297ec53eb6ad020784","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-134","para":"55-134","html":"
The requirement that, if interest rates increase and the embedded derivative is triggered, the investor purchase the second $10,000,000 note for an amount in excess of its fair value (which is about $7,100,000 based on a 10 percent interest rate) generates a result that is economically equivalent to requiring the investor to make a cash payment to the issuer for the amount of the excess. As a result, the cash flows on the original structured note and the excess purchase price on the second note shall be considered in concert. The cash inflows ($10,000,000 principal and $1,780,000 interest) that will be received by the investor on the original note shall be reduced by the amount ($2,900,000) by which the purchase price of the second note is in excess of its fair value, resulting in a net cash inflow ($8,880,000) that is not substantially all of the investor's initial net investment on the original note.
","snippet":"The requirement that, if interest rates increase and the embedded derivative is triggered, the investor purchase the second $10,000,000 note for an amount in excess of its fair value (which is about $7,100,000 based on a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4e87b1f9982244b6a28ecf196b97d0325627688bc091cf577c13ed00b6873862","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-135","para":"55-135","html":"
As demonstrated by this Case, if an embedded derivative requires an asset to be purchased for an amount that exceeds its fair value, the amount of the excess—and not the cash flows related to the purchased asset—shall be considered when analyzing whether the hybrid instrument can contractually be settled in such a way that the investor would not recover substantially all of its initial recorded investment under paragraph 815-15-25-26(a). Whether that purchased asset is a financial asset or a nonfinancial asset (such as gold) is not relevant to the treatment of the excess purchase price. It is noted that requiring the investor to make a cash payment to the issuer is also economically equivalent to reducing the principal on the note.
","snippet":"As demonstrated by this Case, if an embedded derivative requires an asset to be purchased for an amount that exceeds its fair value, the amount of the excess—and not the cash flows related to the purchased asset—shall be…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:132b71e954a3bf6fae9d063261ed0f1e4514717e54e5cc991fd1cb05c6e4639c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-136","para":"55-136","html":"
The note described could have been structured to include terms requiring that the principal of the note be substantially reduced and the coupon reduced to zero if the interest rate for A-rated debt increased to at least 10 percent at the end of 2 years. That alternative structure would clearly have required that the embedded derivative be accounted for separately, because that embedded derivative's existence would have resulted in the possibility that the hybrid instrument could contractually be settled in such a way that the investor would not recover substantially all of its initial recorded investment.
","snippet":"The note described could have been structured to include terms requiring that the principal of the note be substantially reduced and the coupon reduced to zero if the interest rate for A-rated debt increased to at least …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:168ae2d1335e539913f6b746dabd862ba284660483fe3b8b0d6fcac44ae2d600","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-137","para":"55-137","html":"
The following Cases illustrate the application of the guidance beginning in paragraph 815-15-25-26(b) to specific securitized interests in prepayable financial assets:
  1. a
    Securitized pool of guaranteed single-class mortgage pass-through securities (Case A)
  2. b
    Securitized pool of guaranteed single-class mortgage pass-through securities (Case B)
  3. c
    Inverse floater collateralized mortgage obligation (Case C).
","snippet":"The following Cases illustrate the application of the guidance beginning in paragraph 815-15-25-26(b) to specific securitized interests in prepayable financial assets:\n(a) Securitized pool of guaranteed single-class mort…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:404bede3770b89e6df27f76cdece61865a2ebe36fc503fb08e3105f28da47528","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-138","para":"55-138","html":"
The Cases provide no discussion of the requirements of paragraphs 815-15-25-1 and 815-15-25-26(a). However, an analysis of those paragraphs would be required to determine whether the instruments meet the criterion in paragraph 815-15-25-26(b). The analysis of the Cases considers only paragraph 815-15-25-26(b).
","snippet":"The Cases provide no discussion of the requirements of paragraphs 815-15-25-1 and 815-15-25-26(a). However, an analysis of those paragraphs would be required to determine whether the instruments meet the criterion in par…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3f69023207e8174d0f907646659c710a9a2f6a741e51fa989b926a62ef1f0e8b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-139","para":"55-139","html":"
The following Cases illustrate application of the guidance in paragraph 815-15-25-26(b) to a guaranteed single-class mortgage pass-through security:
  1. a
    Guaranteed single-class mortgage pass-through security (Case A1)
  2. b
    Securitization trust includes a freestanding derivative instrument (Case A2).
","snippet":"The following Cases illustrate application of the guidance in paragraph 815-15-25-26(b) to a guaranteed single-class mortgage pass-through security:\n(a) Guaranteed single-class mortgage pass-through security (Case A1)\n(b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6775d16ef06d762ea87ae073353c87ef5da39c08edd9f4003e34fd0f17fcca40","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-140","para":"55-140","html":"
Cases A1 and A2 share all of the following assumptions:
  1. a
    A fixed-rate guaranteed single-class mortgage pass-through security is issued.
  2. b
    Both the interest and principal payments are guaranteed by a third party for a fixed market-based guarantee fee, and a servicer receives a market-based servicing fee that is expected to be more than adequate compensation.
  3. c
    Both the guarantee fee and the servicing fee have priority over the payments to the investors.
  4. d
    The investor does not have the right to accelerate the settlement of the securitized interest.
","snippet":"Cases A1 and A2 share all of the following assumptions:\n(a) A fixed-rate guaranteed single-class mortgage pass-through security is issued.\n(b) Both the interest and principal payments are guaranteed by a third party for …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ad08f3f080bd78d86954efaaa20554ae3b736a566ec34b6d1bbfefd9090c7f13","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-141","para":"55-141","html":"
Under the security, the net cash flows received on the underlying fixed-rate, prepayable, single-family mortgage loans are proportionately passed through to the investors.
","snippet":"Under the security, the net cash flows received on the underlying fixed-rate, prepayable, single-family mortgage loans are proportionately passed through to the investors.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a117fbff2e447c5341b6decaa21f1b7fbd16ac044c5270d731c195d22f048e74","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-142","para":"55-142","html":"
Paragraph 815-15-25-26(b) does not apply to the guaranteed single-class mortgage pass-through security described in the common assumptions and the preceding paragraph. While the priority of the payments to the guarantor and servicer reallocates the cash flows, the example security meets the two criteria in paragraph 815-15-25-26(b).
","snippet":"Paragraph 815-15-25-26(b) does not apply to the guaranteed single-class mortgage pass-through security described in the common assumptions and the preceding paragraph. While the priority of the payments to the guarantor …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5aaf021c51333464a1fc9e0169f63a03657676cd560bd6b960355eb9ae0a5722","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-143","para":"55-143","html":"
Under the security, the underlying prepayable single-family mortgage loans have a variable interest rate. The securitization trust also holds an interest rate swap that is designed to perfectly swap the variable interest rate assets to a fixed interest rate to match the payments on the fixed-rate guaranteed single-class mortgage pass-through security.
","snippet":"Under the security, the underlying prepayable single-family mortgage loans have a variable interest rate. The securitization trust also holds an interest rate swap that is designed to perfectly swap the variable interest…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5dd3bf72bcf2b017a42ce87fe75135f7a7a1e7adec5cbbafd02270801d456fc","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-144","para":"55-144","html":"
Paragraph 815-15-25-26(b) is not applicable to the guaranteed single-class mortgage pass-through security. Because the addition of the freestanding derivative instrument (the interest rate swap) does not create an embedded derivative that requires bifurcation in the guaranteed single-class mortgage pass-through security itself, the example security meets the two criteria in that paragraph. However, if the notional amounts of the securitized loans and the interest rate swap do not match, the fixed-rate securitized interest would have to be evaluated for an embedded derivative because the financial instruments held by the entity might not provide the necessary cash flows.
","snippet":"Paragraph 815-15-25-26(b) is not applicable to the guaranteed single-class mortgage pass-through security. Because the addition of the freestanding derivative instrument (the interest rate swap) does not create an embedd…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a94ec916833841c4627ef31467b1128ddd9465c90b9ec521003608b96a01d338","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-145","para":"55-145","html":"
The following Cases illustrate application of paragraph 815-15-25-26(b) to an interest in a securitized pool of guaranteed single-class mortgage pass-through securities:
  1. a
    Sequential-pay collateralized mortgage obligation (Case B1)
  2. b
    Planned-amortization-class and companion collateralized mortgage obligation (Case B2)
  3. c
    Interest-only strip and principal-only strip (Case B3).
","snippet":"The following Cases illustrate application of paragraph 815-15-25-26(b) to an interest in a securitized pool of guaranteed single-class mortgage pass-through securities:\n(a) Sequential-pay collateralized mortgage obligat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e8a1808c409ff4ad31fac4c1befd5144d52a7a309b085d164acd27a3c82e706","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-146","para":"55-146","html":"
Cases B1, B2, and B3 share the assumption that an entity securitizes a pool of guaranteed single-class mortgage pass-through securities (each identical to those described in the common assumptions in Case A).
","snippet":"Cases B1, B2, and B3 share the assumption that an entity securitizes a pool of guaranteed single-class mortgage pass-through securities (each identical to those described in the common assumptions in Case A).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:63d30d4924a9d81423a3822224477bb585375b0f484d4f536a725c0be17d0142","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-147","para":"55-147","html":"
This Case assumes that the principal payments received, including prepayments of principal, on the underlying collateral are not allocated proportionately to all investors (bond holders). Three classes of securities are issued, Class A, Class B, and Class C, which mature sequentially. All three classes participate in interest payments from the underlying collateral, but, initially, only Class A receives principal payments. Class A receives all principal payments, including prepayments of principal, until it is retired. Next, all principal payments are paid to Class B until it is retired, and so on. Additionally, the investor does not have the right to accelerate the settlement of the securitized interest.
","snippet":"This Case assumes that the principal payments received, including prepayments of principal, on the underlying collateral are not allocated proportionately to all investors (bond holders). Three classes of securities are …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a88d4454bb986ff3b613232c438d2e473a21fd019a8b0946fde1bbe56b30b892","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-148","para":"55-148","html":"
The analysis of the bonds requires the holder to assess the securitized interest in accordance with the criterion in paragraph 815-15-25-33(b). To determine whether the individual bond classes contain an embedded derivative that requires bifurcation, the investor would have to understand the nature and amount of assets, liabilities, and other financial instruments that compose the entire securitization transaction. The holder should obtain sufficient information about the payoff structure and the payment priority of the interest to determine whether an embedded derivative that requires bifurcation exists. Because the securitized interests (assumed to be identical to those described in Case A) included in the resecuritization do not contain any embedded derivatives and there have been no other changes in the cash flows that create other embedded derivatives that require bifurcation, the criterion in paragraph 815-15-25-33(b) is met.
","snippet":"The analysis of the bonds requires the holder to assess the securitized interest in accordance with the criterion in paragraph 815-15-25-33(b). To determine whether the individual bond classes contain an embedded derivat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0d36a10a60a68949550359a087fb4f8ce094d3d4af3276033a35a05038bb3523","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-149","para":"55-149","html":"
Paragraph 815-15-25-26(b) is not applicable to any of the bond classes in the sequential-pay collateralized mortgage obligation. While the prepayment risk in the underlying financial assets is reallocated through the securitization process, concentrating prepayment risk in certain bond classes, all three classes in the Case meet the two criteria in paragraph 815-15-25-33.
","snippet":"Paragraph 815-15-25-26(b) is not applicable to any of the bond classes in the sequential-pay collateralized mortgage obligation. While the prepayment risk in the underlying financial assets is reallocated through the sec…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ad2f76a80304ece4fd39f4a03b569a5f6662547cafb9cec91549e3b522dd71f2","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-150","para":"55-150","html":"
Case B assumes that the principal payments received, including prepayments of principal, on the underlying collateral are not allocated proportionately to all investors (bond holders). Two classes of securities are issued, a planned-amortization-class bond and a companion bond. The planned-amortization-class bond is designed to reduce the prepayment risk to investors by transferring prepayment risk to the companion bond. The planned-amortization-class bond offers a fixed principal repayment schedule that will be met if prepayment on the underlying collateral is within a specified range. Additionally, the investor does not have the right to accelerate the settlement of the securitized interest.
","snippet":"Case B assumes that the principal payments received, including prepayments of principal, on the underlying collateral are not allocated proportionately to all investors (bond holders). Two classes of securities are issue…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f73d905b5cadc7e3a2021659071e3d53ff1c769188711f0572c598fb7123b4b0","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-151","para":"55-151","html":"
The analysis of the bonds requires the holder to assess the securitized interest in accordance with the criterion in paragraph 815-15-25-33(b). To determine whether the individual bond classes contain an embedded derivative that requires bifurcation, the investor would have to understand the nature and amount of assets, liabilities, and other financial instruments that compose the entire securitization transaction. The holder should obtain sufficient information about the payoff structure and the payment priority of the interest to determine whether an embedded derivative that requires bifurcation exists. Because the securitized interests (assumed to be identical to those described in Case A) included in the resecuritization do not contain any embedded derivatives and there have been no other changes in the cash flows that create other embedded derivatives that require bifurcation, the criterion in paragraph 815-15-25-33(b) is met.
","snippet":"The analysis of the bonds requires the holder to assess the securitized interest in accordance with the criterion in paragraph 815-15-25-33(b). To determine whether the individual bond classes contain an embedded derivat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a406956dc71968fdee688dd2c92dac4adfa80a3c509dc765a43f989b0f29fa41","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-152","para":"55-152","html":"
Paragraph 815-15-25-26(b) is not applicable to either the planned-amortization-class or the companion collateralized mortgage obligation. While the prepayment risk in the underlying prepayable financial assets is reallocated through the securitization process, concentrating prepayment risk in the companion bond, the example securities meet the two criteria in paragraph 815-15-25-33.
","snippet":"Paragraph 815-15-25-26(b) is not applicable to either the planned-amortization-class or the companion collateralized mortgage obligation. While the prepayment risk in the underlying prepayable financial assets is realloc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bfe6ed9e1e7bdd82a05ccdd2f7ae9241b1950ec6886d858cb1e1befef22fecda","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-153","para":"55-153","html":"
An interest-only strip and principal-only strip are created by separating the net interest cash flows from the principal cash flows received on a pool of guaranteed single-class mortgage pass-through securities (identical to those described in Case A). The interest cash flows form one bond, which is the interest-only strip. The principal cash flows form the second bond, which is the principal-only strip. Additionally, the investor does not have the right to accelerate the settlement of the securitized interest.
","snippet":"An interest-only strip and principal-only strip are created by separating the net interest cash flows from the principal cash flows received on a pool of guaranteed single-class mortgage pass-through securities (identica…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:83869f3139e792be8f46395a9cb7100507ec191d479611a841e67b65462d2039","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-154","para":"55-154","html":"
As a result of the guarantee fee and the servicing fee in excess of adequate compensation in the underlying guaranteed single-class mortgage pass-through securities, neither the interest-only strip nor the principal-only strip qualifies for the scope exception in paragraphs
815-10-15-72 through 15-73
.
","snippet":"As a result of the guarantee fee and the servicing fee in excess of adequate compensation in the underlying guaranteed single-class mortgage pass-through securities, neither the interest-only strip nor the principal-only…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e3b0b7ec420791ff72e9d8809673a7ad15ace2405df3d58de5f044587fc82a2b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-155","para":"55-155","html":"
The analysis of the interest-only and principal-only strip requires the holder to assess the securitized interest in accordance with the criterion in paragraph 815-15-25-33(b). To determine whether the individual bond classes contain an embedded derivative that requires bifurcation, the investor would have to understand the nature and amount of assets, liabilities, and other financial instruments that compose the entire securitization transaction. The holder should obtain sufficient information about the payoff structure and the payment priority of the interest to determine whether an embedded derivative that requires bifurcation exists. Because the securitized interests (assumed to be identical to those described in Case A) included in the resecuritization do not contain any embedded derivatives and there have been no other changes in the cash flows that create other embedded derivatives that require bifurcation, the criterion in paragraph 815-15-25-33(b) is met.
","snippet":"The analysis of the interest-only and principal-only strip requires the holder to assess the securitized interest in accordance with the criterion in paragraph 815-15-25-33(b). To determine whether the individual bond cl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:88c46f49249a31b2caa5915eacde9a2c949aaf040d528966092689ee37c8e37c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-156","para":"55-156","html":"
Paragraph 815-15-25-26(b) is not applicable to either the interest-only strip or the principal-only strip. While the prepayment risk in the underlying prepayable financial assets is reallocated through the securitization process, concentrating prepayment risk in certain bond classes, both the interest-only strip and principal-only strip in the example meet the two criteria in paragraph 815-15-25-33.
","snippet":"Paragraph 815-15-25-26(b) is not applicable to either the interest-only strip or the principal-only strip. While the prepayment risk in the underlying prepayable financial assets is reallocated through the securitization…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ebedc4279a25188ad705c0d5e117cf1a2e1b123ad2ff6f5efbbbe5be973b8983","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-157","para":"55-157","html":"
A collateralized mortgage obligation is issued with a coupon that fluctuates inversely with a referenced rate. The underlying securitized financial assets are fixed-rate, prepayable, single-family mortgage loans. Two classes of securitized interests are issued, one with a coupon based on a referenced rate (for example, the London Interbank Offered Rate [LIBOR]) and the second with a coupon that fluctuates inversely with that same referenced rate (the inverse floater collateralized mortgage obligation). Cash flows received on the underlying collateral are first used to pay a servicer a market-based servicing fee that is expected to be more than adequate compensation. Additionally, the investor does not have the right to accelerate the settlement of the securitized interest.
","snippet":"A collateralized mortgage obligation is issued with a coupon that fluctuates inversely with a referenced rate. The underlying securitized financial assets are fixed-rate, prepayable, single-family mortgage loans. Two cla…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:174dd83759c37cbf84d415b5eaa6c4bbdd3e5334c370b341b76f1b9f83c6ffb7","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-158","para":"55-158","html":"
Paragraph 815-15-25-26(b) would be applicable to the inverse floater. When assessing the conditions in that paragraph, the holder shall consider the effect of prepayment risk. Therefore, the holder may identify both an embedded derivative related to the prepayment risk and an embedded derivative related to the inverse interest rate risk, which would be combined and recorded as one instrument.
","snippet":"Paragraph 815-15-25-26(b) would be applicable to the inverse floater. When assessing the conditions in that paragraph, the holder shall consider the effect of prepayment risk. Therefore, the holder may identify both an e…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:392245062ff379277564de48df60d96883ce7231e0abff4e66d11024d967287d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-159","para":"55-159","html":"
While the inverse floater collateralized mortgage obligation meets the criterion in paragraph 815-15-25-33(a), the fact that the coupon rate fluctuates inversely with the referenced rate results in the instrument failing the criterion in paragraph 815-15-25-33(b). The inverse floater contains an embedded interest rate derivative that requires bifurcation, and that embedded interest rate derivative does not result solely from the embedded call options in the underlying financial assets. Said another way, the inverse floater meets the conditions of paragraph 815-15-25-26(b) without consideration of the prepayment risk in the underlying mortgage loans.
","snippet":"While the inverse floater collateralized mortgage obligation meets the criterion in paragraph 815-15-25-33(a), the fact that the coupon rate fluctuates inversely with the referenced rate results in the instrument failing…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:df7eaa15bd09f4ef6d323cf1abd2966f4c3e03db9a92a54735968fcba1e3b477","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-160","para":"55-160","html":"
This Example illustrates the application of paragraph 815-15-30-4 and assumes that the illustrative non-option embedded derivative is a plain-vanilla forward contract with symmetrical risk exposure and that the hybrid instrument was newly entered into by the parties to the contract. Assume that the hybrid instrument is not a derivative instrument in its entirety.
","snippet":"This Example illustrates the application of paragraph 815-15-30-4 and assumes that the illustrative non-option embedded derivative is a plain-vanilla forward contract with symmetrical risk exposure and that the hybrid in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:31d061ba9c212bd2482857199662dc16820988c47eb8113d6efb6bba0f37f5d6","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-161","para":"55-161","html":"
Entity A plans to advance Entity X $900 for 1 year at a 6 percent interest rate and concurrently enter into an equity-based derivative instrument in which it will receive any increase or pay any decrease in the current market price ($200) of XYZ Corporation's common stock. Those two transactions (that is, the loan and the derivative instrument) can be bundled in a structured note that could have almost an infinite variety of terms. The following presents 5 possible contractual terms for the structured note that would be purchased by Entity A for $900:
  1. a
    Note 1: Entity A is entitled to receive at the end of 1 year $954 plus any excess (or minus any shortfall) of the current per-share market price of XYZ Corporation's common stock over (or under) $200.
  2. b
    Note 2: Entity A is entitled to receive at the end of 1 year $955 plus any excess (or minus any shortfall) of the current per-share market price of XYZ Corporation's common stock over (or under) $201.
  3. c
    Note 3: Entity A is entitled to receive at the end of 1 year $755 plus any excess (or minus any shortfall) of the current per-share market price of XYZ Corporation's common stock over (or under) $1.
  4. d
    Note 4: Entity A is entitled to receive at the end of 1 year $1,054 plus any excess (or minus any shortfall) of the current per-share market price of XYZ Corporation's common stock over (or under) $300.
  5. e
    Note 5: Entity A is entitled to receive at the end of 1 year $1,060 plus any excess (or minus any shortfall) of the current per-share market price of XYZ Corporation's common stock over (or under) $306.
","snippet":"Entity A plans to advance Entity X $900 for 1 year at a 6 percent interest rate and concurrently enter into an equity-based derivative instrument in which it will receive any increase or pay any decrease in the current m…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4d1b4fd4f2ddab581b0ffe3df54c8b25801b82f6526dbddd7352979d7f568225","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-162","para":"55-162","html":"
All of these five terms of a structured note will provide the same cash flows, given a specified market price of XYZ Corporation's common stock. If the market price of XYZ Corporation's common stock at the end of 1 year is still $200, Entity A will receive $954 under all 5 note terms. If the market price of XYZ Corporation's common stock at the end of 1 year increases to $306, Entity A will receive $1,060 under all 5 note terms.
","snippet":"All of these five terms of a structured note will provide the same cash flows, given a specified market price of XYZ Corporation's common stock. If the market price of XYZ Corporation's common stock at the end of 1 year …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:57dccbf75cee791523703b91385cf9f8c53f799fa6a9fcce8e1b13d2edfa9a4d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-163","para":"55-163","html":"
For simplicity in constructing this Example, it is assumed that an equity-based cash-settled forward contract with a strike price equal to the stock's current market price has a zero fair value. In many circumstances, a zero-value forward contract can have a strike price greater or less than the stock's current market price.
","snippet":"For simplicity in constructing this Example, it is assumed that an equity-based cash-settled forward contract with a strike price equal to the stock's current market price has a zero fair value. In many circumstances, a …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aa71a9f7e91fc499bf0cc801afdcbc1fd39e30303ef031a8b4f5104045aba503","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-164","para":"55-164","html":"
The differences in the terms for these five notes are totally arbitrary because those differences have no effect on the ultimate cash flows under the structured note; thus, those differences are nonsubstantive and should have no influence on how the terms of an embedded derivative are identified. Therefore, the separation of the hybrid instrument into an embedded derivative and a host debt instrument should be the same for all five terms described above for the structured note (because they are merely different descriptions of the same ultimate cash flows). That bifurcation would generally result in the structured note being accounted for as a debt host contract with an initial carrying amount of $900 and a fixed annual rate of interest of 6 percent and an embedded forward contract with a $200 forward price, which results in an initial fair value of zero. Instead, if the five notes were bifurcated based on all their contractual terms, such bifurcation would be the equivalent of simply marking an arbitrary portion of a debt instrument to market based on nonsubstantive arbitrary differences in those contractual terms—an inappropriate outcome.
","snippet":"The differences in the terms for these five notes are totally arbitrary because those differences have no effect on the ultimate cash flows under the structured note; thus, those differences are nonsubstantive and should…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:863a760217d25d0d6ae54640452fdf8c76d35beaccaba9e0840da72f1cc20058","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-165","para":"55-165","html":"
The following Cases illustrate the application of the guidance in this Subtopic to instruments that contain a variety of embedded derivatives:
  1. a
    Inverse floater (Case A)
  2. b
    Levered inverse floater (Case B)
  3. c
    Delevered floater (Case C)
  4. d
    Range floater (Case D)
  5. e
    Ratchet floater (Case E)
  6. f
    Fixed-to-variable note (Case F)
  7. g
    Indexed amortizing note (Case G)
  8. h
    Equity-indexed note (Case H)
  9. i
    Variable principal redemption bond (Case I)
  10. j
    Crude oil knock-in note (Case J)
  11. k
    Gold-linked bull note (Case K)
  12. l
    Step-up bond (Case L)
  13. m
    Credit-sensitive bond (Case M)
  14. n
    Inflation bond (Case N)
  15. o
    Disaster bond (Case O)
  16. p
    Specific equity-linked bond (Case P)
  17. q
    Dual currency bond (Case Q)
  18. r
    Short-term loan with a foreign currency option (Case R)
  19. s
    Lease payment in foreign currency (Case S)
  20. t
    Certain purchases in a foreign currency (Case T)
  21. u
    Convertible debt (Case U)
  22. v
    Dollar-denominated variable-rate interest issued by a special-purpose entity that holds yen-denominated variable-rate bonds and a cross-currency swap (Case V)
  23. w
    Variable-rate interest issued by a special-purpose entity that holds fixed-rate bonds and a pay-fixed, receive-variable interest rate swap (Case W)
  24. x
    Securitization involving subordination and variable-rate tranches (Case X)
  25. y
    Securitization involving subordination and fixed-rate tranches (Case Y)
  26. z
    Partially funded synthetic collateralized debt obligation with multiple tranches (Case Z)
  27. aa
    Fully funded synthetic collateralized debt obligation with multiple tranches (Case AA)
  28. ab
    Fully funded synthetic collateralized debt obligation with a single-tranche structure (Case AB).
","snippet":"The following Cases illustrate the application of the guidance in this Subtopic to instruments that contain a variety of embedded derivatives:\n(a) Inverse floater (Case A)\n(b) Levered inverse floater (Case B)\n(c) Delever…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:07c8426cef43311f73a1882ce0bd47a617835fbd1a791c9d9c5a2d7fa6bef699","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-166","para":"55-166","html":"
Cases A through AB illustrate how the guidance in this Subtopic would be applied to contracts with the described terms. If the terms of a contract are different from the described terms, the application of this Subtopic by either party to the contract may be affected. Furthermore, if any contract of the types discussed in Cases A through AB meets the definition of a derivative instrument in its entirety under paragraphs
815-10-15-83 through 15-139
, the guidance for the application of the provisions of this Subtopic to embedded derivatives does not apply.
","snippet":"Cases A through AB illustrate how the guidance in this Subtopic would be applied to contracts with the described terms. If the terms of a contract are different from the described terms, the application of this Subtopic …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:60ceae0c54018d35ab3cdcc3c068b721498726c874816679966e49eb18a6a83e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-167","para":"55-167","html":"
The illustrative instruments and related assumptions in Cases A through P are based on structured notes illustrated in paragraph 320-10-55-10.
","snippet":"The illustrative instruments and related assumptions in Cases A through P are based on structured notes illustrated in paragraph 320-10-55-10.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:10d5e1bae04f88f1e289dce0f36fe69b31999324405a48b853d99af8390fd21c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-168","para":"55-168","html":"
Specifically, each Case does both of the following:
  1. a
    Provides a brief discussion of the terms of an instrument that contains an embedded derivative
  2. b
    Analyzes the instrument (as of the date of inception) in relation to the provisions of this Subtopic that require an embedded derivative to be accounted for according to this Subtopic if it is not clearly and closely related to the host contract.
","snippet":"Specifically, each Case does both of the following:\n(a) Provides a brief discussion of the terms of an instrument that contains an embedded derivative\n(b) Analyzes the instrument (as of the date of inception) in relation…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:84e7d2e1df97fa50cc119054f1cf3203ae024df90aeac8cf51e7b131a5118270","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-169","para":"55-169","html":"
Unless otherwise stated, Cases A through AB share both of the following assumptions:
  1. a
    If the embedded derivative and host portions of the contract are not clearly and closely related, a separate instrument with the same terms as the embedded derivative would meet the scope requirements in Section 815-10-15.
  2. b
    The contract is not remeasured at fair value under otherwise applicable GAAP with changes in fair value currently included in earnings.
","snippet":"Unless otherwise stated, Cases A through AB share both of the following assumptions:\n(a) If the embedded derivative and host portions of the contract are not clearly and closely related, a separate instrument with the sa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:78984ee51f3a697ea547ea6ece2a0758b64d32ce44b313ca12b31c154ee16d01","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-170","para":"55-170","html":"
An inverse floater is a bond with a coupon rate of interest that varies inversely with changes in specified general interest rate levels or indexes, for example, LIBOR.
","snippet":"An inverse floater is a bond with a coupon rate of interest that varies inversely with changes in specified general interest rate levels or indexes, for example, LIBOR.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e34d53138182035c9283fdbc84a27ed2d5fb2705a282c4b125cc06c64acc622e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-171","para":"55-171","html":"
Assume the coupon is 5.25 percent for 3 months to July 1994 and thereafter at 8.75 percent-6-month U.S. dollar (USD) LIBOR to January 1995. Assume the bond includes a stepping option that allows for spread and caps to step semiannually to maturity.
","snippet":"Assume the coupon is 5.25 percent for 3 months to July 1994 and thereafter at 8.75 percent-6-month U.S. dollar (USD) LIBOR to January 1995. Assume the bond includes a stepping option that allows for spread and caps to st…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a37a5da334c687ef8db03700778ece4b4c78694a2c4abe33a51c010d4b38410b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-172","para":"55-172","html":"
An inverse floater contains an embedded derivative (a fixed-for-variable interest rate swap) that is referenced to an interest rate index (in this circumstance, LIBOR) that alters net interest payments that otherwise would be paid by the debtor or received by the investor on an interest-bearing host contract. If the embedded derivative could potentially result in the investor's not recovering substantially all of its initial recorded investment in the bond (that is, if the inverse floater contains no floor to prevent any erosion of principal due to a negative interest rate), the embedded derivative is not considered to be clearly and closely related to the host contract (see paragraph 815-15-25-26[a]). In that circumstance, the embedded derivative should be separated from the host contract and accounted for by both parties pursuant to the provisions of this Subtopic. (In this Case, there appears to be no possibility of the embedded derivative increasing the investor's rate of return on the host contract to an amount that is at least double the initial rate of return on the host contract [see paragraph 815-15-25-26(b)].) In contrast, if the embedded derivative could not potentially result in the investor's failing to recover substantially all of its initial recorded investment in the bond, the embedded derivative is considered to be clearly and closely related to the host contract and separate accounting for the derivative is neither required nor permitted.
","snippet":"An inverse floater contains an embedded derivative (a fixed-for-variable interest rate swap) that is referenced to an interest rate index (in this circumstance, LIBOR) that alters net interest payments that otherwise wou…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2012312a8ae21cee0d6c83ffc3b4215766e92b06a45cc5ada46fd843ccede78f","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-173","para":"55-173","html":"
A levered inverse floater is a bond with a coupon that varies indirectly with changes in general interest rate levels and applies a multiplier (greater than 1.00) to the specified index in its calculation of interest.
","snippet":"A levered inverse floater is a bond with a coupon that varies indirectly with changes in general interest rate levels and applies a multiplier (greater than 1.00) to the specified index in its calculation of interest.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e1cfd96d00da9073365231cc006c643047f254ce2137fa81fbf0e27be804d0df","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-174","para":"55-174","html":"
Assume that interest accrues at 6 percent to June 1994 and thereafter at 14.55 percent-(2.5x 3-month USD LIBOR).
","snippet":"Assume that interest accrues at 6 percent to June 1994 and thereafter at 14.55 percent-(2.5x 3-month USD LIBOR).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0e1b151636a1615c260e1b761c59888443deb870d9262ad5f63922b2c12eddf9","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-175","para":"55-175","html":"
A levered inverse floater can be viewed as an inverse floater in which the embedded interest rate swap is leveraged. Similar to Case A, the embedded derivative would not be clearly and closely related to the host contract if it potentially could result in the investor's not recovering substantially all of its initial recorded investment in the bond (see paragraph 815-15-25-26[a]) because there is no floor to the interest rate. In that circumstance, the embedded derivative (the leveraged interest rate swap) should be separated from the host contract and accounted for by both parties pursuant to the provisions of Subtopic. In contrast, if an embedded derivative could not potentially result in the investor's failing to recover substantially all of its initial recorded investment in the bond and if there was no possibility of the embedded derivative increasing the investor's rate of return on the host contract to an amount that is at least double the initial rate of return on the host contract (see paragraph 815-15-25-26[b]), the embedded derivative is considered to be clearly and closely related to the host contract and no separate accounting for the derivative is required or permitted.
","snippet":"A levered inverse floater can be viewed as an inverse floater in which the embedded interest rate swap is leveraged. Similar to Case A, the embedded derivative would not be clearly and closely related to the host contrac…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb71fc576b5d77934d70a1a19ccb27f1401fd3ca7daf7d3ad3c8587ee3dca958","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-176","para":"55-176","html":"
A delevered floater is a bond with a coupon rate of interest that lags overall movements in specified general interest rate levels or indexes.
","snippet":"A delevered floater is a bond with a coupon rate of interest that lags overall movements in specified general interest rate levels or indexes.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0ea20494269dad4f5d8131fc420b6d37ce56340fcfacaad3234fc71e6f64a6d0","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-177","para":"55-177","html":"
Assume that the coupon is (.5x 10-year U.S. Treasury constant maturities) + 1.25 percent.
","snippet":"Assume that the coupon is (.5x 10-year U.S. Treasury constant maturities) + 1.25 percent.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fc7beda7f3109aa58759745ae0f3fc97910ae4c6221cb091faf8ef844e1c34a9","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-178","para":"55-178","html":"
A delevered floater may be viewed as containing an embedded derivative (a deleveraged swap or a series of forward contracts) that is referenced to an interest rate index (for example, 50 percent of 10-year U.S. Treasury constant maturities) that alters net interest payments that otherwise would be paid or received on an interest-bearing host contract but could not potentially result in the investor's failing to recover substantially all of its initial recorded investment in the bond (see paragraph 815-15-25-26[a]). (In this circumstance, there appears to be no possibility of the embedded derivative increasing the investor's rate of return on the host contract to an amount that is at least double the initial rate of return on the host contract [see paragraph 815-15-25-26(b)].) The embedded derivative is considered to be clearly and closely related to the host contract as described in paragraph 815-15-25-26. Therefore, the embedded derivative should not be separated from the host contract.
","snippet":"A delevered floater may be viewed as containing an embedded derivative (a deleveraged swap or a series of forward contracts) that is referenced to an interest rate index (for example, 50 percent of 10-year U.S. Treasury …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47c784d8768ad145217887f25bc9c0ff4931f888dbff04e8e3c3ce382b52c009","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-179","para":"55-179","html":"
A range floater is a bond with a coupon that depends on the number of days that a reference rate stays within a preestablished collar; otherwise, the bond pays either zero percent interest or a below-market rate.
","snippet":"A range floater is a bond with a coupon that depends on the number of days that a reference rate stays within a preestablished collar; otherwise, the bond pays either zero percent interest or a below-market rate.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:94520f6625441437e666fced316734afe61b251f10fd19e3a8a8f38c1908a9fd","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-180","para":"55-180","html":"
Assume the investor receives 5.5 percent on each day that 3-month USD LIBOR is between 3 percent and 4 percent, with the upper limit increasing annually after a specified date. The coupon will be equal to 0 percent for each day that 3-month USD LIBOR is outside that range.
","snippet":"Assume the investor receives 5.5 percent on each day that 3-month USD LIBOR is between 3 percent and 4 percent, with the upper limit increasing annually after a specified date. The coupon will be equal to 0 percent for e…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:983d913af508fd05c70a265adbdf9b81866816cd35d9abd91ee41dac8ed06980","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-181","para":"55-181","html":"
A range floater may be viewed as containing embedded derivatives (two written conditional exchange option contracts with notional amounts equal to the par value of the fixed-rate instrument) that are referenced to an interest rate index (in this instance, LIBOR) that alter net interest payments that otherwise would be paid by the debtor or received by the investor on an interest-bearing host contract but could not potentially result in the investor's failing to recover substantially all of its initial recorded investment in the bond (see paragraph 815-15-25-26[a]). In this instance, there appears to be no possibility of increasing the investor's rate of return on the host contract to an amount that is at least double the initial rate of return on the host contract (see paragraph 815-15-25-26[b]). The embedded derivatives are considered to be clearly and closely related to the host contract as described in paragraph 815-15-25-26. Therefore, the embedded derivatives should not be separated from the host contract.
","snippet":"A range floater may be viewed as containing embedded derivatives (two written conditional exchange option contracts with notional amounts equal to the par value of the fixed-rate instrument) that are referenced to an int…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ebf4a0f331c7a8aa9be0a169bc70309869b17eb16ac852da4251b807ef165e90","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-182","para":"55-182","html":"
A ratchet floater is a bond that pays a variable rate of interest and has an adjustable cap, adjustable floor, or both that move in sync with each new reset rate.
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Assume the coupon is 3-month USD LIBOR + 50 basis points. In addition to having a lifetime cap of 7.25 percent, the coupon will be collared each period between the previous coupon and the previous coupon plus 25 basis points.
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A ratchet floater may be viewed as containing embedded derivatives (combinations of purchased and written options that create changing caps and floors) that are referenced to an interest rate index (in this example, LIBOR) that alter net interest payments that otherwise would be paid by the debtor or received by the investor on an interest-bearing host contract but could not potentially result in the investor's failing to recover substantially all of its initial recorded investment in the bond (see paragraph 815-15-25-26[a]). In this Case, there appears to be no possibility of increasing the investor's rate of return on the host contract to an amount that is at least double the initial rate of return on the host contract (see paragraph 815-15-25-26[b]). The embedded derivatives are considered to be clearly and closely related to the host contract as described in paragraph 815-15-25-26. Therefore, the embedded derivatives should not be separated from the host contract.
","snippet":"A ratchet floater may be viewed as containing embedded derivatives (combinations of purchased and written options that create changing caps and floors) that are referenced to an interest rate index (in this example, LIBO…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:264ec7ba5393b7e49c05b284c7cb765d63b4393c01025c25045d66016e885ec4","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-185","para":"55-185","html":"
A fixed-to-variable note is a bond that pays a varying coupon (first-year coupon is fixed; second- and third-year coupons are based on LIBOR, U.S. Treasury bills, or a prime rate).
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A fixed-to-variable note may be viewed as containing an embedded derivative (a forward-starting interest rate swap) that is referenced to an interest rate index (such as LIBOR) that alters net interest payments that otherwise would be paid by the debtor or received by the investor on an interest-bearing host instrument but could not potentially result in the investor's failing to recover substantially all of its initial recorded investment in the bond (see paragraph 815-15-25-26[a]). Likewise, there is no possibility of increasing the investor's rate of return on the host contract to an amount that is both at least double the initial rate of return on the host contract and at least twice what otherwise would be the market return for a contract that has the same terms as the host contract and that involves a debtor with a similar credit quality (see paragraph 815-15-25-26[b]). The embedded derivative is considered to be clearly and closely related to the host contract as described in paragraph 815-15-25-26. Therefore, the embedded derivative should not be separated from the host contract.
","snippet":"A fixed-to-variable note may be viewed as containing an embedded derivative (a forward-starting interest rate swap) that is referenced to an interest rate index (such as LIBOR) that alters net interest payments that othe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:93fe4226a8f292672e5657ba88db1efa6487e053801141590e7ad17ff58c5898","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-187","para":"55-187","html":"
An indexed amortizing note is a bond that repays principal based on a predetermined amortization schedule or target value. The amortization is linked to changes in a specific mortgage-backed security index or interest rate index. The maturity of the bond changes as the related index changes. This instrument includes a varying maturity. Assume that the contract does not meet the conditions in paragraph 815-15-25-26(a) or 815-15-25-26(b).
","snippet":"An indexed amortizing note is a bond that repays principal based on a predetermined amortization schedule or target value. The amortization is linked to changes in a specific mortgage-backed security index or interest ra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aeedd454ff1900ce693c1e96af07c5bef0fb46f664c4b7f12a337d7f44919cb2","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-188","para":"55-188","html":"
An indexed amortizing note can be viewed as a fixed-rate amortizing note combined with a conditional exchange option contract that requires partial or total early payment of the note based on changes in a specific mortgage-backed security index or a specified change in an interest rate index. Because the requirement to prepay is ultimately tied to changing interest rates, the embedded derivative is considered to be clearly and closely related to a fixed-rate note. Therefore, the embedded derivative should not be separated from the host contract.
","snippet":"An indexed amortizing note can be viewed as a fixed-rate amortizing note combined with a conditional exchange option contract that requires partial or total early payment of the note based on changes in a specific mortga…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6cd500d3d4802e4acd15bf8f560da35a33d9b19dbf859832dc4356db4b608500","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-189","para":"55-189","html":"
An equity-indexed note is a bond for which the return of interest, principal, or both is tied to a specified equity security or index, for instance, the Standard and Poor's 500 S&P 500 Index. This instrument may contain a fixed or varying coupon rate and may place all or a portion of principal at risk.
","snippet":"An equity-indexed note is a bond for which the return of interest, principal, or both is tied to a specified equity security or index, for instance, the Standard and Poor's 500 S&P 500 Index. This instrument may contain …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a24a7cd083ddaa3854ec684253a2fb836279b5c62bdab56f1d3838c91c19249b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-190","para":"55-190","html":"
An equity-indexed note essentially combines an interest-bearing instrument with a series of forward exchange contracts or option contracts. Often, a portion of the coupon interest rate is, in effect, used to purchase options that provide some form of floor on the potential loss of principal that would result from a decline in the referenced equity index. Because forward or option contracts for which the underlying is an equity index are not clearly and closely related to an investment in an interest-bearing note, those embedded derivatives should be separated from the host contract and accounted for by both parties pursuant to the provisions of this Subtopic.
","snippet":"An equity-indexed note essentially combines an interest-bearing instrument with a series of forward exchange contracts or option contracts. Often, a portion of the coupon interest rate is, in effect, used to purchase opt…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3b91c12719dc3497bd4fc22aa6668eab6b7e51eb73bbeb24c63799c219efbe54","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-191","para":"55-191","html":"
A variable principal redemption bond's principal redemption value at maturity depends on the change in an underlying index over a predetermined observation period. A typical circumstance would be a bond that guarantees a minimum par redemption value of 100 percent and provides the potential for a supplemental principal payment at maturity as compensation for the below-market rate of interest offered with the instrument.
","snippet":"A variable principal redemption bond's principal redemption value at maturity depends on the change in an underlying index over a predetermined observation period. A typical circumstance would be a bond that guarantees a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c0d9bdd14358a2d39b4d794e31911ac794cd49d5ef0e3cf2cb357734e9a348b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-192","para":"55-192","html":"
Assume that a supplemental principal payment will be paid to the investor, at maturity, if the final S&P 500 closing value (determined at a specified date) is less than its initial value at date of issuance and the 10-year U.S. Treasury constant maturities is greater than 2 percent as of a specified date. In all circumstances, the minimum principal redemption will be 100 percent of par.
","snippet":"Assume that a supplemental principal payment will be paid to the investor, at maturity, if the final S&P 500 closing value (determined at a specified date) is less than its initial value at date of issuance and the 10-ye…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c5ae9b2dec21944ebccc04ba90bdefcdbf4e18f5435780cd8a42a5aca4e0b58c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-193","para":"55-193","html":"
A variable principal redemption bond essentially combines an interest-bearing investment with an option that is purchased with a portion of the bond's coupon interest payments. Because the embedded option entitling the investor to an additional return is partially contingent on the S&P 500 index closing above a specified amount, it is not clearly and closely related to an investment in a debt instrument. Therefore, the embedded option should be separated from the host contract and accounted for by both parties pursuant to the provisions of this Subtopic.
","snippet":"A variable principal redemption bond essentially combines an interest-bearing investment with an option that is purchased with a portion of the bond's coupon interest payments. Because the embedded option entitling the i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dfc0d8382dc26e784f7b27d6d094cbb21d865accd5e07805880e388aa9a7e11d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-194","para":"55-194","html":"
An illustrative crude oil knock-in note has a 1 percent coupon and guarantees repayment of principal with upside potential based on the strength of the oil market.
","snippet":"An illustrative crude oil knock-in note has a 1 percent coupon and guarantees repayment of principal with upside potential based on the strength of the oil market.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:61436302b6b07a6101390de3597f920cd09da618213528700d48e658f49fe29a","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-195","para":"55-195","html":"
A crude oil knock-in note essentially combines an interest-bearing instrument with a series of option contracts. A significant portion of the coupon interest rate is, in effect, used to purchase options that provide the investor with potential gains resulting from increases in specified crude oil prices. Because the option contracts are indexed to the price of crude oil, they are not clearly and closely related to an investment in an interest-bearing note. Therefore, the embedded option contract should be separated from the host contract and accounted for by both parties pursuant to the provisions of this Subtopic.
","snippet":"A crude oil knock-in note essentially combines an interest-bearing instrument with a series of option contracts. A significant portion of the coupon interest rate is, in effect, used to purchase options that provide the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6753297b8ce36b2d5142958a3804962d32578dfde785f01db976abe366879d0","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-196","para":"55-196","html":"
An illustrative gold-linked bull note has a fixed 3 percent coupon and guarantees repayment of principal with upside potential if the price of gold increases.
","snippet":"An illustrative gold-linked bull note has a fixed 3 percent coupon and guarantees repayment of principal with upside potential if the price of gold increases.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b11e57fc6cfa9cc62af17712c2eb35342abbc4c71149b926988b452a15ed5707","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-197","para":"55-197","html":"
A gold-linked bull note can be viewed as combining an interest-bearing instrument with a series of option contracts. A portion of the coupon interest rate is, in effect, used to purchase call options that provide the investor with potential gains resulting from increases in gold prices. Because the option contracts are indexed to the price of gold, they are not clearly and closely related to an investment in an interest-bearing note. Therefore, the embedded option contracts should be separated from the host contract and accounted for by both parties pursuant to the provisions of this Subtopic.
","snippet":"A gold-linked bull note can be viewed as combining an interest-bearing instrument with a series of option contracts. A portion of the coupon interest rate is, in effect, used to purchase call options that provide the inv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:78dc06ebfe089605acd5c249114d11c38f648bbafba8a42af707d21a4e99ee3d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-198","para":"55-198","html":"
A step-up bond provides an introductory above-market yield and steps up to a new coupon, which will be below then-current market rates or, alternatively, the bond may be called in lieu of the step-up in the coupon rate.
","snippet":"A step-up bond provides an introductory above-market yield and steps up to a new coupon, which will be below then-current market rates or, alternatively, the bond may be called in lieu of the step-up in the coupon rate.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7304c1fc33f7f66895ca63f2adcddf99fa8e727b1a0b302e21f6e30e01120cee","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-199","para":"55-199","html":"
A step-up bond can be viewed as a fixed-rate bond with an embedded call option and a changing interest rate feature. The bond pays an initial above-market interest rate to compensate for the call option and the future below-market rate (that is, below the forward yield curve, as determined at issuance based on the existing upward-sloping yield curve). Because the call option is related to changes in interest rates, it is clearly and closely related to an investment in a fixed-rate bond. Therefore, the embedded derivatives should not be separated from the host contract.
","snippet":"A step-up bond can be viewed as a fixed-rate bond with an embedded call option and a changing interest rate feature. The bond pays an initial above-market interest rate to compensate for the call option and the future be…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b097ffaa0a50605df49379a3e7600586a474490182bf626a01a0ea4ba70f07a8","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-200","para":"55-200","html":"
A credit-sensitive bond has a coupon rate of interest that resets based on changes in the issuer's credit rating.
","snippet":"A credit-sensitive bond has a coupon rate of interest that resets based on changes in the issuer's credit rating.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:165f5a784def0564def4814c6566f5a832460e5dda99a2d3c46293622cb93449","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-201","para":"55-201","html":"
A credit-sensitive bond can be viewed as combining a fixed-rate bond with a conditional exchange contract (or option contract) that entitles the investor to a higher rate of interest if the credit rating of the issuer declines. Because the creditworthiness of the debtor and the interest rate on a debt instrument are clearly and closely related, the embedded derivative should not be separated from the host contract.
","snippet":"A credit-sensitive bond can be viewed as combining a fixed-rate bond with a conditional exchange contract (or option contract) that entitles the investor to a higher rate of interest if the credit rating of the issuer de…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:04b85af2a788868d837921e19f639c3b933919821091f4b9f0049f6d79e4316e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-202","para":"55-202","html":"
An inflation bond has a contractual principal amount that is indexed to the inflation rate but cannot decrease below par; the coupon rate is typically below that of traditional bonds of similar maturity.
","snippet":"An inflation bond has a contractual principal amount that is indexed to the inflation rate but cannot decrease below par; the coupon rate is typically below that of traditional bonds of similar maturity.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bbdc7e9ff50439102adc9e7b824d9605cf6347d1db4681932be4bac04335cc9d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-203","para":"55-203","html":"
An inflation bond can be viewed as a fixed-rate bond for which a portion of the coupon interest rate has been exchanged for a conditional exchange contract (or option contract) indexed to the consumer price index, or other index of inflation in the economic environment for the currency in which the bond is denominated, that entitles the investor to payment of additional principal based on increases in the referenced index. Such rates of inflation and interest rates on the debt instrument are considered to be clearly and closely related. Therefore, the embedded derivative should not be separated from the host contract.
","snippet":"An inflation bond can be viewed as a fixed-rate bond for which a portion of the coupon interest rate has been exchanged for a conditional exchange contract (or option contract) indexed to the consumer price index, or oth…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eee1414fab72ce2a5199465be8fbb90089d251e2a646622d531e13529ec61559","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-204","para":"55-204","html":"
A disaster bond pays a coupon above that of an otherwise comparable traditional bond; however, all or a substantial portion of the principal amount is subject to loss if a specified disaster experience occurs.
","snippet":"A disaster bond pays a coupon above that of an otherwise comparable traditional bond; however, all or a substantial portion of the principal amount is subject to loss if a specified disaster experience occurs.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0becceade71b9f89db0d80b120d96530f3de589d2c200e4c93d72d580c6a527c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-205","para":"55-205","html":"
A disaster bond can be viewed as a fixed-rate bond combined with a conditional exchange contract (an option contract). The investor receives an additional coupon interest payment in return for giving the issuer an option indexed to industry loss experience on a specified disaster. Because the option contract is indexed to the specified disaster experience, it cannot be viewed as being clearly and closely related to an investment in a fixed-rate bond. Therefore, the embedded derivative should be separated from the host contract and accounted for by both parties pursuant to the provisions of this Subtopic.
","snippet":"A disaster bond can be viewed as a fixed-rate bond combined with a conditional exchange contract (an option contract). The investor receives an additional coupon interest payment in return for giving the issuer an option…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f5c3f094df421bbd599e0d1fd0fe9359c10072e041e5ee8f5a6e3f6998fc9cd","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-206","para":"55-206","html":"
However, if the embedded derivative entitles the holder of the option (that is, the issuer of the disaster bond) to be compensated only for changes in the value of specified assets or liabilities for which the holder is at risk (including the liability for insurance claims payable due to the specified disaster) as a result of an identified insurable event (see paragraphs
815-10-15-53 through 15-54
), a separate instrument with the same terms as the embedded derivative would not meet the definition of a derivative instrument in Section 815-10-15. In that circumstance, because the criterion in paragraph 815-15-25-1(c) would not be met, there is no embedded derivative to be separated from the host contract, and the disaster bond would not be subject to the requirements of this Subtopic. The investor is essentially providing a form of insurance or reinsurance coverage to the issuer.
","snippet":"However, if the embedded derivative entitles the holder of the option (that is, the issuer of the disaster bond) to be compensated only for changes in the value of specified assets or liabilities for which the holder is …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b5f31b0d8090df0a2cf91b59008a86d6e71f67f6d37eae627009724d87cc5718","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-207","para":"55-207","html":"
A specific equity-linked bond pays a coupon slightly below that of traditional bonds of similar maturity; however, the principal amount is linked to the stock market performance of an equity investee of the issuer. The issuer may settle the obligation by delivering the shares of the equity investee or may deliver the equivalent fair value in cash.
","snippet":"A specific equity-linked bond pays a coupon slightly below that of traditional bonds of similar maturity; however, the principal amount is linked to the stock market performance of an equity investee of the issuer. The i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b675da5789aa621a669ed6e8d8ac7c8ba5ff48b7d9ea27e9bac5b86f82fa88ea","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-208","para":"55-208","html":"
A specific equity-linked bond can be viewed as combining an interest-bearing instrument with, depending on its terms, a series of forward exchange contracts or option contracts based on an equity instrument. Often, a portion of the coupon interest rate is used to purchase options that provide some form of floor on the loss of principal due to a decline in the price of the referenced equity instrument. The forward or option contracts do not qualify for the exception in paragraph 815-10-15-59(b) because the shares in the equity investee owned by the issuer meet the definition of a financial instrument. Because forward or option contracts for which the underlying is the price of a specific equity instrument are not clearly and closely related to an investment in an interest-bearing note, the embedded derivative should be separated from the host contract and accounted for by both parties pursuant to the provisions of this Subtopic.
","snippet":"A specific equity-linked bond can be viewed as combining an interest-bearing instrument with, depending on its terms, a series of forward exchange contracts or option contracts based on an equity instrument. Often, a por…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:933e32efb66881c874782ca3ce618c77c9c7d1ba1c681aa06fef28ddd05b8737","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-209","para":"55-209","html":"
A dual currency bond provides for repayment of principal in U.S. dollars and periodic interest payments denominated in a foreign currency. In this circumstance, a U.S. entity with the dollar as its functional currency is borrowing funds from an independent party with those repayment terms as described.
","snippet":"A dual currency bond provides for repayment of principal in U.S. dollars and periodic interest payments denominated in a foreign currency. In this circumstance, a U.S. entity with the dollar as its functional currency is…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6bab670577e6b90429705e9c55f6fe745cea69ad9f40abaafaa8cf4acfa2bc4","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-210","para":"55-210","html":"
Because the portion of this instrument relating to the periodic interest payments denominated in a foreign currency is subject to the requirement in Topic 830 to recognize the foreign currency transaction gain or loss in earnings, the instrument should not be considered as containing an embedded foreign currency derivative instrument pursuant to paragraph 815-15-15-5. In this circumstance, the U.S. entity has the dollar as the functional currency and is making interest payments in a foreign currency. Remeasurement of the liability is required using future equivalent dollar interest payments determined by the current spot exchange rate and discounted at the historical effective interest rate.
","snippet":"Because the portion of this instrument relating to the periodic interest payments denominated in a foreign currency is subject to the requirement in Topic 830 to recognize the foreign currency transaction gain or loss in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09c60d3e8fa2bebfb23dd0205d849c9d49d07dd34951525fd7477b7d72fcbbb4","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-211","para":"55-211","html":"
A U.S. lender issues a loan at an above-market interest rate. The loan is made in U.S. dollars, the borrower's functional currency, and the borrower has the option to repay the loan in U.S. dollars or in a fixed amount of a specified foreign currency.
","snippet":"A U.S. lender issues a loan at an above-market interest rate. The loan is made in U.S. dollars, the borrower's functional currency, and the borrower has the option to repay the loan in U.S. dollars or in a fixed amount o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aef466e91955631e21f7105b769715c2db2b1df2d2ddced5e855f5d7f07089e3","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-212","para":"55-212","html":"
This instrument can be viewed as combining a loan at prevailing market interest rates and a foreign currency option. The lender has written a foreign currency option exposing it to changes in foreign currency exchange rates during the outstanding period of the loan. The premium for the option has been paid as part of the interest rate. Because the borrower has the option to repay the loan in U.S. dollars or in a fixed amount of a specified foreign currency, the provisions of paragraph 815-15-15-5 are not relevant to this Case. That paragraph addresses foreign-currency-denominated interest or principal payments but does not apply to foreign currency options embedded in a functional-currency-denominated debt host contract. Because a foreign currency option is not clearly and closely related to issuing a loan, the embedded option should be separated from the host contract and accounted for by both parties pursuant to the provisions of this Subtopic. In contrast, if both the principal payment and the interest payments on the loan had been payable only in a fixed amount of a specified foreign currency, there would be no embedded foreign currency derivative pursuant to this Subtopic.
","snippet":"This instrument can be viewed as combining a loan at prevailing market interest rates and a foreign currency option. The lender has written a foreign currency option exposing it to changes in foreign currency exchange ra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2afdcb9dcd7253fd594bf03e9b381d125a7fecb2f7aca8fbba2b5bce725ea0b9","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-213","para":"55-213","html":"
This Case involves a lease payment in foreign currency. A U.S. entity's operating lease with a Japanese lessor is payable in yen (JPY). The functional currency of the U.S. entity is the U.S. dollar (USD).
","snippet":"This Case involves a lease payment in foreign currency. A U.S. entity's operating lease with a Japanese lessor is payable in yen (JPY). The functional currency of the U.S. entity is the U.S. dollar (USD).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66772ed6f072c2e2f336d94160373e535235e6ea3b8fcda0519bd124d350ce4c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-214","para":"55-214","html":"
Using available information about the lessor and its operations, the U.S. entity may decide it is reasonable to conclude that JPY would be the currency of the primary economic environment in which the Japanese lessor operates, consistent with the functional currency notion in Topic 830.
","snippet":"Using available information about the lessor and its operations, the U.S. entity may decide it is reasonable to conclude that JPY would be the currency of the primary economic environment in which the Japanese lessor ope…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:668b304f974ef8b0c90b15a82be1bfa072b83fc53827791834772569b32b754e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-215","para":"55-215","html":"
Thus, the lease should not be viewed as containing an embedded swap converting USD lease payments to JPY. Alternatively, if the lease payments are specified in a currency seemingly unrelated to each party's functional currency, such as drachmas (GRD) (assuming the leased property is not in Greece), the embedded foreign currency swap should be separated from the host contract and accounted for as a derivative for purposes of this Subtopic because the provisions of paragraph 815-15-15-10 would not apply and a separate instrument with the same terms would meet the definition of a derivative instrument in Section 815-10-15.
","snippet":"Thus, the lease should not be viewed as containing an embedded swap converting USD lease payments to JPY. Alternatively, if the lease payments are specified in a currency seemingly unrelated to each party's functional cu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6c729a39fd5e072b0de4a113d9267f61664cff3dc0343fba6c25bd161fb138f4","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-216","para":"55-216","html":"
Assume a U.S. entity enters into a contract to purchase corn from a local American supplier in six months for a fixed amount of Japanese yen (JPY); JPY is not the functional currency of either party to the transaction. The corn is expected to be delivered and used over a reasonable period in the normal course of business. Because JPY is not the functional currency of either party to the contract and the purchase of corn is transacted internationally in many different currencies, the contract does not qualify for the normal purchases and normal sales exception under Subtopic 815-10. The contract is a compound derivative comprising a U.S. dollar- (USD-) denominated forward contract for the purchase of corn and an embedded foreign currency swap from the purchaser's functional currency (USD) to JPY. The compound derivative instrument cannot be separated into its components (representing the foreign currency derivative instrument and the forward commodity contract) and accounted for separately under this Subtopic.
","snippet":"Assume a U.S. entity enters into a contract to purchase corn from a local American supplier in six months for a fixed amount of Japanese yen (JPY); JPY is not the functional currency of either party to the transaction. T…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fb91ef168516bb5863e87d2415974b220fd3b6488148930864133784aacab8a1","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-217","para":"55-217","html":"
In a convertible debt instrument, an investor receives a below-market interest rate and receives the option to convert its debt instrument into the equity of the issuer at an established conversion rate. The terms of the conversion require that the issuer deliver shares of stock to the investor.
","snippet":"In a convertible debt instrument, an investor receives a below-market interest rate and receives the option to convert its debt instrument into the equity of the issuer at an established conversion rate. The terms of the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47aeff34fb469c4386f36acf8a220d04f0270676d5e4113456c2aeb12c6643b3","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-218","para":"55-218","html":"
This instrument essentially contains a call option on the issuer's stock. Under the provisions of this Subtopic, the accounting by the issuer and investor can differ. The issuer's accounting depends on whether a separate instrument with the same terms as the embedded written option would be a derivative instrument pursuant to Section 815-10-15. Assuming the option is indexed to the issuer's own stock and a separate instrument with the same terms would be classified in stockholders' equity in the statement of financial position, the written option is not considered to be a derivative instrument for the issuer under paragraph 815-10-15-74(a) and should not be separated from the host contract.
","snippet":"This instrument essentially contains a call option on the issuer's stock. Under the provisions of this Subtopic, the accounting by the issuer and investor can differ. The issuer's accounting depends on whether a separate…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e127f8f12e0f6b067ab3a1297a654608fa5dfc87c53d61492f2670e0ebcab39d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-219","para":"55-219","html":"
In contrast, if the terms of the conversion allow for a cash settlement rather than delivery of the issuer's shares at the investor's option, the exception in paragraph 815-10-15-74(a) for the issuer does not apply because the contract would not be classified in stockholders' equity in the issuer's statement of financial position. In that circumstance, the issuer should separate the embedded derivative from the host contract and account for it pursuant to the provisions of this Subtopic because both of the following conditions exist:
  1. a
    An option based on the entity's stock price is not clearly and closely related to an interest-bearing debt instrument.
  2. b
    The option would not be considered an equity instrument of the issuer (see paragraph 815-40-25-4(a)(2)).
","snippet":"In contrast, if the terms of the conversion allow for a cash settlement rather than delivery of the issuer's shares at the investor's option, the exception in paragraph 815-10-15-74(a) for the issuer does not apply becau…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:491284eefe14124a03cadb07fd11d22d1aac681707202197ef071a103c6ee889","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-220","para":"55-220","html":"
Similarly, if the convertible debt is indexed to another entity's publicly traded common stock, the issuer should separate the embedded derivative from the host contract and account for it pursuant to the provisions of this Subtopic because both of the following conditions exist:
  1. a
    An option based on another entity's stock price is not clearly and closely related to an investment in an interest-bearing note.
  2. b
    The option would not be considered an equity instrument of the issuer.
","snippet":"Similarly, if the convertible debt is indexed to another entity's publicly traded common stock, the issuer should separate the embedded derivative from the host contract and account for it pursuant to the provisions of t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ae80a1a84553ba2bd129817d533765da8d92129687677cd4783862db3a1b1250","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-221","para":"55-221","html":"
The exception in paragraph 815-10-15-74 does not apply to the investor's accounting. Therefore, in both circumstances described, the investor should separate the embedded option contract from the host contract and account for the embedded option contract pursuant to the provisions of this Subtopic because the option contract is based on the price of another entity's equity instrument and thus is not clearly and closely related to an investment in an interest-bearing note. However, if the terms of conversion do not allow for a cash settlement and if the common stock delivered upon conversion is privately held (that is, is not readily convertible to cash), the embedded derivative would not be separated from the host contract because it would not meet the criteria for net settlement as discussed beginning in paragraph 815-10-15-99.
","snippet":"The exception in paragraph 815-10-15-74 does not apply to the investor's accounting. Therefore, in both circumstances described, the investor should separate the embedded option contract from the host contract and accoun…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1f92c9fd3e9c705aa64a3258715c7e64909362d08cc3761f931e186b0e950c9a","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-222","para":"55-222","html":"
Assume a dollar-denominated variable-rate interest is issued by a special-purpose entity that holds yen-denominated variable-rate bonds and a cross-currency swap to pay yen and receive dollars. If the variable rate reflects a current market rate and the notional amounts of the bonds and the swap correspond to the notional amount of the interests issued, the dollar-denominated variable-rate interest would not have an embedded derivative requiring bifurcation because the terms of the beneficial interest do not indicate an embedded derivative and the financial instruments held by the entity provide the necessary cash flows.
","snippet":"Assume a dollar-denominated variable-rate interest is issued by a special-purpose entity that holds yen-denominated variable-rate bonds and a cross-currency swap to pay yen and receive dollars. If the variable rate refle…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a563aab85a815927f9777b84d2e62faba3e0b66544d98845f75fced3eb146ca","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-223","para":"55-223","html":"
Assume a variable-rate interest is issued by a special-purpose entity that holds fixed-rate bonds and a pay-fixed, receive-variable interest rate swap. The variable-rate interest would not have an embedded derivative requiring bifurcation because the terms of the beneficial interest do not indicate an embedded derivative and the financial instruments held by the entity provide the necessary cash flows. However, if the notional amounts of the fixed-rate bonds and the variable interest rate swap do not match, the variable-rate interest would have to be evaluated for an embedded derivative under paragraph 815-15-25-26 because the financial instruments held by the entity might not provide the necessary cash flows.
","snippet":"Assume a variable-rate interest is issued by a special-purpose entity that holds fixed-rate bonds and a pay-fixed, receive-variable interest rate swap. The variable-rate interest would not have an embedded derivative req…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:16d6dd5f4cfa2870c9b17191c780dfbab413c8e8a4f138793ad6233ce9d1215a","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-224","para":"55-224","html":"
Assume a special-purpose entity that holds nonprepayable fixed-rate bonds issues all of the following three tranches:
  1. a
    A senior, variable-rate financial instrument (with a limited exposure to credit losses on the fixed-rate bonds)
  2. b
    A subordinated financial instrument that is entitled to 90 percent of the difference between the fixed rate received from the bonds and the variable rate paid to the senior financial instrument (with a limited exposure to credit losses on the fixed-rate bonds)
  3. c
    A residual financial instrument that is entitled to the remainder of the fixed-rate payment from the bonds after any credit losses on the fixed-rate bonds.
","snippet":"Assume a special-purpose entity that holds nonprepayable fixed-rate bonds issues all of the following three tranches:\n(a) A senior, variable-rate financial instrument (with a limited exposure to credit losses on the fixe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f011e2ccad2e9e6b4cbf444c35751f1f4380a1c0af00c9ef08f7eb642396762a","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-225","para":"55-225","html":"
Each of the three tranches in the preceding paragraph would be a hybrid financial instrument with an embedded interest rate derivative feature that requires bifurcation analysis under paragraph 815-10-15-11 and Section 815-15-25 because the terms are variable rate even though the entity does not hold assets that bear a variable rate. This analysis considers the structure as a whole including the related liabilities. The embedded interest rate derivative feature in the senior, variable-rate financial instrument is considered to be clearly and closely related to the host contract. With respect to the subordinated financial instrument and the residual financial instrument, there could be a shortfall of cash flow after the senior interest holders are paid, due to adverse changes in interest rates, and the investor in either the subordinated interest or the residual interest might not recover substantially all of its initial recorded investment in the interest; thus, the embedded interest rate derivative feature is considered to be not clearly and closely related to the host contract. Therefore, the embedded interest rate derivative should be separated from the host contract and accounted for in accordance with the provisions of this Subtopic. Paragraph 815-15-15-9 is not relevant because risk features other than credit risk are present in the beneficial interests that require application of paragraph 815-10-15-11 and Section 815-15-25.
","snippet":"Each of the three tranches in the preceding paragraph would be a hybrid financial instrument with an embedded interest rate derivative feature that requires bifurcation analysis under paragraph 815-10-15-11 and Section 8…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d42bf1662f30aadb02a5a49e3baa704fd566725b6694118ae55ffa360bfcae49","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-226","para":"55-226","html":"
Assume a special-purpose entity that holds prepayable fixed-rate loans issues all of the following three tranches:
  1. a
    A senior, fixed-rate financial instrument that is entitled to receive fixed-rate interest payments and all the prepayments and repayments of principal amounts received from the debtors (with a limited exposure to credit losses on the fixed-rate loans)
  2. b
    A subordinated, fixed-rate financial instrument that is entitled to receive fixed-rate interest payments and the prepayments and repayments of principal amounts received from the debtors only after the holders of the senior financial instrument have been paid in full (with a limited exposure to credit losses on the fixed-rate loans)
  3. c
    A residual financial instrument that is entitled to the remainder of the fixed-rate interest payments from the loans and the prepayments and repayments of principal amounts received from the debtors only after the holders of both the senior financial instrument and the subordinated financial instrument have been paid in full. All credit losses on the fixed-rate loans are absorbed first by the holders of the residual financial instrument.
","snippet":"Assume a special-purpose entity that holds prepayable fixed-rate loans issues all of the following three tranches:\n(a) A senior, fixed-rate financial instrument that is entitled to receive fixed-rate interest payments an…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9695deae77c2f94dbddd3f4836ea9df8296a86a203820d3abd98441aa4d127c7","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-226A","para":"55-226A","html":"
Each of the three tranches in the preceding paragraph would be a hybrid financial instrument with an embedded derivative feature. Because the embedded derivative feature involves only the transfer of credit risk that is only in the form of subordination of one financial instrument to another (assuming that the investor did not pay a significant premium for the interest in the tranche), the scope exception in paragraph 815-15-15-9 applies, and the embedded credit derivative feature existing in the tranches would not be subject to the application of paragraph 815-10-15-11 and Section 815-15-25.
","snippet":"Each of the three tranches in the preceding paragraph would be a hybrid financial instrument with an embedded derivative feature. Because the embedded derivative feature involves only the transfer of credit risk that is …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ad373e4cbcf01a026dcce65394f1f955c011e54cfda378bc5b75ad11ba4ca2b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-226B","para":"55-226B","html":"
Assume a special-purpose entity that holds guaranteed investment contracts and that wrote a credit default swap on a referenced credit to a third party with a significantly larger notional amount than the guaranteed investment contracts issues various tranches of credit-linked beneficial interests to investors that differ in terms of priority and in their potential obligation to fund any losses on the credit default swap. That is, if credit losses greater than the value of the guaranteed investment contracts are incurred under the credit default swap, the investors in each of the tranches might be required to provide additional funds to the special-purpose entity, which would then pass those funds on as payments to the holder of the credit default swap. Because the investors in those tranches are exposed to making potential future payments, all the embedded derivative features would be subject to the application of paragraph 815-10-15-11 and Section 815-15-25 (provided that the investor's overall contract is not a derivative in its entirety under Section 815-10-15). While the risk in those tranches is credit related, the investor can lose more than its original investment. Therefore, the credit risk for those tranches is not related only to subordination and would be evaluated under paragraph 815-10-15-11 and Section 815-15-25, particularly paragraph 815-15-25-51A.
","snippet":"Assume a special-purpose entity that holds guaranteed investment contracts and that wrote a credit default swap on a referenced credit to a third party with a significantly larger notional amount than the guaranteed inve…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:291845c0ea709485c7e7c6bf454d4264431d0cacdfd76716b4e0d5809d26c426","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-226C","para":"55-226C","html":"
Assume a special-purpose entity that holds securities issued by AA-rated Entity A and that wrote a credit default swap on a referenced credit (BBB-rated Entity B) to a third party (with a smaller notional amount than the securities held) issues various tranches of credit-linked beneficial interests to investors that differ in terms of priority for the distribution of cash flows from the special-purpose entity. The assets in the special-purpose entity are sufficient to fund any losses on the credit default swap. Furthermore, none of the tranches expose the investor to making potential future payments related to defaults on the written credit default swap. Rather, the investor is exposed to a potential reduction in its future cash inflows, which is the effect of the credit risk related to the credit default swap. That reduction in future cash flows is allocated among the tranches by the subordination of one tranche to another. Each of the tranches would be a hybrid financial instrument with an embedded credit derivative feature that requires bifurcation analysis under paragraph 815-10-15-11 and Section 815-15-25 because the beneficial interests are exposed to credit risk from the securities held (Entity A) and also from credit risk introduced by the credit default swap (Entity B) and, thus, the payments to investors would be affected if either Entity A or Entity B defaults. The embedded credit derivative feature in the beneficial interests would not be clearly and closely related to the host contract under Section 815-15-25. Therefore, the embedded credit derivative feature should be separated from the host contract and accounted for in accordance with the provisions of this Subtopic. Paragraph 815-15-15-9 is not relevant because the embedded credit risk is not related solely to subordination.
","snippet":"Assume a special-purpose entity that holds securities issued by AA-rated Entity A and that wrote a credit default swap on a referenced credit (BBB-rated Entity B) to a third party (with a smaller notional amount than the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a431574db087105434b777207a7d4fe4521c21a4e4a72ec5e20775218c1bb97d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-226D","para":"55-226D","html":"
Assume a special-purpose entity that holds securities issued by AA-rated Entity C and that wrote a credit default swap on a referenced credit (BBB-rated Entity D) to a third party uses a single-tranche structure to issue credit-linked beneficial interests to multiple investors. The assets in the special-purpose entity are sufficient to fund any losses on the credit default swap. Because the single-tranche structure involves no subordination of one financial instrument to another, the scope exception in paragraph 815-15-15-9 does not apply. The embedded credit derivative feature existing in the beneficial interests would be subject to the application of paragraph 815-10-15-11 and Section 815-15-25, as discussed in Case AA.
","snippet":"Assume a special-purpose entity that holds securities issued by AA-rated Entity C and that wrote a credit default swap on a referenced credit (BBB-rated Entity D) to a third party uses a single-tranche structure to issue…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:48fe7cac30cfcd107e8e91e3ec6c9ad29764dc993a37621ca6afd81a5cf4b50d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-227","para":"55-227","html":"
To illustrate the host contract and embedded derivative valuation issues in this Subtopic, consider the following equity-indexed annuity point-to-point design example, which includes a minimum account value stated as a return on the principal amount of the annuity.
","snippet":"To illustrate the host contract and embedded derivative valuation issues in this Subtopic, consider the following equity-indexed annuity point-to-point design example, which includes a minimum account value stated as a r…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bc7de6393a29619f5167349947cc65b74efe90cacc08a7baf0ad1520e2a0921b","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-228","para":"55-228","html":"
At inception, the insurer has received $100,000, recorded as follows.
","snippet":"At inception, the insurer has received $100,000, recorded as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ae51bc1e33d2da839ad23ed758d4261df138f02a447d57d4142cb0b032236ef6","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-229","para":"55-229","html":"
In the preceding journal entry, paragraphs 815-15-30-2 and 815-15-35-3 are followed: the embedded derivative is recorded at fair value, and the carrying value assigned to the host contract is the difference between the proceeds received from the issuance of the hybrid instrument and the fair value of the embedded derivative.
","snippet":"In the preceding journal entry, paragraphs 815-15-30-2 and 815-15-35-3 are followed: the embedded derivative is recorded at fair value, and the carrying value assigned to the host contract is the difference between the p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a0e2aefc4758ed9b17092fae22f6cdd3fc8b0b7caeef1b09245eefb71f1f557","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-230","para":"55-230","html":"
Accordingly, in this Example, the host contract would be accreted annually to the minimum account value at the end of the contract ($103,030) using an effective yield method (in this Example, the implicit interest rate underlying the host is 8.8 percent).
","snippet":"Accordingly, in this Example, the host contract would be accreted annually to the minimum account value at the end of the contract ($103,030) using an effective yield method (in this Example, the implicit interest rate u…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ca137f19c7164946025709d30802735aa6000cab10932011d0069e20884c9801","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-231","para":"55-231","html":"
From the issuer's (insurer's) perspective, an equity-indexed annuity liability comprises a fixed annuity host and an embedded written equity option. The embedded equity option should be accounted for under the provisions of Subtopic 815-10. The fixed annuity component should be accounted for under the provisions of Topic 944 that require debt instrument accounting. In this Example, the host contract is a discounted debt instrument that should be accreted using the effective yield method to its minimum account value at the projected maturity or termination date.
","snippet":"From the issuer's (insurer's) perspective, an equity-indexed annuity liability comprises a fixed annuity host and an embedded written equity option. The embedded equity option should be accounted for under the provisions…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b3d5b8f67071af314d521704945f6d638ac5a1c3454855a000b2ae51517108b6","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-232","para":"55-232","html":"
Upon receipt of consideration for an equity-indexed annuity, the issuing entity should allocate a portion of the consideration to the embedded written option, as described in paragraphs 815-15-30-2 and 815-15-35-3, that is, the fair value of the option is assigned to the embedded derivative. The remainder of the consideration should be assigned to a fixed annuity host contract. Both credited interest and changes in the fair value of the embedded equity option would be recognized in earnings. Accordingly, in this Example, the host contract would be accreted annually to the minimum account value at the end of the contract ($103,030) using an effective yield method (in this example, the implicit interest rate underlying the host is 8.8 percent).
","snippet":"Upon receipt of consideration for an equity-indexed annuity, the issuing entity should allocate a portion of the consideration to the embedded written option, as described in paragraphs 815-15-30-2 and 815-15-35-3, that …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:da44eb31d9fc10cfc888ef2275ebed9423b7771d1f5665caa28b8bf14879775f","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-233","para":"55-233","html":"
The following Cases illustrate valuation of the components under the following scenarios at the end of Year 1:
  1. a
    Standard and Poor's Index increases (Case A).
  2. b
    Standard and Poor's Index decreases (Case B).
","snippet":"The following Cases illustrate valuation of the components under the following scenarios at the end of Year 1:\n(a) Standard and Poor's Index increases (Case A).\n(b) Standard and Poor's Index decreases (Case B).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3411c26c3998387f6d9a7a17fbfb56c44ce3217d2bd228b1c26debdf818c8d35","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-234","para":"55-234","html":"
The components are valued as follows.
","snippet":"The components are valued as follows.\nValue under Topic 944 (in absence of this Subtopic): $115,000 ($100,000 at 15% return)","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:838bebacf6124b8274b28d8371343ff3c10b5159045b9d948874180eb6734f9d","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-235","para":"55-235","html":"
Note that because of the market's implicit valuation of future volatility in the Standard and Poor's Index, as reflected in the fair value of the embedded derivative, the combined value of the embedded derivative and the host contract is greater than that which would be calculated for the contract as a whole under Topic 944. The proper accounting in this Case is to record a total liability of $116,000, the hybrid contract value under this Subtopic.
","snippet":"Note that because of the market's implicit valuation of future volatility in the Standard and Poor's Index, as reflected in the fair value of the embedded derivative, the combined value of the embedded derivative and the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:36e99b58ecc63103dd7f28a867a304359e3d513fd9728fc8f07f2ad565424fda","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-236","para":"55-236","html":"
The components are valued as follows.
","snippet":"The components are valued as follows.\nValue under Topic 944 (in absence of this Subtopic): $101,000 ($100,000 at 1% return)","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:48da21f2ba5bd8d9b7448d4cf5097be413133a60689d089f96e46fdcae6b272e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-237","para":"55-237","html":"
The components already reflect the application of paragraph 815-15-25-1 (the derivative instrument is measured at fair value) and paragraph 815-15-25-4 (the host contract is accreted like a debt instrument).
","snippet":"The components already reflect the application of paragraph 815-15-25-1 (the derivative instrument is measured at fair value) and paragraph 815-15-25-4 (the host contract is accreted like a debt instrument).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ce0f0af6f9fb1d2274f2f41c27988ea3f83f4275710c15c48b8ea3b561d7e21e","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-238","para":"55-238","html":"
As a result, the equity-indexed annuity liability would be recorded at $95,000 at the end of Year 1. A separate Topic 944 calculation of account value is no longer required because the derivative instrument is carried at fair value in accordance with this Subtopic and the host contract is recorded following the GAAP accounting guidance for an investment contract under that Topic. Therefore, the insurer should ignore any minimum liability that exceeds the sum of the embedded derivative separately accounted for and the host debt instrument that is accounted for applying the debt model.
","snippet":"As a result, the equity-indexed annuity liability would be recorded at $95,000 at the end of Year 1. A separate Topic 944 calculation of account value is no longer required because the derivative instrument is carried at…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b41bbec9ac2af84a2590f9d473fc0c147ac3f8efe963900908bc0311e221dce8","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-239","para":"55-239","html":"
This Example illustrates the application of paragraph 815-15-15-15 to the cited contract.
","snippet":"This Example illustrates the application of paragraph 815-15-15-15 to the cited contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:923b1cd766a0ed1a125b4f25ddd79fca321920ac62d083ba175a325cfc02d355","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-240","para":"55-240","html":"
On March 1, 20X0, Entity A enters into a Japanese yen- (JPY-) denominated forward purchase agreement to purchase a specified quantity of widgets in six months from Entity B. Entity A's functional currency is the U.S. dollar (USD) and Entity B's functional currency is JPY. The spot JPY/USD foreign exchange rate at the inception of the agreement is USD 1.00 equals JPY 110.00. Entity A wishes to collar its foreign exchange rate risk by ensuring that it will never pay more than the JPY equivalent to USD 11.00 per widget in return for committing to Entity B that it will never pay less than the JPY equivalent to USD 8.80 per widget. The agreement defines the price according to the following schedule.
","snippet":"On March 1, 20X0, Entity A enters into a Japanese yen- (JPY-) denominated forward purchase agreement to purchase a specified quantity of widgets in six months from Entity B. Entity A's functional currency is the U.S. dol…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d30d0b4325be00e12eeff8366a8d8ccbf829607fdbd7ab25afd5433be41fc070","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-241","para":"55-241","html":"
Entity A is exposed to foreign exchange risk in the range between JPY 100 and JPY 125, whereas Entity B is exposed outside that range. The following are various scenarios.
","snippet":"Entity A is exposed to foreign exchange risk in the range between JPY 100 and JPY 125, whereas Entity B is exposed outside that range. The following are various scenarios.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:56fdf5a8a069dd1181e5bb342cb0c7fdc2f747e29edbc27baf72780b19facd4c","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-242","para":"55-242","html":"
In essence, Entity A has not locked in a USD price or a JPY price for the purchased widgets. Instead, as desired, Entity A has locked in a price range in its functional currency (USD) between USD 8.80 and USD 11.00 for the purchased widgets. The final price to be paid within this range will be determined based on the JPY/USD foreign exchange rate. Based on the terms, the contract contains an embedded cap and floor (options). For purposes of this Example, assume that the combination of options represents a net purchased option for Entity A.
","snippet":"In essence, Entity A has not locked in a USD price or a JPY price for the purchased widgets. Instead, as desired, Entity A has locked in a price range in its functional currency (USD) between USD 8.80 and USD 11.00 for t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:20d2b2eb584122875c9689e0c1ff1981d12e7baaaea05a37f7294d8ed9b742fc","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"citation":"815-15-55-243","para":"55-243","html":"
The embedded foreign currency options within Entity A's purchase contract would qualify for the exclusion under paragraph 815-15-15-15 for purposes of Entity A's accounting because all of the following conditions exist:
  1. a
    The options are denominated in JPY and USD (the functional currencies of both parties to the contract).
  2. b
    There is no leverage feature within the options.
  3. c
    The combination of foreign currency options represents a net purchased option.
","snippet":"The embedded foreign currency options within Entity A's purchase contract would qualify for the exclusion under paragraph 815-15-15-15 for purposes of Entity A's accounting because all of the following conditions exist:\n…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:314a65fd11bfede3a8cd7e920c3dca9fce48ab43f1c4f0f32126ff465e5edf74","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d38743753e44ccdccbbad4d566175c5cbc9572da104a172c1944ea6296e222d7","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7b39334709154ec846b4899dab47ac940c1ef28424910ed2d59339d07ccf85c6","downloaded_from":"2026-09-10T01:36:24.773Z","last_downloaded_at":"2026-09-10T01:36:24.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480929","source_sha256":"86aa2e26beef442a4bbae6ae5e39618e67e25f61a6ab291367deff9d6bcc608b"}},{"number":"65","label":"65 Transition and Open Effective Date Information","anchor":"65-transition-and-open-effective-date-information","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-15-65-1","para":"65-1","html":"
Paragraph superseded on 06/20/2011 after the end of the transition period stated in Accounting Standards Update No. 2010-08, Technical Corrections to Various Topics.
","snippet":"Paragraph superseded on 06/20/2011 after the end of the transition period stated in Accounting Standards Update No. 2010-08, Technical Corrections to Various Topics.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:98bf45568924f8f1ac5645d0742dd5c6e3e3eff4055db4ed1d2fd3f8bce5204e","downloaded_from":"2026-09-10T01:36:28.479Z","last_downloaded_at":"2026-09-10T01:36:28.479Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480896","source_sha256":"91492c7445b7248692b5550afc2c97f0419c07d7f150f99fb45a7fd5e332eefd"}},{"citation":"815-15-65-2","para":"65-2","html":"
Paragraph superseded on 06/20/2018 after the end of the transition period stated in Accounting Standards Update No. 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity.
","snippet":"Paragraph superseded on 06/20/2018 after the end of the transition period stated in Accounting Standards Update No. 2014-16, Derivatives and Hedging (Topic 815): Determining Whether the Host Contract in a Hybrid Financia…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:29a638425c38a3e948a1b50f11e827c50c9c93e1a1e55a40947f89571f49509c","downloaded_from":"2026-09-10T01:36:28.479Z","last_downloaded_at":"2026-09-10T01:36:28.479Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480896","source_sha256":"91492c7445b7248692b5550afc2c97f0419c07d7f150f99fb45a7fd5e332eefd"}},{"citation":"815-15-65-3","para":"65-3","html":"
Paragraph superseded on 07/17/2019 after the end of the transition period stated in Accounting Standards Update No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments.
","snippet":"Paragraph superseded on 07/17/2019 after the end of the transition period stated in Accounting Standards Update No. 2016-06, Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e93c8cf383f5daf583ec2960a17ae809b7ce3e3fa699be86ec650f01ee5c0359","downloaded_from":"2026-09-10T01:36:28.479Z","last_downloaded_at":"2026-09-10T01:36:28.479Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480896","source_sha256":"91492c7445b7248692b5550afc2c97f0419c07d7f150f99fb45a7fd5e332eefd"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bf43d62b4fe756a6cb9daa17ff5b9e6dfd8412de46a71848a28741756ea610d3","downloaded_from":"2026-09-10T01:36:28.479Z","last_downloaded_at":"2026-09-10T01:36:28.479Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480896","source_sha256":"91492c7445b7248692b5550afc2c97f0419c07d7f150f99fb45a7fd5e332eefd"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:127c8c10384174a4010a6ff1550cc08f3d7227c39d82a2c791ae37fcc8e9e1f2","downloaded_from":"2026-09-10T01:36:28.479Z","last_downloaded_at":"2026-09-10T01:36:28.479Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480896","source_sha256":"91492c7445b7248692b5550afc2c97f0419c07d7f150f99fb45a7fd5e332eefd"}}],"enrichment":{"summary":"ASC 815-15 governs when a derivative-like feature embedded in a contract that is not itself a derivative in its entirety (a \"hybrid instrument\") must be separated (\"bifurcated\") from the host contract and accounted for as a standalone derivative under Subtopic 815-10. Bifurcation is required if and only if all three criteria in 815-15-25-1 are met: the embedded feature's economic characteristics and risks are not clearly and closely related to the host, the hybrid is not already remeasured at fair value through earnings, and a freestanding instrument with the same terms would be a derivative. As an alternative, an entity may irrevocably elect to measure the entire hybrid financial instrument at fair value through earnings (815-15-25-4), and if it cannot reliably identify and measure the embedded derivative it must measure the whole contract at fair value through earnings (815-15-25-53).","key_points":["Bifurcation is required if and only if all three criteria in 815-15-25-1 are met: (a) not clearly and closely related, (b) the hybrid is not already remeasured at fair value through earnings, and (c) a separate instrument with the same terms would be a derivative under Section 815-10-15.","An embedded derivative exists only within a single contract; an option added or attached to existing debt by a different counterparty is a freestanding instrument, not an embedded derivative (815-15-25-2; 815-10-15-6).","An entity may irrevocably elect at initial recognition (or at a remeasurement/new basis event) to measure the entire hybrid financial instrument at fair value through earnings, but only after determining that an embedded derivative requiring bifurcation exists (815-15-25-4 through 25-6); such a contract may not be designated as a hedging instrument (815-15-35-1).","Multiple bifurcatable features in one hybrid must be bundled and accounted for as a single compound embedded derivative and may not be split by risk type (815-15-25-7 through 25-9); clearly-and-closely-related features are excluded from the compound derivative (815-15-25-10).","For debt hosts, interest-rate-only embedded features are clearly and closely related unless the investor could fail to recover substantially all of its initial recorded investment or the feature could at least double the investor's initial rate of return and produce twice the then-current market return (815-15-25-26); commodity-, equity-, and third-party-credit-indexed features are not clearly and closely related (815-15-25-47 through 25-49, 25-51), while creditworthiness of the obligor and nonleveraged inflation indexing are (815-15-25-46, 25-50).","Call/put options that accelerate settlement of debt are tested under the four-step decision sequence in 815-15-25-42 (index adjustment, underlying other than interest rate or credit risk, substantial premium or discount, contingently exercisable acceleration of principal).","On separation, the embedded derivative is recorded at fair value and the host is assigned the residual carrying amount (815-15-30-2); non-option embedded derivatives are calibrated to a fair value of zero at inception (815-15-30-4), but option-based embedded derivatives use the stated strike and are not adjusted to be at the money (815-15-30-6)."],"categories":["Derivatives and hedging","Financial instruments","Fair value","Debt and equity"],"audience_level":"advanced","student_note":"Bifurcation analysis is a staple of structured finance and convertible debt questions: memorize the three-part test in 815-15-25-1 and the debt-host \"clearly and closely related\" examples. The most common mistake is skipping criterion (c) — many features (e.g., conversion options on the issuer's own stock, equity kickers indexed to non-readily-convertible assets) fail bifurcation because a freestanding instrument with the same terms would not be a derivative at all.","related_topics":["815-10","815-20","815-40","825-10","470-20","830-20"],"key_concepts":["embedded derivative","hybrid instrument","host contract","clearly and closely related","bifurcation","fair value election","compound embedded derivative","debt versus equity host"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:757c7881627768f36314aedf793ed8baa353abaf00f11978cfe1d16bd032c775","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:36:30.992Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"815-40","title":"Contracts in Entity's Own Equity","topic_title":"Derivatives and Hedging","score":0.8092,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9fe40999638b5bd265faf703f19769da9fd4ac14b624590d7d6c67eeb2be57a2","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-10","title":"Overall","topic_title":"Derivatives and Hedging","score":0.7619,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4d35c54898f186cb4af6f5bedbee7c796c6295fc433df9a6b3796ad1c9ff15ae","downloaded_from":"2026-09-10T01:34:51.547Z","last_downloaded_at":"2026-09-10T01:35:54.090Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"470-20","title":"Debt with Conversion and Other Options","topic_title":"Debt","score":0.7554,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d85a34090eb139a716f9b223b2c685f1d7366bf6d02791fa86fbe1002c0eb623","downloaded_from":"2026-09-10T00:31:05.799Z","last_downloaded_at":"2026-09-10T00:31:53.248Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not 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Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:83f11ad394d27b575a1d167f8bdc6841f5e8b78d30f6cace1bdf1b738136bfb0","downloaded_from":"2026-09-10T01:36:33.249Z","last_downloaded_at":"2026-09-10T01:37:01.175Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:df979d77a04b9e3fae4b9efa0985d46c7a7a049684f9dcecec051c3546bf8a5b","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:36:30.992Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-20","topic":"815","title":"Hedging—General","area":"Broad Transactions","paragraphs":542,"summary":"ASC 815-20 sets the general \"gatekeeping\" rules for hedge accounting that apply to all three hedge types — fair value, cash flow, and net investment hedges. It requires formal designation and documentation at hedge inception (risk management objective, hedging instrument, hedged item, hedged risk, and the effectiveness assessment method), and it specifies which items and transactions may be designated as hedged items, which risks may be designated as the hedged risk, which instruments may be hedging instruments, and how effectiveness must be assessed. Items outside those criteria (e.g., equity method investments, most intra-entity transactions, an entity's own equity) simply cannot be hedged for accounting purposes.","concepts":["hedge designation and documentation","hedge effectiveness assessment","hedged item eligibility","forecasted transaction probability","benchmark interest rate","portfolio layer method","contractually specified component","functional currency exposure"],"categories":["Derivatives and hedging","Financial instruments","Foreign currency","Recognition"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-20-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Auction Rate NotesAmendedAccounting Standards Update No. 2017-1208/28/2017
Beneficial InterestsAddedAccounting Standards Update No. 2022-0103/28/2022
Contractually Specified ComponentSupersededAccounting Standards Update No. 2025-0911/25/2025
Contractually Specified ComponentAddedAccounting Standards Update No. 2017-1208/28/2017
Credit RiskAmendedAccounting Standards Update No. 2017-1208/28/2017
Credit RiskAmendedAccounting Standards Update No. 2010-0802/02/2010
Fair Value HedgeAddedAccounting Standards Update No. 2017-1208/28/2017
Fed Funds Effective Rate Overnight Index Swap RateAddedAccounting Standards Update No. 2018-1610/25/2018
Fed Funds Effective Swap Rate (or Overnight Index Swap Rate)SupersededAccounting Standards Update No. 2018-1610/25/2018
Fed Funds Effective Swap Rate (or Overnight Index Swap Rate)AddedAccounting Standards Update No. 2013-1007/17/2013
Financial InstrumentAmendedAccounting Standards Update No. 2024-0203/29/2024
Financial Statements Are Available to Be IssuedAddedAccounting Standards Update No. 2014-0301/16/2014
Hedged LayerAddedAccounting Standards Update No. 2022-0103/28/2022
Interest Rate RiskAmendedAccounting Standards Update No. 2017-1208/28/2017
LIBOR Swap RateAmendedAccounting Standards Update No. 2018-1610/25/2018
London Interbank Offered Rate (LIBOR) Swap RateAddedAccounting Standards Update No. 2018-1610/25/2018
London Interbank Offered Rate Swap RateSupersededAccounting Standards Update No. 2018-1610/25/2018
Not-for-Profit EntityAddedAccounting Standards Update No. 2014-0301/16/2014
Other Comprehensive IncomeAddedMaintenance Update 2014-20 (PDF)09/29/2014
Private CompanyAddedAccounting Standards Update No. 2014-0301/16/2014
Probable (2nd def.)AddedAccounting Standards Update No. 2015-1006/12/2015
Public Business EntityAmendedMaintenance Update 2017-06 (PDF)04/07/2017
Public Business EntityAmendedMaintenance Update 2016-11 (PDF)06/27/2016
Public Business EntityAddedAccounting Standards Update No. 2014-0301/16/2014
Readily Convertible to CashAmendedAccounting Standards Update No. 2024-0203/29/2024
Secured Overnight Financing Rate (SOFR) Overnight Index Swap RateAddedAccounting Standards Update No. 2018-1610/25/2018
Securities Industry and Financial Markets Association (SIFMA) Municipal Swap RateAddedAccounting Standards Update No. 2017-1208/28/2017
Spot RateAddedAccounting Standards Update No. 2014-0603/14/2014
TransactionAmendedAccounting Standards Update No. 2024-0203/29/2024
815-20-05-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-05-2AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-05-3 through 05-10
SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-05-4AmendedAccounting Standards Update No. 2012-0410/01/2012
815-20-15-1AmendedAccounting Standards Update No. 2019-0404/25/2019
815-20-25-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-2AmendedAccounting Standards Update No. 2015-1006/12/2015
815-20-25-3AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-3AmendedAccounting Standards Update No. 2022-0103/28/2022
815-20-25-3AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-3AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-6AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-6AmendedAccounting Standards Update No. 2013-1007/17/2013
815-20-25-6AAmendedAccounting Standards Update No. 2018-1610/25/2018
815-20-25-6AAmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-6AAmendedAccounting Standards Update No. 2013-1007/17/2013
815-20-25-6BAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-8AmendedAccounting Standards Update No. 2025-0709/29/2025
815-20-25-12AmendedAccounting Standards Update No. 2019-0404/25/2019
815-20-25-12AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-12AAmendedAccounting Standards Update No. 2022-0103/28/2022
815-20-25-12AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-12BAddedAccounting Standards Update No. 2022-0103/28/2022
815-20-25-15AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-15AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-15AmendedAccounting Standards Update No. 2015-1006/12/2015
815-20-25-15AmendedAccounting Standards Update No. 2012-0410/01/2012
815-20-25-15AmendedAccounting Standards Update No. 2010-0701/28/2010
815-20-25-15AmendedAccounting Standards Update No. 2010-0802/02/2010
815-20-25-16AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-17AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-19AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-19AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-19BAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-22ASupersededAccounting Standards Update No. 2025-0911/25/2025
815-20-25-22AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-22BSupersededAccounting Standards Update No. 2025-0911/25/2025
815-20-25-22BAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-22CAddedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-28AmendedAccounting Standards Update No. 2016-0101/05/2016
815-20-25-29AmendedAccounting Standards Update No. 2014-0603/14/2014
815-20-25-36AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-37AmendedAccounting Standards Update No. 2016-0101/05/2016
815-20-25-43AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-43AmendedAccounting Standards Update No. 2016-0101/05/2016
815-20-25-46BAmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-46BAmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-50AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-51AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-54AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-71AmendedAccounting Standards Update No. 2016-0101/05/2016
815-20-25-72AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-73AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-77AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-77AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-79AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-79AmendedAccounting Standards Update No. 2024-0203/29/2024
815-20-25-79 through 25-86
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-79AAmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-79AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-79BAddedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-83AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-83BAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-84AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-84AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-88AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-25-102AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-104 through 25-106
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-104AmendedAccounting Standards Update No. 2011-0405/12/2011
815-20-25-111AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-113AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-117AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-117A through 25-117D
AddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-118AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-118AAmendedAccounting Standards Update No. 2022-0103/28/2022
815-20-25-118AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-119AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-119AmendedAccounting Standards Update No. 2014-0301/16/2014
815-20-25-125AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-129AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-129AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-131ASupersededAccounting Standards Update No. 2016-0303/07/2016
815-20-25-131A through 25-131E
AddedAccounting Standards Update No. 2014-0301/16/2014
815-20-25-131AA through 25-132SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-25-131AAAddedAccounting Standards Update No. 2016-0303/07/2016
815-20-25-131ABAddedAccounting Standards Update No. 2016-0303/07/2016
815-20-25-133 through 25-143
AddedAccounting Standards Update No. 2017-1208/28/2017
815-20-25-139AmendedAccounting Standards Update No. 2022-0103/28/2022
815-20-25-139AmendedAccounting Standards Update No. 2019-0404/25/2019
815-20-25-143AmendedAccounting Standards Update No. 2019-0404/25/2019
815-20-35-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-35-1AmendedAccounting Standards Update No. 2016-0101/05/2016
815-20-35-2AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-35-2A through 35-2G
AddedAccounting Standards Update No. 2017-1208/28/2017
815-20-35-6AmendedMaintenance Update 2014-20 (PDF)09/29/2014
815-20-35-7SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-35-8AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-35-9AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-35-11AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-35-12AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-35-13SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-35-16AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-35-17SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-35-19AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-45-1SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-45-1A through 45-1D
AddedAccounting Standards Update No. 2017-1208/28/2017
815-20-45-1CCAddedAccounting Standards Update No. 2022-0103/28/2022
815-20-45-3AddedAccounting Standards Update No. 2017-1208/28/2017
815-20-45-4AddedAccounting Standards Update No. 2022-0103/28/2022
815-20-50-1AmendedAccounting Standards Update No. 2009-1612/23/2009
815-20-55-2AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-4AAmendedAccounting Standards Update No. 2022-0103/28/2022
815-20-55-4AAmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-5 through 55-8
SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-55-6AmendedAccounting Standards Update No. 2012-0410/01/2012
815-20-55-11AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-11AmendedAccounting Standards Update No. 2016-0202/25/2016
815-20-55-12AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-14AAmendedAccounting Standards Update No. 2022-0103/28/2022
815-20-55-14AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-14BAddedAccounting Standards Update No. 2022-0103/28/2022
815-20-55-15AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-15A through 55-15D
AddedAccounting Standards Update No. 2022-0103/28/2022
815-20-55-17AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-17AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-18A through 55-18DAddedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-19AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-19AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-23AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-23AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-23A through 55-23D
AddedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-24AmendedAccounting Standards Update No. 2016-1912/14/2016
815-20-55-26A through 55-26E
SupersededAccounting Standards Update No. 2025-0911/25/2025
815-20-55-26A through 55-26E
AddedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-27 through 55-32
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-33AAmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-33AAmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-33BAmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-33CSupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-55-33DSupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-55-33EAmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-33FSupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-55-33GAddedAccounting Standards Update No. 2019-0404/25/2019
815-20-55-38AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-39SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-55-40AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-41 through 55-43
SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-55-44AmendedAccounting Standards Update No. 2016-1912/14/2016
815-20-55-44AAmendedAccounting Standards Update No. 2016-1912/14/2016
815-20-55-44CAmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-46AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-50AmendedMaintenance Update 2014-07 (PDF)03/17/2014
815-20-55-51AmendedMaintenance Update 2014-07 (PDF)03/17/2014
815-20-55-51AmendedAccounting Standards Update No. 2014-0603/14/2014
815-20-55-54 through 55-56
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-54AmendedAccounting Standards Update No. 2014-0301/16/2014
815-20-55-56AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-56AmendedAccounting Standards Update No. 2016-0503/10/2016
815-20-55-56AAddedAccounting Standards Update No. 2016-0503/10/2016
815-20-55-62AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-62AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-64AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-68AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-69AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-71AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-73SupersededAccounting Standards Update No. 2016-0202/25/2016
815-20-55-75AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-79AAmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-79AAmendedAccounting Standards Update No. 2014-0301/16/2014
815-20-55-79BAmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-79BAmendedAccounting Standards Update No. 2014-0301/16/2014
815-20-55-79C through 55-79ADAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-79PAmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-79RAmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-80AAddedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-86AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-88AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-89AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-89AAddedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-89BAddedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-90AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-91AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-92AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-94AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-94AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-95AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-96AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-96AAddedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-97AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-98AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-98AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-99AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-99A through 55-99E
AddedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-103 through 55-105
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-107 through 55-110
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-115AmendedAccounting Standards Update No. 2025-0709/29/2025
815-20-55-116AmendedAccounting Standards Update No. 2025-0709/29/2025
815-20-55-117AmendedAccounting Standards Update No. 2016-0101/05/2016
815-20-55-118 through 55-122
SupersededAccounting Standards Update No. 2016-0101/05/2016
815-20-55-119AmendedAccounting Standards Update No. 2012-0410/01/2012
815-20-55-123AmendedAccounting Standards Update No. 2016-0101/05/2016
815-20-55-126AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-129AmendedAccounting Standards Update No. 2025-0911/25/2025
815-20-55-129AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-131AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-135AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-149AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-155AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-175AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-178AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-187 through 55-192
SupersededAccounting Standards Update No. 2016-0101/05/2016
815-20-55-197AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-198SupersededAccounting Standards Update No. 2016-0202/25/2016
815-20-55-199AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-204AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-211AmendedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-226 through 55-229
SupersededAccounting Standards Update No. 2017-1208/28/2017
815-20-55-230 through 55-238
AddedAccounting Standards Update No. 2017-1208/28/2017
815-20-55-238AmendedMaintenance Update 2017-14 (PDF)09/13/2017
815-20-65-1AddedAccounting Standards Update No. 2013-1007/17/2013
815-20-65-2AddedAccounting Standards Update No. 2016-0503/10/2016
815-20-65-3AmendedAccounting Standards Update No. 2019-1011/15/2019
815-20-65-3AmendedAccounting Standards Update No. 2019-0404/25/2019
815-20-65-3AmendedMaintenance Update 2017-14 (PDF)09/13/2017
815-20-65-3AddedAccounting Standards Update No. 2017-1208/28/2017
815-20-65-4AddedAccounting Standards Update No. 2018-1610/25/2018
815-20-65-5AddedAccounting Standards Update No. 2019-0404/25/2019
815-20-65-6AddedAccounting Standards Update No. 2022-0103/28/2022
815-20-65-7AddedAccounting Standards Update No. 2025-0911/25/2025
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nAuction Rate Notes | Amended | Accounting Standards Update No. 2017-12 | 08/28/2017 |\nBe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e1571f9fff48de200baeb2c75796d340cf9b16cf965f70f4332cdd13869f9ed0","downloaded_from":"2026-09-10T01:36:33.249Z","last_downloaded_at":"2026-09-10T01:36:33.249Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480835","source_sha256":"543c610f8c38de17a2759325837bb1512a2432b150e45178b6107b047fcb3b55"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6ed4f303c9a3ade63ea162f6b469bdac9c687b702042224db9b178f8ba5292f","downloaded_from":"2026-09-10T01:36:33.249Z","last_downloaded_at":"2026-09-10T01:36:33.249Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480835","source_sha256":"543c610f8c38de17a2759325837bb1512a2432b150e45178b6107b047fcb3b55"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2d2861da5a042ef1cd32ac7ec3c3a90e8c7ea03c8971c824e319e4dca1366efc","downloaded_from":"2026-09-10T01:36:33.249Z","last_downloaded_at":"2026-09-10T01:36:33.249Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480835","source_sha256":"543c610f8c38de17a2759325837bb1512a2432b150e45178b6107b047fcb3b55"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-20-05-1","para":"05-1","html":"
The Derivatives and Hedging Topic includes several Subtopics on hedging activities:
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    Hedging—General (Subtopic 815-20)
  2. b
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  3. c
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  4. d
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This Subtopic provides general guidance applicable to all three types of hedging relationships: fair value hedges, cash flow hedges, and hedges of a net investment in a foreign operation. This Subtopic includes the basic guidance for qualifying for hedge accounting such as hedge documentation requirements, which types of risks are eligible for hedge accounting, and which items may or may not be designated as hedged items and hedging instruments. This Subtopic also provides guidance on hedge effectiveness criteria and assessments of hedge effectiveness. Financial statement presentation of the change in the fair value of a qualifying hedging instrument also is covered in this Subtopic. such as subsequent measurement and dedesignation of a hedging relationship. Implementation guidance and examples specific to fair value, cash flow, and net investment hedges are included in both Subtopic 815-20 and the specific Subtopics for each type of hedging relationship. Disclosure guidance for all hedging relationships is included in Section 815-10-50, and disclosure examples are included in Section 815-10-55. Incremental disclosure guidance for cash flow hedges is provided in Section 815-30-50.
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Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f224eba8e70abd40266a29e86aec210fa6ec2f5e83bf871fd680c07789763812","downloaded_from":"2026-09-10T01:36:36.626Z","last_downloaded_at":"2026-09-10T01:36:36.626Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480802","source_sha256":"1bccf606366c290f963d12c04608e8fa95cb874bf6509357423364a092d256b1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c5fcbe68ad86bcef7fd80802429636ec384825e9b0aeb059a6fd73721187f2a8","downloaded_from":"2026-09-10T01:36:36.626Z","last_downloaded_at":"2026-09-10T01:36:36.626Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480802","source_sha256":"1bccf606366c290f963d12c04608e8fa95cb874bf6509357423364a092d256b1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e9fc7b0585de6caa272ad9548e9f8850f2be0c7821518f653f35bfc891c29bb","downloaded_from":"2026-09-10T01:36:36.626Z","last_downloaded_at":"2026-09-10T01:36:36.626Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480802","source_sha256":"1bccf606366c290f963d12c04608e8fa95cb874bf6509357423364a092d256b1"}},{"number":"10","label":"10 Objectives","anchor":"10-objectives","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-20-10-1","para":"10-1","html":"
Paragraph 815-10-10-1 states that one cornerstone underlying the guidance in this Topic is that special accounting for items designated as being hedged should be provided only for qualifying items. That paragraph explains that one aspect of qualification should be an assessment of the expectation of effective offsetting changes in fair values or cash flows during the term of the hedge for the risk being hedged.
","snippet":"Paragraph 815-10-10-1 states that one cornerstone underlying the guidance in this Topic is that special accounting for items designated as being hedged should be provided only for qualifying items. That paragraph explain…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1835044d4b19fbb2eb1108c1710e6d5dc748e2a7bf61fad3e0d8e1e1cee8ea77","downloaded_from":"2026-09-10T01:36:38.819Z","last_downloaded_at":"2026-09-10T01:36:38.819Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480769","source_sha256":"0271db7a08ab24ac909bd1814c75ab1ac0d1bf741ddb3863849b456d28881605"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:77d700df2f6cb9b36ea28dcc47f347da0e8cd4b6994f7a971be077ef5c4e1a10","downloaded_from":"2026-09-10T01:36:38.819Z","last_downloaded_at":"2026-09-10T01:36:38.819Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480769","source_sha256":"0271db7a08ab24ac909bd1814c75ab1ac0d1bf741ddb3863849b456d28881605"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6c1ba0f71948097318dc9dd5c9454424c366e4ec8c0c798ae83ea059ac048111","downloaded_from":"2026-09-10T01:36:38.819Z","last_downloaded_at":"2026-09-10T01:36:38.819Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480769","source_sha256":"0271db7a08ab24ac909bd1814c75ab1ac0d1bf741ddb3863849b456d28881605"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Entities","paragraphs":[{"citation":"815-20-15-1","para":"15-1","html":"
The guidance in this Subtopic applies to all entities, with the following exceptions:
  1. a
    Entities that do not report earnings separately are not permitted to use cash flow hedge accounting as described in this Subtopic or Subtopic 815-30 on cash flow hedges.
  2. b
    Entities that do not report earnings separately are not permitted to elect the amortization approach for amounts excluded from the assessment of effectiveness under fair value hedge accounting in accordance with paragraphs 815-20-25-83A and 815-25-35-1(a).
","snippet":"The guidance in this Subtopic applies to all entities, with the following exceptions:\n(a) Entities that do not report earnings separately are not permitted to use cash flow hedge accounting as described in this Subtopic …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:030d1d91541cf021b6a1bcf99e0d2198a9a5baad4a2ea9e4c8389183a369b074","downloaded_from":"2026-09-10T01:36:41.696Z","last_downloaded_at":"2026-09-10T01:36:41.696Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480748","source_sha256":"f5939a65d1aa340089291364853a18a5a0c3252a5d74eb68207a856185c1612c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:407c2154b7b6f4bce21d07ec6b123d6bd00b69d4d5d3941cf6da255bf1c0c6b6","downloaded_from":"2026-09-10T01:36:41.696Z","last_downloaded_at":"2026-09-10T01:36:41.696Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480748","source_sha256":"f5939a65d1aa340089291364853a18a5a0c3252a5d74eb68207a856185c1612c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e6a00077200777a5e136e4fc4a44cd9d382f13838c9cfdb081d9b8df0a51f20f","downloaded_from":"2026-09-10T01:36:41.696Z","last_downloaded_at":"2026-09-10T01:36:41.696Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480748","source_sha256":"f5939a65d1aa340089291364853a18a5a0c3252a5d74eb68207a856185c1612c"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-20-25-1","para":"25-1","html":"
This Section sets forth criteria that must be met for designated hedging instruments and hedged items or transactions to qualify for fair value hedge accounting, cash flow hedge accounting, and accounting for a hedge of a net investment in a foreign operation. The criteria are organized as follows:
  1. a
    Formal designation and documentation at hedge inception
  2. b
    Eligibility of hedged items and transactions
  3. c
    Eligibility of hedging instruments
  4. d
    Hedge effectiveness.
  5. e
    Hedge accounting provisions applicable to certain private companies
  6. f
    Hedge accounting provisions applicable to certain not-for-profit entities.
","snippet":"This Section sets forth criteria that must be met for designated hedging instruments and hedged items or transactions to qualify for fair value hedge accounting, cash flow hedge accounting, and accounting for a hedge of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0cbd308b82c7d3582876d52841df59c676ef53c8d1db49346e90e377a4a2f41f","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-2","para":"25-2","html":"
The guidance in this Section specifies whether a criterion applies to one or more types of hedging relationships. For example, paragraph 815-20-25-3(b)(1) is specified as a criterion that applies to fair value hedges, cash flow hedges, and net investment hedges.
","snippet":"The guidance in this Section specifies whether a criterion applies to one or more types of hedging relationships. For example, paragraph 815-20-25-3(b)(1) is specified as a criterion that applies to fair value hedges, ca…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0ab095f50d31d4ab3cce997c009f6ff103823eb18691ed11bd4d406d61a251c7","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b7c0ca2ed89559d73c11027f8dd71f026530e745af84c1816931367af0c54fe0","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"block":null,"heading":"Formal Designation and Documentation at Hedge Inception","paragraphs":[{"citation":"815-20-25-3","para":"25-3","html":"
Concurrent designation and documentation of a hedge is critical; without it, an entity could retroactively identify a hedged item, a hedged transaction, or a method of assessing effectiveness to achieve a desired accounting result. To qualify for hedge accounting, there shall be, at inception of the hedge, formal documentation of all of the following:
  1. a
    Subparagraph not used
  2. b
    Documentation requirement applicable to fair value hedges, cash flow hedges, and net investment hedges:
    1. 1
      The hedging relationship
    2. 2
      The entity's risk management objective and strategy for undertaking the hedge, including identification of all of the following:
      1. i
        The hedging instrument.
      2. ii
        The hedged item or transaction.
      3. iii
        The nature of the risk being hedged.
      4. iv
        The method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness in offsetting the exposure to changes in the hedged item's fair value (if a fair value hedge) or hedged transaction's variability in cash flows (if a cash flow hedge) attributable to the hedged risk. There shall be a reasonable basis for how the entity plans to assess the hedging instrument's effectiveness.
        1. 01
          An entity shall perform an initial prospective assessment of hedge effectiveness on a quantitative basis (using either a dollar-offset test or a statistical method such as regression analysis) unless one of the following applies:
          1. A
            In a cash flow or fair value hedge, the entity applies the shortcut method in accordance with paragraphs
            815-20-25-102 through 25-117
          2. B
            In a cash flow or fair value hedge, the entity determines that the critical terms of the hedging instrument and the hedged item match in accordance with paragraphs
            815-20-25-84 through 25-85
            .
          3. C
            In a cash flow hedge, the hedging instrument is an option, and the conditions in paragraphs 815-20-25-126 and 815-20-25-129 through 25-129A are met.
          4. D
            In a cash flow hedge, a private company that is not a financial institution as described in paragraph 942-320-50-1 applies the simplified hedge accounting approach in paragraphs
            815-20-25-133 through 25-138
            .
          5. E
            In a cash flow hedge, the entity assesses hedge effectiveness under the change in variable cash flows method in accordance with paragraphs
            815-30-35-16 through 35-24
            , and all of the conditions in paragraph 815-30-35-22 are met.
          6. F
            In a cash flow hedge, the entity assesses hedge effectiveness under the hypothetical derivative method in accordance with paragraphs
            815-30-35-25 through 35-29
            , and all of the critical terms of the hypothetical derivative and hedging instrument are the same.
          7. G
            In a net investment hedge, the entity assesses hedge effectiveness using a method based on changes in spot exchange rates, and the conditions in paragraph 815-35-35-5 (for derivative instruments) or 815-35-35-12 (for nonderivative instruments) are met.
          8. H
            In a net investment hedge, the entity assesses hedge effectiveness using a method based on changes in forward exchange rates, and the conditions in paragraph 815-35-35-17A are met.
        2. 02
          The initial prospective quantitative hedge effectiveness assessment using information applicable as of the date of hedge inception is considered to be performed concurrently at hedge inception if it is completed by the earliest of the following:
          1. A
            The first quarterly hedge effectiveness assessment date
          2. B
            The date that financial statements that include the hedged transaction are available to be issued
          3. C
            The date that any criterion in Section 815-20-25 no longer is met
          4. D
            The date of expiration, sale, termination, or exercise of the hedging instrument
          5. E
            The date of dedesignation of the hedging relationship
          6. F
            For a cash flow hedge of a forecasted transaction (in accordance with paragraph 815-20-25-13(b)), the date that the forecasted transaction occurs.
        3. 03
          An entity also shall document at hedge inception whether it elects to perform subsequent retrospective and prospective hedge effectiveness assessments on a qualitative basis and how it intends to carry out that qualitative assessment. See paragraphs
          815-20-35-2A through 35-2F
          for additional guidance on qualitative assessments of effectiveness. In addition, the entity shall document which quantitative method it will use if facts and circumstances of the hedging relationship change and the entity must quantitatively assess hedge effectiveness in accordance with paragraph 815-20-35-2D. An entity must document that it will perform the same quantitative assessment method for both initial and subsequent prospective hedge effectiveness assessments. The guidance in paragraphs
          815-20-55-55 through 55-56
          applies if the entity wants to change its quantitative method of assessing effectiveness after the initial quantitative effectiveness assessment.
        4. 04
          An entity that applies the shortcut method in paragraphs
          815-20-25-102 through 25-117
          may elect to document at hedge inception a quantitative method to assess hedge effectiveness and measure hedge results if the entity determines at some point during the term of the hedging relationship that the use of the shortcut method was not or no longer is appropriate. See paragraphs
          815-20-25-117A through 25-117D
          .
      5. v
        Subparagraph superseded by Accounting Standards Update No. 2017-12.
      6. vi
        If the entity is hedging foreign currency risk on an after-tax basis, that the assessment of effectiveness will be on an after-tax basis (rather than on a pretax basis).
  3. c
    Documentation requirement applicable to fair value hedges only:
    1. 1
      For a fair value hedge of a firm commitment, a reasonable method for recognizing in earnings the asset or liability representing the gain or loss on the hedged firm commitment.
    2. 2
      For one or more interest rate risk hedging relationships designated under the portfolio layer method, an analysis to support the entity's expectation that the hedged layer or layers is anticipated to be outstanding for the designated hedge period (see paragraph 815-20-25-12A for additional guidance).
  4. d
    Documentation requirement applicable to cash flow hedges only:
    1. 1
      For a cash flow hedge of a forecasted transaction, documentation shall include all relevant details, including all of the following:
      1. i
        The date on or period within which the forecasted transaction is expected to occur.
      2. ii
        The specific nature of asset or liability involved (if any).
      3. iii
        Either of the following:
        1. 01
          The expected currency amount for hedges of foreign currency exchange risk; that is, specification of the exact amount of foreign currency being hedged
        2. 02
          The quantity of the forecasted transaction for hedges of other risks; that is, specification of the physical quantity (that is, the number of items or units of measure) encompassed by the hedged forecasted transaction.
      4. iv
        If a forecasted sale or purchase is being hedged for price risk, the hedged transaction shall not be specified in either of the following ways:
        1. 01
          Solely in terms of expected currency amounts
        2. 02
          As a percentage of sales or purchases during a period.
      5. v
        The current price of a forecasted transaction shall be identified to satisfy the criterion in paragraph 815-20-25-75(b) for offsetting cash flows.
      6. vi
        The hedged forecasted transaction shall be described with sufficient specificity so that when a transaction occurs, it is clear whether that transaction is or is not the hedged transaction. Thus, a forecasted transaction could be identified as the sale of either the first 15,000 units of a specific product sold during a specified 3-month period or the first 5,000 units of a specific product sold in each of 3 specific months, but it could not be identified as the sale of the last 15,000 units of that product sold during a 3-month period (because the last 15,000 units cannot be identified when they occur, but only when the period has ended).
      7. vii
        If the hedged risk is the variability in cash flows attributable to changes in a contractually specified component in a forecasted purchase or sale of a nonfinancial asset, identification of the contractually specified component.
      8. viii
        If the hedged risk is the variability in cash flows attributable to changes in a contractually specified interest rate for forecasted interest receipts or payments on a variable-rate financial asset or liability, identification of the contractually specified interest rate.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Concurrent designation and documentation of a hedge is critical; without it, an entity could retroactively identify a hedged item, a hedged transaction, or a method of assessing effectiveness to achieve a desired accounting result. To qualify for hedge accounting, there shall be, at inception of the hedge, formal documentation of all of the following:
  1. a
  2. b
    Documentation requirement applicable to fair value hedges, cash flow hedges, and net investment hedges:
    1. 1
      The hedging relationship
    2. 2
      The entity's risk management objective and strategy for undertaking the hedge, including identification of all of the following:
      1. i
        The hedging instrument.
      2. ii
        The hedged item or transaction.
      3. iii
        The nature of the risk being hedged (also see the requirements in (d)(1)(viii)).
      4. iv
        The method that will be used to retrospectively and prospectively assess the hedging instrument's effectiveness in offsetting the exposure to changes in the hedged item's fair value (if a fair value hedge) or hedged transaction's variability in cash flows (if a cash flow hedge) attributable to the hedged risk. There shall be a reasonable basis for how the entity plans to assess the hedging instrument's effectiveness.
        1. 01
          An entity shall perform an initial prospective assessment of hedge effectiveness on a quantitative basis (using either a dollar-offset test or a statistical method such as regression analysis) unless one of the following applies:
          1. A
            In a cash flow or fair value hedge, the entity applies the shortcut method in accordance with paragraphs
            815-20-25-102 through 25-117
          2. B
            In a cash flow or fair value hedge, the entity determines that the critical terms of the hedging instrument and the hedged item match in accordance with paragraphs
            815-20-25-84 through 25-85
            .
          3. C
            In a cash flow hedge, the hedging instrument is an option, and the conditions in paragraphs 815-20-25-126 and 815-20-25-129 through 25-129A are met.
          4. D
            In a cash flow hedge, a private company that is not a financial institution as described in paragraph 942-320-50-1 applies the simplified hedge accounting approach in paragraphs
            815-20-25-133 through 25-138
            .
          5. E
            In a cash flow hedge, the entity assesses hedge effectiveness under the change in variable cash flows method in accordance with paragraphs
            815-30-35-16 through 35-24
            , and all of the conditions in paragraph 815-30-35-22 are met.
          6. F
            In a cash flow hedge, the entity assesses hedge effectiveness under the hypothetical derivative method in accordance with paragraphs
            815-30-35-25 through 35-29
            , and all of the critical terms of the hypothetical derivative and hedging instrument are the same.
          7. G
            In a net investment hedge, the entity assesses hedge effectiveness using a method based on changes in spot exchange rates, and the conditions in paragraph 815-35-35-5 (for derivative instruments) or 815-35-35-12 (for nonderivative instruments) are met.
          8. H
            In a net investment hedge, the entity assesses hedge effectiveness using a method based on changes in forward exchange rates, and the conditions in paragraph 815-35-35-17A are met.
        2. 02
          The initial prospective quantitative hedge effectiveness assessment using information applicable as of the date of hedge inception is considered to be performed concurrently at hedge inception if it is completed by the earliest of the following:
          1. A
            The first quarterly hedge effectiveness assessment date
          2. B
            The date that financial statements that include the hedged transaction are available to be issued
          3. C
            The date that any criterion in Section 815-20-25 no longer is met
          4. D
            The date of expiration, sale, termination, or exercise of the hedging instrument
          5. E
            The date of dedesignation of the hedging relationship
          6. F
            For a cash flow hedge of a forecasted transaction (in accordance with paragraph 815-20-25-13(b)), the date that the forecasted transaction occurs.
        3. 03
          An entity also shall document at hedge inception whether it elects to perform subsequent retrospective and prospective hedge effectiveness assessments on a qualitative basis and how it intends to carry out that qualitative assessment. See paragraphs
          815-20-35-2A through 35-2F
          for additional guidance on qualitative assessments of effectiveness. In addition, the entity shall document which quantitative method it will use if facts and circumstances of the hedging relationship change and the entity must quantitatively assess hedge effectiveness in accordance with paragraph 815-20-35-2D. An entity must document that it will perform the same quantitative assessment method for both initial and subsequent prospective hedge effectiveness assessments. The guidance in paragraphs
          815-20-55-55 through 55-56
          applies if the entity wants to change its quantitative method of assessing effectiveness after the initial quantitative effectiveness assessment.
        4. 04
          An entity that applies the shortcut method in paragraphs
          815-20-25-102 through 25-117
          may elect to document at hedge inception a quantitative method to assess hedge effectiveness and measure hedge results if the entity determines at some point during the term of the hedging relationship that the use of the shortcut method was not or no longer is appropriate. See paragraphs
          815-20-25-117A through 25-117D
          .
      5. v
      6. vi
        If the entity is hedging foreign currency risk on an after-tax basis, that the assessment of effectiveness will be on an after-tax basis (rather than on a pretax basis).
  3. c
    Documentation requirement applicable to fair value hedges only:
    1. 1
      For a fair value hedge of a firm commitment, a reasonable method for recognizing in earnings the asset or liability representing the gain or loss on the hedged firm commitment.
    2. 2
      For one or more interest rate risk hedging relationships designated under the portfolio layer method, an analysis to support the entity's expectation that the hedged layer or layers is anticipated to be outstanding for the designated hedge period (see paragraph 815-20-25-12A for additional guidance).
  4. d
    Documentation requirement applicable to cash flow hedges only:
    1. 1
      For a cash flow hedge of a forecasted transaction, documentation shall include all relevant details, including all of the following:
      1. i
        The date on or period within which the forecasted transaction is expected to occur.
      2. ii
        The specific nature of asset or liability involved (if any).
      3. iii
        Either of the following:
        1. 01
          The expected currency amount for hedges of foreign currency exchange risk; that is, specification of the exact amount of foreign currency being hedged
        2. 02
          The quantity of the forecasted transaction for hedges of other risks; that is, specification of the physical quantity (that is, the number of items or units of measure) encompassed by the hedged forecasted transaction.
      4. iv
        If a forecasted sale or purchase is being hedged for price risk, the hedged transaction shall not be specified in either of the following ways:
        1. 01
          Solely in terms of expected currency amounts
        2. 02
          As a percentage of sales or purchases during a period.
      5. v
        The current price of a forecasted transaction shall be identified to satisfy the criterion in paragraph 815-20-25-75(b) for offsetting cash flows.
      6. vi
        The hedged forecasted transaction shall be described with sufficient specificity so that when a transaction occurs, it is clear whether that transaction is or is not the hedged transaction. Thus, a forecasted transaction could be identified as the sale of either the first 15,000 units of a specific product sold during a specified 3-month period or the first 5,000 units of a specific product sold in each of 3 specific months, but it could not be identified as the sale of the last 15,000 units of that product sold during a 3-month period (because the last 15,000 units cannot be identified when they occur, but only when the period has ended).
      7. vii
        If the hedged risk is the variability in cash flows attributable to changes in a component of the price of a nonfinancial asset (or a subcomponent as described in paragraph 815-20-25-22C(b)(2))in a forecasted purchase or sale of a nonfinancial asset that meets the criterion in paragraph 815-20-25-15(i)(3), identification of the component (or subcomponent).
      8. viii
        If the hedged risk is the variability in cash flows attributable to changes in a contractually specified interest rate for forecasted interest receipts or payments on a variable-rate financial asset or liability, identification of the contractually specified interest rate. See paragraphs
        815-30-35-37B through 35-37M
        for guidance on changing the contractually specified interest rate for a hedge of forecasted interest payments on a variable-rate debt instrument that permits the borrower to select at each reset period the interest rate index from a list of contractual options (including the interest rate tenor) upon which interest is accrued (this debt instrument is referred to throughout Topic 815 as “choose-your-rate” debt).
    2. 2
      For a cash flow hedge of a group of forecasted transactions, the method that will be used to determine whether a group of individual forecasted transactions have a similar risk exposure in accordance with paragraph 815-20-55-23A.
","snippet":"Concurrent designation and documentation of a hedge is critical; without it, an entity could retroactively identify a hedged item, a hedged transaction, or a method of assessing effectiveness to achieve a desired account…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5c5e43a5df305745387bddce6a4d0bdc803fd3b73a58c05bdb9fee61b4bdd524","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-3A","para":"25-3A","html":"
See paragraphs
815-20-25-133 through 25-142
for guidance on the timing of completing the hedge documentation required by paragraph 815-20-25-3 for a private company that is not a financial institution. The guidance in paragraphs
815-20-25-133 through 25-138
applies to hedging relationships in which the simplified hedge accounting approach is applied. The guidance in paragraphs
815-20-25-139 through 25-142
applies to all hedging relationships other than those in which the simplified hedge accounting approach is applied. The guidance in paragraphs
815-20-25-139 through 25-142
also applies to not-for-profit entities (except for not-for-profit entities that have issued, or are a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market) in accordance with paragraph 815-20-25-143.
","snippet":"See paragraphs 815-20-25-133 through 25-142 for guidance on the timing of completing the hedge documentation required by paragraph 815-20-25-3 for a private company that is not a financial institution. The guidance in pa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bddc5ed49dbc45ec969487b3a20ea9ba321409f052e4c76a796d6de34fe34b00","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f2129f2f23750f955afd4c6ca23e8eadc1f0898e9cb5ad23534c39459ee0986","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"block":null,"heading":"Eligibility of Hedged Items and Transactions","paragraphs":[{"citation":"815-20-25-4","para":"25-4","html":"
The eligibility criteria for hedged items and transactions are organized as follows:
  1. a
    Hedged item and transaction criteria applicable to both fair value hedges and cash flow hedges
  2. b
    Hedged item criteria applicable to fair value hedges only
  3. c
    Hedged transaction criteria applicable to cash flow hedges only
  4. d
    Hedged items involving foreign exchange risk
  5. e
    Items specifically ineligible for designation as a hedged item or transaction.
","snippet":"The eligibility criteria for hedged items and transactions are organized as follows:\n(a) Hedged item and transaction criteria applicable to both fair value hedges and cash flow hedges\n(b) Hedged item criteria applicable …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6298b6c903627ed7f59a64b3d67e0726aeafc258851fabbdbb58b01ba4350303","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-5","para":"25-5","html":"
Incremental eligibility criteria applicable to both fair value hedges and cash flow hedges are organized as follows:
  1. a
    Hedged items involving interest rate risk
  2. b
    Normal purchase or normal sale contract as a hedged item or transaction
  3. c
    Different proportions of the same asset as a hedged item.
","snippet":"Incremental eligibility criteria applicable to both fair value hedges and cash flow hedges are organized as follows:\n(a) Hedged items involving interest rate risk\n(b) Normal purchase or normal sale contract as a hedged i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5bc633efb07298981beb2ce1f98a04fed1a4e4113a0660e8a02a49197be16015","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-6","para":"25-6","html":"
Hedges involving a benchmark interest rate are addressed in paragraphs 815-20-25-12(f) and 815-20-25-12A (for fair value hedges) and paragraph 815-20-25-15(j) (for cash flow hedges). Hedges involving a contractually specified interest rate are addressed in 815-20-25-15(j) (for cash flow hedges). The benchmark interest rate or the contractually specified interest rate being hedged in a hedge of interest rate risk shall be specifically identified as part of the designation and documentation at the inception of the hedging relationship. Paragraphs
815-20-25-19A through 25-19B
provide guidance on the interest rate risk designation of hedges of forecasted issuances or purchases of debt instruments. An entity shall not simply designate prepayment risk as the risk being hedged for a financial asset. However, it can designate the option component of a prepayable instrument as the hedged item in a fair value hedge of the entity's exposure to changes in the overall fair value of that prepayment option, perhaps thereby achieving the objective of its desire to hedge prepayment risk. The effect of an embedded derivative of the same risk class shall be considered in designating a hedge of an individual risk. For example, the effect of an embedded prepayment option shall be considered in designating a hedge of interest rate risk.
","snippet":"Hedges involving a benchmark interest rate are addressed in paragraphs 815-20-25-12(f) and 815-20-25-12A (for fair value hedges) and paragraph 815-20-25-15(j) (for cash flow hedges). Hedges involving a contractually spec…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:82cb89fb58e5072c1472afe07b506a6e3cccc1e0f9186b9d071302d6ee142635","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-6A","para":"25-6A","html":"
In the United States, the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (LIBOR) swap rate, the Fed Funds Effective Rate Overnight Index Swap Rate, the Securities Industry and Financial Markets Association (SIFMA) Municipal Swap Rate, and the Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rateare considered to be benchmark interest rates. In each financial market, generally only the most widely used and quoted rates may be considered benchmark interest rates.
","snippet":"In the United States, the interest rates on direct Treasury obligations of the U.S. government, the London Interbank Offered Rate (LIBOR) swap rate, the Fed Funds Effective Rate Overnight Index Swap Rate, the Securities …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:81ade036addec89d15429356e64f3c9299d070b5472faa6e47fe52f7b3ec3979","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-6B","para":"25-6B","html":"
An entity may designate a fair value hedge of interest rate risk in which the hedged item is a prepayable instrument in accordance with paragraph 815-20-25-6. The entity may consider only how changes in the benchmark interest rate affect the decision to settle the hedged item before its scheduled maturity (for example, an entity may consider only how changes in the benchmark interest rate affect an obligor's decision to call a debt instrument when it has the right to do so). The entity need not consider other factors that would affect this decision (for example, credit risk) when assessing hedge effectiveness. Paragraph 815-25-35-13A discusses the measurement of the hedged item.
","snippet":"An entity may designate a fair value hedge of interest rate risk in which the hedged item is a prepayable instrument in accordance with paragraph 815-20-25-6. The entity may consider only how changes in the benchmark int…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ecdf27ef933669009b53f29f441a793c9be25ad892c185d3b6e57af7197383d4","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-7","para":"25-7","html":"
A contract that is not subject to the requirements of Subtopic 815-10 because it qualifies for the normal purchases and normal sales scope exception may be designated as a hedged item in a fair value hedge, if the provisions of this Section are met. As the hedged item, the contract would be accounted for under fair value hedge accounting. Similarly, the purchase under that contract may be the hedged transaction in a cash flow hedge, if the provisions of paragraph 815-20-25-15 are met. For cash flow hedges, the special accounting applies to the hedging instrument, not to the purchase contract that is related to the hedged forecasted transaction.
","snippet":"A contract that is not subject to the requirements of Subtopic 815-10 because it qualifies for the normal purchases and normal sales scope exception may be designated as a hedged item in a fair value hedge, if the provis…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b1c71f826acd732e64377ed629bd271a1a94d2a79328b52389ad0e9021279c29","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-8","para":"25-8","html":"
In emphasizing the conditions in the definition of a derivative instrument in paragraphs
815-10-15-83 through 15-139
, paragraphs
815-10-15-13 through 15-82
essentially exempt contracts that meet the definition of a derivative instrument from the requirements of Subtopic 815-10 applicable to derivative instruments. However, paragraphs
815-10-15-13 through 15-82
are not intended to preclude such contracts from being subject to the requirements of Subtopic 815-10 applicable to the hedged item in a fair value hedge.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8In emphasizing the conditions in the definition of a derivative instrument in paragraphs
815-10-15-83 through 15-139
, paragraphs
815-10-15-13 through 15-60
and
815-10-15-62 through 15-82
essentially exempt contracts that meet the definition of a derivative instrument from the requirements of Subtopic 815-10 applicable to derivative instruments. However, paragraphs
815-10-15-13 through 15-60
and
815-10-15-62 through 15-82
are not intended to preclude such contracts from being subject to the requirements of Subtopic 815-10 applicable to the hedged item in a fair value hedge.
","snippet":"In emphasizing the conditions in the definition of a derivative instrument in paragraphs 815-10-15-83 through 15-139, paragraphs 815-10-15-13 through 15-82 essentially exempt contracts that meet the definition of a deriv…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a429084050a665f438629f3c2cff586b06ecd618a98eb441c55f2afa852be0a","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-9","para":"25-9","html":"
A contract that qualifies for the normal purchases and normal sales exception will typically satisfy the criteria for a firm commitment and will not be recognized on an entity's financial statements because of the exclusion from recognition under Subtopic 815-10 or other Topics. The transaction under a contract that qualifies for the normal purchases and normal sales exception but does not satisfy the criteria for a firm commitment because the contract does not contain a fixed price may be the hedged transaction in a cash flow hedge.
","snippet":"A contract that qualifies for the normal purchases and normal sales exception will typically satisfy the criteria for a firm commitment and will not be recognized on an entity's financial statements because of the exclus…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1e4d747ce010d6bbc6d151d9d35603e6ed158cbb62fb4ae962515542d25e4241","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-10","para":"25-10","html":"
In a hedging relationship in which a collar that is comprised of a purchased option and a written option that have different notional amounts is designated as the hedging instrument and the hedge's effectiveness is assessed based on changes in the collar's intrinsic value, the hedged item may be specified as two different proportions of the same asset referenced in the collar, based on the upper and lower price ranges specified in the two options that make up the collar. That is, the quantities of the asset designated as being hedged may be different based on those price ranges in which the collar's intrinsic value is other than zero. This guidance shall be applied only to collars that are a combination of a single written option and a single purchased option for which the underlying in both options is the same. This guidance shall not be applied by analogy to other derivative instruments designated as hedging instruments. Although the quantities of the asset designated as being hedged may be different based on the upper and lower price ranges in the collar, the actual assets that are the subject of the hedging relationship may not change. The quantities that are designated as hedged for a specific price or rate change shall be specified at the inception of the hedging relationship and shall not be changed unless the hedging relationship is dedesignated and a new hedging relationship is redesignated. Since the hedge's effectiveness is based on changes in the collar's intrinsic value, the assessment of hedge effectiveness shall compare the actual change in intrinsic value of the collar to the change in value of the prespecified quantity of the hedged asset that occurred during the hedge period.
","snippet":"In a hedging relationship in which a collar that is comprised of a purchased option and a written option that have different notional amounts is designated as the hedging instrument and the hedge's effectiveness is asses…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:da031b789b947788ea22e6cd71754a1b0e5e28f325f6994c02448407318b1695","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-11","para":"25-11","html":"
An entity may designate a derivative instrument as hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof (hedged item) that is attributable to a particular risk if all applicable criteria in this Section are met.
","snippet":"An entity may designate a derivative instrument as hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof (hedged item) that is attributable to a particular risk if …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:549ed179e1abd617501b68a964be18beb080dc09b7972d35d73558d50568224c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-12","para":"25-12","html":"
An asset or a liability is eligible for designation as a hedged item in a fair value hedge if all of the following additional criteria are met:
  1. a
    The hedged item is specifically identified as either all or a specific portion of a recognized asset or liability or of an unrecognized firm commitment.
  2. b
    The hedged item is a single asset or liability (or a specific portion thereof) or is a portfolio of similar assets or a portfolio of similar liabilities (or a specific portion thereof), in which circumstance:
    1. 1
      If similar assets or similar liabilities are aggregated and hedged as a portfolio, the individual assets or individual liabilities shall share the risk exposure for which they are designated as being hedged. The change in fair value attributable to the hedged risk for each individual item in a hedged portfolio shall be expected to respond in a generally proportionate manner to the overall change in fair value of the aggregate portfolio attributable to the hedged risk. See the discussion beginning in paragraph 815-20-55-14 for related implementation guidance. An entity may use different stratification criteria for the purposes of impairment testing and for the purposes of grouping similar assets to be designated as a hedged portfolio in a fair value hedge.
    2. 2
      If the hedged item is a specific portion of an asset or liability (or of a portfolio of similar assets or a portfolio of similar liabilities), the hedged item is one of the following:
      1. i
        A percentage of the entire asset or liability (or of the entire portfolio). An entity shall not express the hedged item as multiple percentages of a recognized asset or liability and then retroactively determine the hedged item based on an independent matrix of those multiple percentages and the actual scenario that occurred during the period for which hedge effectiveness is being assessed.
      2. ii
        One or more selected contractual cash flows, including one or more individual interest payments during a selected portion of the term of a debt instrument (such as the portion of the asset or liability representing the present value of the interest payments in any consecutive two years of a four-year debt instrument). Paragraph 815-25-35-13B discusses the measurement of the change in fair value of the hedged item in partial-term hedges of interest rate risk using an assumed term.
      3. iii
        A put option or call option (including an interest rate cap or price cap or an interest rate floor or price floor) embedded in an existing asset or liability that is not an embedded derivative accounted for separately pursuant to paragraph 815-15-25-1.
      4. iv
        The residual value in a lessor's net investment in a direct financing or sales-type lease.
  3. c
    The hedged item presents an exposure to changes in fair value attributable to the hedged risk that could affect reported earnings. The reference to affecting reported earnings does not apply to an entity that does not report earnings as a separate caption in a statement of financial performance, such as a not-for-profit entity (NFP), in accordance with paragraph 815-20-15-1.
  4. d
    If the hedged item is all or a portion of a debt security (or a portfolio of similar debt securities) that is classified as held to maturity in accordance with Topic 320, the designated risk being hedged is the risk of changes in its fair value attributable to credit risk, foreign exchange risk, or both. If the hedged item is an option component of a held-to-maturity security that permits its prepayment, the designated risk being hedged is the risk of changes in the entire fair value of that option component. If the hedged item is other than an option component of a held-to-maturity security that permits its prepayment, the designated hedged risk also shall not be the risk of changes in its overall fair value.
  5. e
    If the hedged item is a nonfinancial asset or liability (other than a recognized loan servicing right or a nonfinancial firm commitment with financial components), the designated risk being hedged is the risk of changes in the fair value of the entire hedged asset or liability (reflecting its actual location if a physical asset). That is, the price risk of a similar asset in a different location or of a major ingredient shall not be the hedged risk. Thus, in hedging the exposure to changes in the fair value of gasoline, an entity may not designate the risk of changes in the price of crude oil as the risk being hedged for purposes of determining effectiveness of the fair value hedge of gasoline.
  6. f
    If the hedged item is a financial asset or liability, a recognized loan servicing right, or a nonfinancial firm commitment with financial components, the designated risk being hedged is any of the following:
    1. 1
      The risk of changes in the overall fair value of the entire hedged item
    2. 2
      The risk of changes in its fair value attributable to changes in the designated benchmark interest rate (referred to as interest rate risk)
    3. 3
      The risk of changes in its fair value attributable to changes in the related foreign currency exchange rates (referred to as foreign exchange risk)
    4. 4
      The risk of changes in its fair value attributable to both of the following (referred to as credit risk):
      1. i
        Changes in the obligor's creditworthiness
      2. ii
        Changes in the spread over the benchmark interest rate with respect to the hedged item's credit sector at inception of the hedge.
    5. 5
      If the risk designated as being hedged is not the risk in paragraph 815-20-25-12(f)(1), two or more of the other risks (interest rate risk, foreign currency exchange risk, and credit risk) may simultaneously be designated as being hedged.
  7. g
    The item is not otherwise specifically ineligible for designation (see paragraph 815-20-25-43).
","snippet":"An asset or a liability is eligible for designation as a hedged item in a fair value hedge if all of the following additional criteria are met:\n(a) The hedged item is specifically identified as either all or a specific p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0cee7a7253d06762a6e81871828a2bab59676e2af1b8c2bc348ae0bf3e19adac","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-12A","para":"25-12A","html":"
For a closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments, an entity may designate as the hedged item or items a hedged layer or layers if the following criteria are met (this designation is referred to throughout Topic 815 as the “portfolio layer method”):
  1. a
    As part of the initial hedge documentation, an analysis is completed and documented to support the entity's expectation that the hedged item or items (that is, the hedged layer or layers in aggregate) is anticipated to be outstanding for the designated hedge period. That analysis shall incorporate the entity's current expectations of prepayments, defaults, and other factors affecting the timing and amount of cash flows associated with the closed portfolio.
  2. b
    For purposes of its analysis in (a), the entity assumes that as prepayments, defaults, and other factors affecting the timing and amount of cash flows occur, they first will be applied to the portion of the closed portfolio that is not hedged.
  3. c
    The entity applies the partial-term hedging guidance in paragraph 815-20-25-12(b)(2)(ii) to the assets or beneficial interest used to support the entity’s expectation in (a). An asset that matures on a hedged layer’s assumed maturity date meets this requirement.
See paragraphs
815-25-55-1A through 55-1E
for implementation guidance related to a closed portfolio with multiple hedged layers.
","snippet":"For a closed portfolio of financial assets or one or more beneficial interests secured by a portfolio of financial instruments, an entity may designate as the hedged item or items a hedged layer or layers if the followin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:36d4db00eae9fc0dcfe2d7e18ff8e519b06f5fd77e3fd89db0ccfc8dda55514b","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-12B","para":"25-12B","html":"
After a closed portfolio is established in accordance with paragraph 815-20-25-12A, an entity may designate new hedging relationships associated with the closed portfolio without dedesignating any existing hedging relationships associated with the closed portfolio if the criteria in paragraph 815-20-25-12A are met for those newly designated hedging relationships.
","snippet":"After a closed portfolio is established in accordance with paragraph 815-20-25-12A, an entity may designate new hedging relationships associated with the closed portfolio without dedesignating any existing hedging relati…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:36444bc2f2585bcf44f33cfd950233a50ad364fa42f8e76cc7cb01269825b51b","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-13","para":"25-13","html":"
An entity may designate a derivative instrument as hedging the exposure to variability in expected future cash flows that is attributable to a particular risk. That exposure may be associated with either of the following:
  1. a
    An existing recognized asset or liability (such as all or certain future interest payments on variable-rate debt)
  2. b
    A forecasted transaction (such as a forecasted purchase or sale).
Note that the glossary definition of transaction is intended to clearly distinguish a transaction from an internal cost allocation or an event that happens within an entity.
","snippet":"An entity may designate a derivative instrument as hedging the exposure to variability in expected future cash flows that is attributable to a particular risk. That exposure may be associated with either of the following…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eac4f7420cf54e952550d7526ae48780bc92fb8fe63734ebf396917d6c87d445","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-14","para":"25-14","html":"
For purposes of this Subtopic and Subtopic 815-30, the individual cash flows related to a recognized asset or liability and the cash flows related to a forecasted transaction are both referred to as a forecasted transaction or hedged transaction.
","snippet":"For purposes of this Subtopic and Subtopic 815-30, the individual cash flows related to a recognized asset or liability and the cash flows related to a forecasted transaction are both referred to as a forecasted transact…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4b8453f32c2c83c42d3ff8c5e20986006e2038e93789bd7f2ab213a4913d0340","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-15","para":"25-15","html":"
A forecasted transaction is eligible for designation as a hedged transaction in a cash flow hedge if all of the following additional criteria are met:
  1. a
    The forecasted transaction is specifically identified as either of the following:
    1. 1
      A single transaction
    2. 2
      A group of individual transactions that share the same risk exposure for which they are designated as being hedged. A forecasted purchase and a forecasted sale shall not both be included in the same group of individual transactions that constitute the hedged transaction.
  2. b
    The occurrence of the forecasted transaction is probable.
  3. c
    The forecasted transaction meets both of the following conditions:
    1. 1
      It is a transaction with a party external to the reporting entity (except as permitted by paragraphs 815-20-25-30 and
      815-20-25-38 through 25-40
      ).
    2. 2
      It presents an exposure to variations in cash flows for the hedged risk that could affect reported earnings.
  4. d
    The forecasted transaction is not the acquisition of an asset or incurrence of a liability that will subsequently be remeasured with changes in fair value attributable to the hedged risk reported currently in earnings.
  5. e
    If the forecasted transaction relates to a recognized asset or liability, the asset or liability is not remeasured with changes in fair value attributable to the hedged risk reported currently in earnings.
  6. f
    If the variable cash flows of the forecasted transaction relate to a debt security that is classified as held to maturity under Topic 320, the risk being hedged is the risk of changes in its cash flows attributable to any of the following risks:
    1. 1
      Credit risk
    2. 2
      Foreign exchange risk.
  7. g
    The forecasted transaction does not involve a business combination subject to the provisions of Topic 805or a combination accounted for by an NFP that is subject to the provisions of Subtopic 958-805.
  8. h
    The forecasted transaction is not a transaction (such as a forecasted purchase, sale, or dividend) involving either of the following:
    1. 1
      A parent entity's interests in consolidated subsidiaries
    2. 2
      An entity's own equity instruments.
  9. i
    If the hedged transaction is the forecasted purchase or sale of a nonfinancial asset, the designated risk being hedged is any of the following:
    1. 1
      The risk of changes in the functional-currency-equivalent cash flows attributable to changes in the related foreign currency exchange rates
    2. 2
      The risk of changes in the cash flows relating to all changes in the purchase price or sales price of the asset reflecting its actual location if a physical asset (regardless of whether that price and the related cash flows are stated in the entity's functional currency or a foreign currency), not the risk of changes in the cash flows relating to the purchase or sale of a similar asset in a different location.
    3. 3
      The risk of variability in cash flows attributable to changes in a contractually specified component. (See additional criteria in paragraphs
      815-20-25-22A through 25-22B
      for designating the variability in cash flows attributable to changes in a contractually specified component as the hedged risk.)
  10. j
    If the hedged transaction is the forecasted purchase or sale of a financial asset or liability (or the interest payments on that financial asset or liability) or the variable cash inflow or outflow of an existing financial asset or liability, the designated risk being hedged is any of the following:
    1. 1
      The risk of overall changes in the hedged cash flows related to the asset or liability, such as those relating to all changes in the purchase price or sales price (regardless of whether that price and the related cash flows are stated in the entity's functional currency or a foreign currency)
    2. 2
      For forecasted interest receipts or payments on an existing variable-rate financial instrument, the risk of changes in its cash flows attributable to changes in the contractually specified interest rate (referred to as interest rate risk). For a forecasted issuance or purchase of a debt instrument (or the forecasted interest payments on a debt instrument), the risk of changes in cash flows attributable to changes in the benchmark interest rate or the expected contractually specified interest rate. See paragraphs
      815-20-25-19A through 25-19B
      for further guidance on the designation of interest rate risk in the forecasted issuance or purchase of a debt instrument.
    3. 3
      The risk of changes in the functional-currency-equivalent cash flows attributable to changes in the related foreign currency exchange rates (referred to as foreign exchange risk)
    4. 4
      The risk of changes in its cash flows attributable to all of the following (referred to as credit risk):
      1. i
        Default
      2. ii
        Changes in the obligor's creditworthiness
      3. iii
        Changes in the spread over the contractually specified interest rate or benchmark interest rate with respect to the related financial asset's or liability's credit sector at inception of the hedge.
    If the risk designated as being hedged is not the risk in paragraph 815-20-25-15(j)(1), two or more of the other risks (interest rate risk, foreign exchange risk, and credit risk) simultaneously may be designated as being hedged.
  11. k
    The item is not otherwise specifically ineligible for designation (see paragraph 815-20-25-43).
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7A forecasted transaction is eligible for designation as a hedged transaction in a cash flow hedge if all of the following additional criteria are met:
  1. a
    The forecasted transaction is specifically identified as either of the following:
    1. 1
      A single transaction
    2. 2
      A group of individual transactions that have a similar risk exposure for which they are designated as being hedged. A forecasted purchase and a forecasted sale shall not both be included in the same group of individual transactions that constitute the hedged transaction.
  2. b
    The occurrence of the forecasted transaction is probable.
  3. c
    The forecasted transaction meets both of the following conditions:
    1. 1
      It is a transaction with a party external to the reporting entity (except as permitted by paragraphs 815-20-25-30 and
      815-20-25-38 through 25-40
      ).
    2. 2
      It presents an exposure to variations in cash flows for the hedged risk that could affect reported earnings.
  4. d
    The forecasted transaction is not the acquisition of an asset or incurrence of a liability that will subsequently be remeasured with changes in fair value attributable to the hedged risk reported currently in earnings.
  5. e
    If the forecasted transaction relates to a recognized asset or liability, the asset or liability is not remeasured with changes in fair value attributable to the hedged risk reported currently in earnings. For example, if the forecasted transaction relates to the purchase or sale of a nonfinancial item under a contract that is accounted for as a derivative under Topic 815 (that is, a recognized asset or liability), an entity may designate the variable price component (or subcomponent) in the contract as the hedged risk if all other hedge criteria are satisfied.
  6. f
    If the variable cash flows of the forecasted transaction relate to a debt security that is classified as held to maturity under Topic 320, the risk being hedged is the risk of changes in its cash flows attributable to any of the following risks:
    1. 1
      Credit risk
    2. 2
      Foreign exchange risk.
  7. g
    The forecasted transaction does not involve a business combination subject to the provisions of Topic 805or a combination accounted for by an NFP that is subject to the provisions of Subtopic 958-805.
  8. h
    The forecasted transaction is not a transaction (such as a forecasted purchase, sale, or dividend) involving either of the following:
    1. 1
      A parent entity's interests in consolidated subsidiaries
    2. 2
      An entity's own equity instruments.
  9. i
    If the hedged transaction is the forecasted purchase or sale of a nonfinancial asset, the designated risk being hedged is any of the following:
    1. 1
      The risk of changes in the functional-currency-equivalent cash flows attributable to changes in the related foreign currency exchange rates
    2. 2
      The risk of changes in the cash flows relating to all changes in the purchase price or sales price of the asset reflecting its actual location if a physical asset (regardless of whether that price and the related cash flows are stated in the entity's functional currency or a foreign currency), not the risk of changes in the cash flows relating to the purchase or sale of a similar asset in a different location.
    3. 3
      The risk of changes in cash flows relating to a variable component (or subcomponent) of the purchase or sales price of a nonfinancial asset that meets the criteria in paragraph 815-20-25-22C.
  10. j
    If the hedged transaction is the forecasted purchase or sale of a financial asset or liability (or the interest payments on that financial asset or liability) or the variable cash inflow or outflow of an existing financial asset or liability, the designated risk being hedged is any of the following:
    1. 1
      The risk of overall changes in the hedged cash flows related to the asset or liability, such as those relating to all changes in the purchase price or sales price (regardless of whether that price and the related cash flows are stated in the entity's functional currency or a foreign currency)
    2. 2
      For forecasted interest receipts or payments on an existing variable-rate financial instrument, the risk of changes in its cash flows attributable to changes in the contractually specified interest rate (referred to as interest rate risk). For a forecasted issuance or purchase of a debt instrument (or the forecasted interest payments on a debt instrument), the risk of changes in cash flows attributable to changes in the benchmark interest rate or the expected contractually specified interest rate. See paragraphs
      815-20-25-19A through 25-19B
      for further guidance on the designation of interest rate risk in the forecasted issuance or purchase of a debt instrument.
    3. 3
      The risk of changes in the functional-currency-equivalent cash flows attributable to changes in the related foreign currency exchange rates (referred to as foreign exchange risk)
    4. 4
      The risk of changes in its cash flows attributable to all of the following (referred to as credit risk):
      1. i
        Default
      2. ii
        Changes in the obligor's creditworthiness
      3. iii
        Changes in the spread over the contractually specified interest rate or benchmark interest rate with respect to the related financial asset's or liability's credit sector at inception of the hedge.
    If the risk designated as being hedged is not the risk in paragraph 815-20-25-15(j)(1), two or more of the other risks (interest rate risk, foreign exchange risk, and credit risk) simultaneously may be designated as being hedged.
  11. k
    The item is not otherwise specifically ineligible for designation (see paragraph 815-20-25-43).
","snippet":"A forecasted transaction is eligible for designation as a hedged transaction in a cash flow hedge if all of the following additional criteria are met:\n(a) The forecasted transaction is specifically identified as either o…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8e6c33cbf3af9339d75e0088ade44ee3dc93ec04237106b20c5cf73942f23ca2","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-15A","para":"25-15A","html":"
This Topic places no limitations on an entity's ability to prospectively designate, dedesignate, and redesignate a qualifying hedge of the same forecasted transaction.
","snippet":"This Topic places no limitations on an entity's ability to prospectively designate, dedesignate, and redesignate a qualifying hedge of the same forecasted transaction.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:12855123c37c11a72d11f02befe6cc1689fde8584af749e380a823f9efd0b121","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-16","para":"25-16","html":"
Example 4 (see paragraph 815-20-55-88) illustrates that how the hedged forecasted transaction is designated and documented in a cash flow hedge is critically important in determining whether it is probable that the hedged forecasted transaction will occur. The following guidance expands on the timing and probability criteria in paragraphs 815-20-25-3 and 815-20-25-15(b):
  1. a
    Effect of counterparty creditworthiness on probability. An entity using a cash flow hedge shall assess the creditworthiness of the counterparty to the hedged forecasted transaction in determining whether the forecasted transaction is probable, particularly if the hedged transaction involves payments pursuant to a contractual obligation of the counterparty.
  2. b
    Probability of forecasted acquisition of a marketable debt security. To qualify for cash flow hedge accounting for an option designated as a hedge of the forecasted acquisition of a marketable debt security, an entity must be able to establish at the inception of the hedging relationship that the acquisition of the marketable debt security is probable, without regard to the means of acquiring it. In documenting the hedging relationship, the entity shall specify the date on or period within which the forecasted acquisition of the security will occur. The evaluation of whether the forecasted acquisition of a marketable debt security is probable of occurring shall be independent of the terms and nature of the derivative instrument designated as the hedging instrument. Specifically, in determining whether an option designated as a hedge of the forecasted acquisition of a marketable debt security may qualify for cash flow hedge accounting, the probability of the forecasted transaction being consummated shall be evaluated without consideration of whether the option designated as the hedging instrument has an intrinsic value other than zero.
  3. c
    Uncertainty of timing within a range. For forecasted transactions whose timing involves some uncertainty within a range, that range could be documented as the originally specified time period if the hedged forecasted transaction is described with sufficient specificity so that when a transaction occurs, it is clear whether that transaction is or is not the hedged transaction. As long as it remains probable that a forecasted transaction will occur by the end of the originally specified time period, cash flow hedge accounting for that hedging relationship would continue. See paragraph 815-30-40-4 for related guidance and Example 5 (see paragraph 815-20-55-100), which illustrates the application of this paragraph.
  4. d
    Importance of timing in both documentation and hedge effectiveness. Although documenting only the period within which the forecasted transaction will occur is sufficient to comply with the requirements of paragraph 815-20-25-3, compliance with Section 815-20-35 and paragraph 815-20-25-75(b) requires that the best estimate of the forecasted transaction's timing be both documented and used in assessing hedge effectiveness. As explained in paragraphs 815-20-25-84 and
    815-20-25-120 through 25-121
    , the time value of money is likely to be important in the assessment of cash flow hedge effectiveness, especially if the entity plans to use a rollover or tailing strategy to hedge its forecasted transaction.     The use of time value of money requires information about the timing of cash flows.
  5. e
    The term probable requires a significantly greater likelihood of occurrence than the phrase more likely than not.
  6. f
    The cash flow hedging model does not require that it be probable that any variability in the hedged transaction will actually occur—that is, in a cash flow hedge, the variability in future cash flows must be a possibility, but not necessarily a probability. However, the hedging derivative must be highly effective at achieving offsetting cash flows whenever that variability in future interest does occur.
","snippet":"Example 4 (see paragraph 815-20-55-88) illustrates that how the hedged forecasted transaction is designated and documented in a cash flow hedge is critically important in determining whether it is probable that the hedge…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e051f730ad45fcbcf8ec7263a74ec8c50881248c4a400c9897db3a93fefe9ec3","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-17","para":"25-17","html":"
In this Subtopic, the phrase issuance of fixed-rate debt includes the issuance of a zero-coupon instrument because the interest element in a zero-coupon instrument is fixed at its issuance.
","snippet":"In this Subtopic, the phrase issuance of fixed-rate debt includes the issuance of a zero-coupon instrument because the interest element in a zero-coupon instrument is fixed at its issuance.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:82234996018a467aaf1b6571f21683582787ff96f29b0f1becdf715f3c77fad2","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-18","para":"25-18","html":"
Provided the entity meets all the other cash flow hedging criteria, an entity may designate as the hedged risk the risk of changes in either of the following:
  1. a
    The coupon payments (or the interest element of the final cash flow if interest is paid only at maturity) related to the forecasted issuance of fixed-rate debt
  2. b
    The total proceeds attributable to changes in the benchmark interest rate related to the forecasted issuance of fixed-rate debt.
The derivative instrument used to hedge either of these risks must provide offsetting cash flows for the hedging relationship to be effective in accordance with paragraph 815-20-35-3.
","snippet":"Provided the entity meets all the other cash flow hedging criteria, an entity may designate as the hedged risk the risk of changes in either of the following:\n(a) The coupon payments (or the interest element of the final…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8e6b0c99d19db5ccc5856440bb2c6097012165810664832af9c5a36021f6eb57","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-19","para":"25-19","html":"
An entity shall not characterize its variable-rate debt as fixed-rate debt that, at each interest reset date, is effectively rolled over to another issuance of fixed-rate debt that has a new fixed interest rate until the next reset date.
","snippet":"An entity shall not characterize its variable-rate debt as fixed-rate debt that, at each interest reset date, is effectively rolled over to another issuance of fixed-rate debt that has a new fixed interest rate until the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b90f4c1b253ded54b77ce893bcd119a5b0e8a6c63d1cf43c6059c428927ca04c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-19A","para":"25-19A","html":"
In accordance with paragraph 815-20-25-6, if an entity designates a cash flow hedge of interest rate risk attributable to the variability in cash flows of a forecasted issuance or purchase of a debt instrument, it shall specify the nature of the interest rate risk being hedged as follows:
  1. a
    If an entity expects that it will issue or purchase a fixed-rate debt instrument, the entity shall designate the variability in cash flows attributable to changes in the benchmark interest rate as the hedged risk.
  2. b
    If an entity expects that it will issue or purchase a variable-rate debt instrument, the entity shall designate the variability in cash flows attributable to changes in the contractually specified interest rate as the hedged risk.
","snippet":"In accordance with paragraph 815-20-25-6, if an entity designates a cash flow hedge of interest rate risk attributable to the variability in cash flows of a forecasted issuance or purchase of a debt instrument, it shall …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:652ba5e92b1c2d492b52540f75995ef1c7e70559b701a647c1d67da5e2df7376","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-19B","para":"25-19B","html":"
If an entity does not know at the inception of the hedging relationship whether the debt instrument that will be issued or purchased will be fixed rate or variable rate, the entity shall designate as the hedged risk the variability in cash flows attributable to changes in a rate that would qualify both as a benchmark interest rate if the instrument issued or purchased is fixed rate and as a contractually specified interest rate if the instrument issued or purchased is variable rate.
","snippet":"If an entity does not know at the inception of the hedging relationship whether the debt instrument that will be issued or purchased will be fixed rate or variable rate, the entity shall designate as the hedged risk the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:57c65e5f3e87ef1fbf26a8df716d985070deddd8de5afe33f715dd0759b2df23","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-20","para":"25-20","html":"
Paragraph 815-20-25-15(a) does not require that hedged variable interest payments relate to a specific unchanging obligation or group of variable-rate obligations if those obligations are prepayable. Example 7 (see paragraph 815-20-55-106) illustrates this principle.
","snippet":"Paragraph 815-20-25-15(a) does not require that hedged variable interest payments relate to a specific unchanging obligation or group of variable-rate obligations if those obligations are prepayable. Example 7 (see parag…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fb663449ccc87c02350aeed6096848d93a43be5093ffd6f9bceb2655f4829b78","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-21","para":"25-21","html":"
Paragraph 815-10-15-4 states that, if a contract meets the definition of both a derivative instrument and a firm commitment under the Derivatives and Hedging Topic (as illustrated in Example 8 [see paragraph 815-20-55-111]), then an entity shall account for the contract as a derivative instrument unless one of the exceptions in this Topic applies. In that circumstance, either of the following may be true:
  1. a
    The forecasted transaction and the derivative instrument used to hedge it are with the same counterparty.
  2. b
    The derivative instrument is the same contract under which the entity executes the forecasted transaction.
","snippet":"Paragraph 815-10-15-4 states that, if a contract meets the definition of both a derivative instrument and a firm commitment under the Derivatives and Hedging Topic (as illustrated in Example 8 [see paragraph 815-20-55-11…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6aba1a5e73797d7fa647892b1f9208bf9a0a75611005f61cbee1e482d1150a7c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-22","para":"25-22","html":"
Assuming other cash flow hedge criteria are met, a derivative instrument that will involve gross settlement may be designated as the hedging instrument in a cash flow hedge of the variability of the consideration to be paid or received in a forecasted transaction that will occur upon gross settlement of the derivative instrument itself (an all-in-one hedge). This guidance applies to fixed-price contracts to acquire or sell a nonfinancial or financial asset that are accounted for as derivative instruments under this Topic provided the criteria for a cash flow hedge are met.
","snippet":"Assuming other cash flow hedge criteria are met, a derivative instrument that will involve gross settlement may be designated as the hedging instrument in a cash flow hedge of the variability of the consideration to be p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:12d648565ec85bcba6fef34fef32d1272f2f37e0ad58969a17f5e5d2bd13e5c4","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-22A","para":"25-22A","html":"
For existing contracts, determining whether the variability in cash flows attributable to changes in a contractually specified component may be designated as the hedged risk in a cash flow hedge is based on the following:
  1. a
    If the contract to purchase or sell a nonfinancial asset is a derivative in its entirety and an entity applies the normal purchases and normal sales scope exception in accordance with Subtopic 815-10, any contractually specified component in the contract is eligible to be designated as the hedged risk. If the entity does not apply the normal purchases and normal sales scope exception, no pricing component is eligible to be designated as the hedged risk.
  2. b
    If the contract to purchase or sell a nonfinancial asset is not a derivative in its entirety, any contractually specified component remaining in the host contract (that is, the contract to purchase or sell a nonfinancial asset after any embedded derivatives have been bifurcated in accordance with Subtopic 815-15) is eligible to be designated as the hedged risk.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7
Editor's Note: The heading that precedes paragraph 815-20-25-22A will be amended upon transition as shown below, and the content of the paragraph will be superseded.
• • > Eligibility Criteria for Designating the Variability in Cash Flows Attributable to Changes in a Component (or Subcomponent) of the Purchase Price or Sales Price of a Nonfinancial Asset as the Hedged Risk
Paragraph superseded by Accounting Standards Update No. 2025-09.
","snippet":"For existing contracts, determining whether the variability in cash flows attributable to changes in a contractually specified component may be designated as the hedged risk in a cash flow hedge is based on the following…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fe0d6137aaa6d86a8bbdfabfab65f24043747e9616b7fc26ca6a1c17aade41be","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-22B","para":"25-22B","html":"
An entity may designate the variability in cash flows attributable to changes in a contractually specified component in accordance with paragraph 815-20-25-15(i)(3) to purchase or sell a nonfinancial asset for a period longer than the contractual term or for a not-yet-existing contract to purchase or sell a nonfinancial asset if the entity expects that the requirements in paragraph 815-20-25-22A will be met when the contract is executed. Once the contract is executed, the entity shall apply the guidance in paragraph 815-20-25-22A to determine whether the variability in cash flows attributable to changes in the contractually specified component can continue to be designated as the hedged risk. See paragraphs
815-20-55-26A through 55-26E
for related implementation guidance.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Paragraph superseded by Accounting Standards Update No. 2025-09.
","snippet":"An entity may designate the variability in cash flows attributable to changes in a contractually specified component in accordance with paragraph 815-20-25-15(i)(3) to purchase or sell a nonfinancial asset for a period l…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:61a21f12fae8bbfea09e6932a7142b843fa87559d525bd2c5d5cae64ac5864e0","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-22C","para":"25-22C","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7An entity may designate the variability in cash flows attributable to changes in a component (or subcomponent) of the forecasted purchase price or sales price of a nonfinancial asset as the hedged risk in a cash flow hedge as follows:
  1. a
    If the purchase price or sales price of the nonfinancial asset is not determined in accordance with a pricing formula in an agreement, the hedged variable component is clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to the nonfinancial asset being purchased or sold.
  2. b
    If the purchase price or sales price of the nonfinancial asset is determined in accordance with a pricing formula in an agreement, the hedged variable component is either of the following:
    1. 1
      Explicitly referenced in the agreement’s pricing formula and clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to the nonfinancial asset being purchased or sold
    2. 2
      Clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to a variable component that meets the conditions in (b)(1) (that is, a “subcomponent”). (Throughout Subtopic 815-20, reference to a subcomponent refers only to the designation guidance in this subparagraph.)
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7An entity may designate the variability in cash flows attributable to changes in a component (or subcomponent) of the forecasted …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:030bb30b42a5a50fa197560a6e3b95aa9cde83346cc210db12ed3557443cf7f4","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-23","para":"25-23","html":"
Under the functional currency concept of Topic 830, exposure to a foreign currency exists only in relation to a specific operating unit's designated functional currency cash flows. Therefore, exposure to foreign currency risk shall be assessed at the unit level.
","snippet":"Under the functional currency concept of Topic 830, exposure to a foreign currency exists only in relation to a specific operating unit's designated functional currency cash flows. Therefore, exposure to foreign currency…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c3ecc27b789144f93672417f96ab5f709ba88fc183d6823d566a2036dad8de7","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-24","para":"25-24","html":"
A unit has exposure to foreign currency risk only if it enters into a transaction (or has an exposure) denominated in a currency other than the unit's functional currency.
","snippet":"A unit has exposure to foreign currency risk only if it enters into a transaction (or has an exposure) denominated in a currency other than the unit's functional currency.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:69b548ee8d75eced91c5f8867d69266f87877d8b3e52fb8404aefe0bd0d280ff","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-25","para":"25-25","html":"
Due to the requirement in Topic 830 for remeasurement of assets and liabilities denominated in a foreign currency into the unit's functional currency, changes in exchange rates for those currencies will give rise to exchange gains or losses, which results in direct foreign currency exposure for the unit but not for the parent entity if its functional currency differs from its unit's functional currency.
","snippet":"Due to the requirement in Topic 830 for remeasurement of assets and liabilities denominated in a foreign currency into the unit's functional currency, changes in exchange rates for those currencies will give rise to exch…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7bcd173c5280a7a12d69f0edfd0c0965a5e65937a6715104bb134e0ce6b48aae","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-26","para":"25-26","html":"
The functional currency concepts of Topic 830 are relevant if the foreign currency exposure being hedged relates to any of the following:
  1. a
    An unrecognized foreign-currency-denominated firm commitment
  2. b
    A recognized foreign-currency-denominated asset or liability
  3. c
    A foreign-currency-denominated forecasted transaction
  4. d
    The forecasted functional-currency-equivalent cash flows associated with a recognized asset or liability
  5. e
    A net investment in a foreign operation.
","snippet":"The functional currency concepts of Topic 830 are relevant if the foreign currency exposure being hedged relates to any of the following:\n(a) An unrecognized foreign-currency-denominated firm commitment\n(b) A recognized …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2e2175bd9b1452a43c765a33be628e36d8e21876c90ff5a529da43c132d740f0","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-27","para":"25-27","html":"
Because a parent entity whose functional currency differs from its subsidiary's functional currency is not directly exposed to the risk of exchange rate changes due to a subsidiary transaction that is denominated in a currency other than a subsidiary's functional currency, the parent cannot qualify for hedge accounting for a hedge of that risk. Accordingly, a parent entity that has a different functional currency cannot qualify for hedge accounting for direct hedges of a subsidiary's recognized asset or liability, unrecognized firm commitment or forecasted transaction denominated in a currency other than the subsidiary's functional currency. Also, a parent that has a different functional currency cannot qualify for hedge accounting for a hedge of a net investment of a first-tier subsidiary in a second-tier subsidiary.
","snippet":"Because a parent entity whose functional currency differs from its subsidiary's functional currency is not directly exposed to the risk of exchange rate changes due to a subsidiary transaction that is denominated in a cu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a3d85c8208e8a1e15b6389dc2f758fe7289072b1b816480e7ec19e8aa2d687e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-28","para":"25-28","html":"
If the hedged item is denominated in a foreign currency, an entity may designate any of the following types of hedges of foreign currency exposure:
  1. a
    A fair value hedge of an unrecognized firm commitment or a recognized asset or liability (including an available-for-sale debt security)
  2. b
    A cash flow hedge of any of the following:
    1. 1
      A forecasted transaction
    2. 2
      An unrecognized firm commitment
    3. 3
      The forecasted functional-currency-equivalent cash flows associated with a recognized asset or liability
    4. 4
      A forecasted intra-entity transaction.
  3. c
    A hedge of a net investment in a foreign operation.
","snippet":"If the hedged item is denominated in a foreign currency, an entity may designate any of the following types of hedges of foreign currency exposure:\n(a) A fair value hedge of an unrecognized firm commitment or a recognize…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c0cff2c758ec76b7020723bee5412ac0a74f096cbb07dc81caa6508d5b67b434","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-29","para":"25-29","html":"
The recognition in earnings of the foreign currency transaction gain or loss on a foreign-currency-denominated asset or liability based on changes in the foreign currency spot rate is not considered to be the remeasurement of that asset or liability with changes in fair value attributable to foreign exchange risk recognized in earnings, which is discussed in the criteria in paragraphs 815-20-25-15(d) and 815-20-25-43(c). Thus, those criteria are not impediments to either of the following:
  1. a
    A foreign currency fair value or cash flow hedge of such a foreign-currency-denominated asset or liability
  2. b
    A foreign currency cash flow hedge of the forecasted acquisition or incurrence of a foreign-currency-denominated asset or liability whose carrying amount will be remeasured at spot exchange rates under paragraph 830-20-35-1.
","snippet":"The recognition in earnings of the foreign currency transaction gain or loss on a foreign-currency-denominated asset or liability based on changes in the foreign currency spot rate is not considered to be the remeasureme…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8c0e3ed9bd66b428fdebeba01d158bc1e06531eeb5ac66b5e2af6b29c55fd6f","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-30","para":"25-30","html":"
Both of the following conditions shall be met for foreign currency cash flow hedges, foreign currency fair value hedges, and hedges of the net investment in a foreign operation:
  1. a
    For consolidated financial statements, either of the following conditions is met:
    1. 1
      The operating unit that has the foreign currency exposure is a party to the hedging instrument.
    2. 2
      Another member of the consolidated group that has the same functional currency as that operating unit is a party to the hedging instrument and there is no intervening subsidiary with a different functional currency. See guidance beginning in paragraph 815-20-25-52 for conditions under which an intra-entity foreign currency derivative can be the hedging instrument in a cash flow hedge of foreign exchange risk.
  2. b
    The hedged transaction is denominated in a currency other than the hedging unit's functional currency.
","snippet":"Both of the following conditions shall be met for foreign currency cash flow hedges, foreign currency fair value hedges, and hedges of the net investment in a foreign operation:\n(a) For consolidated financial statements,…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2bf83632f32e0e9f05655b370f89496f21843fd3b17908d6c0de3edad549f897","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-31","para":"25-31","html":"
However, a subsidiary may enter into an intra-entity hedging instrument with the parent entity, and that contract can be a hedging instrument in the consolidated financial statements if the parent entity enters into an offsetting contract (pursuant to paragraph 815-20-25-52 for the appropriate hedging relationship) with an unrelated third party to hedge the exposure it acquired from issuing the derivative instrument to the subsidiary that initiated the hedge.
","snippet":"However, a subsidiary may enter into an intra-entity hedging instrument with the parent entity, and that contract can be a hedging instrument in the consolidated financial statements if the parent entity enters into an o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6c170e83073037fe83e94be5b27f165a6cdb4a67d4ecbedfd9c9d92777c700a","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-32","para":"25-32","html":"
If a subsidiary has the same functional currency as the parent entity or other member of the consolidated group, the parent entity or that other member of the consolidated group may, subject to certain restrictions, enter into a derivative instrument or nonderivative instrument that is designated as the hedging instrument in a hedge of that subsidiary's foreign exchange risk in consolidated financial statements.
","snippet":"If a subsidiary has the same functional currency as the parent entity or other member of the consolidated group, the parent entity or that other member of the consolidated group may, subject to certain restrictions, ente…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:632863c8574ae54d8787325808bdc14db3dfeec8c2935835236d4ee6d0ed13d6","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-33","para":"25-33","html":"
In some instances, it may not be practical or feasible to hedge in the same currency and, therefore, a hedging instrument also may be denominated in a currency for which the exchange rate generally moves in tandem with the exchange rate for the currency in which the hedged item is denominated.
","snippet":"In some instances, it may not be practical or feasible to hedge in the same currency and, therefore, a hedging instrument also may be denominated in a currency for which the exchange rate generally moves in tandem with t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1aefb77ef2239d03d8723f071077ecf330b4ad7ce5137907e3bafe5155f91207","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-34","para":"25-34","html":"
The provisions of this Section (including paragraph 815-20-25-28) that permit a recognized foreign-currency-denominated asset or liability to be the hedged item in a fair value or cash flow hedge of foreign currency exposure also pertain to a recognized foreign-currency-denominated receivable or payable that results from a hedged forecasted foreign-currency-denominated sale or purchase on credit. Specifically, an entity may choose to designate either of the following:
  1. a
    A single cash flow hedge that encompasses the variability of functional currency cash flows attributable to foreign exchange risk related to the settlement of the foreign-currency-denominated receivable or payable resulting from a forecasted sale or purchase on credit
  2. b
    Both of the following separate hedges:
    1. 1
      A cash flow hedge of the variability of functional currency cash flows attributable to foreign exchange risk related to a forecasted foreign-currency-denominated sale or purchase on credit
    2. 2
      A foreign currency fair value hedge of the resulting recognized foreign-currency-denominated receivable or payable.
","snippet":"The provisions of this Section (including paragraph 815-20-25-28) that permit a recognized foreign-currency-denominated asset or liability to be the hedged item in a fair value or cash flow hedge of foreign currency expo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9fa4e20d4cbb75ce9d9679b7bc5a0abfad8728385ca1a4a63a0b915b2b4d2f9","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-35","para":"25-35","html":"
If two separate hedges are designated, the cash flow hedge would terminate (that is, be dedesignated) when the hedged sale or purchase occurs and the foreign-currency-denominated receivable or payable is recognized.
","snippet":"If two separate hedges are designated, the cash flow hedge would terminate (that is, be dedesignated) when the hedged sale or purchase occurs and the foreign-currency-denominated receivable or payable is recognized.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2dd0c2d2a4d58cdee906a0e25c6ed8421040358b3a919fb1a0c6bc04afd5830e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-36","para":"25-36","html":"
The use of the same foreign currency derivative instrument for both the cash flow hedge and the fair value hedge is not prohibited.
","snippet":"The use of the same foreign currency derivative instrument for both the cash flow hedge and the fair value hedge is not prohibited.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c296100abf1f677abeb904c48b6df2ed42c2c4f26b781f4ff32669d7753aa6de","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-37","para":"25-37","html":"
This paragraph identifies possible hedged items in fair value hedges of foreign exchange risk. If every applicable criterion is met, all of the following are eligible for designation as a hedged item in a fair value hedge of foreign exchange risk:
  1. a
    Recognized asset or liability. A derivative instrument can be designated as hedging the changes in the fair value of a recognized asset or liability (or a specific portion thereof) for which a foreign currency transaction gain or loss is recognized in earnings under the provisions of paragraph 830-20-35-1. All recognized foreign-currency-denominated assets or liabilities for which a foreign currency transaction gain or loss is recorded in earnings shall qualify for the accounting specified in Subtopic 815-25 if all the fair value hedge criteria in this Section (including the conditions in paragraph 815-20-25-30(a) through (b)) are met.
  2. b
    Available-for-sale debt security. A derivative instrument can be designated as hedging the changes in the fair value of an available-for-sale debt security (or a specific portion thereof) attributable to changes in foreign currency exchange rates. The designated hedging relationship qualifies for the accounting specified in Subtopic 815-25 if all the fair value hedge criteria in this Section (including the conditions in paragraph 815-20-25-30(a) through (b)) are met.
  3. c
    Subparagraph superseded by Accounting Standards Update No. 2016-01.
  4. d
    Unrecognized firm commitment. Paragraph 815-20-25-58 states that a derivative instrument or a nonderivative financial instrument that may give rise to a foreign currency transaction gain or loss under Topic 830 can be designated as hedging changes in the fair value of an unrecognized firm commitment, or a specific portion thereof, attributable to foreign currency exchange rates.
","snippet":"This paragraph identifies possible hedged items in fair value hedges of foreign exchange risk. If every applicable criterion is met, all of the following are eligible for designation as a hedged item in a fair value hedg…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ccc5a4fbb864c3c19e3ca47192b2665a74fab8270d70ee7b5ab2d52773378c7d","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-38","para":"25-38","html":"
The conditions in the following paragraph relate to a derivative instrument designated as hedging the foreign currency exposure to variability in the functional-currency-equivalent cash flows associated with any of the following:
  1. a
    A forecasted transaction (for example, a forecasted export sale to an unaffiliated entity with the price to be denominated in a foreign currency)
  2. b
    A recognized asset or liability
  3. c
    An unrecognized firm commitment
  4. d
    A forecasted intra-entity transaction (for example, a forecasted sale to a foreign subsidiary or a forecasted royalty from a foreign subsidiary).
","snippet":"The conditions in the following paragraph relate to a derivative instrument designated as hedging the foreign currency exposure to variability in the functional-currency-equivalent cash flows associated with any of the f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:896c3f25cd0d8b36b1e0122ae656e7e8a59491b8104c8e62ecae483cc0ee38f2","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-39","para":"25-39","html":"
A hedging relationship of the type described in the preceding paragraph qualifies for hedge accounting if all the following criteria are met:
  1. a
    The criteria in paragraph 815-20-25-30(a) through (b) are met.
  2. b
    All of the cash flow hedge criteria in this Section otherwise are met, except for the criterion in paragraph 815-20-25-15(c) that requires that the forecasted transaction be with a party external to the reporting entity.
  3. c
    If the hedged transaction is a group of individual forecasted foreign-currency-denominated transactions, a forecasted inflow of a foreign currency and a forecasted outflow of the foreign currency cannot both be included in the same group.
  4. d
    If the hedged item is a recognized foreign-currency-denominated asset or liability, all the variability in the hedged item's functional-currency-equivalent cash flows shall be eliminated by the effect of the hedge.
","snippet":"A hedging relationship of the type described in the preceding paragraph qualifies for hedge accounting if all the following criteria are met:\n(a) The criteria in paragraph 815-20-25-30(a) through (b) are met.\n(b) All of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ab99e1d95198d722d98174946a5ec43dfa1dc4e4ae6bc9653c665c3c3644866f","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-40","para":"25-40","html":"
For purposes of item (d) in the preceding paragraph, an entity shall not specifically exclude a risk from the hedge that will affect the variability in cash flows. For example, a cash flow hedge cannot be used with a variable-rate foreign-currency-denominated asset or liability and a derivative instrument based solely on changes in exchange rates because the derivative instrument does not eliminate all the variability in the functional currency cash flows. As long as no element of risk that affects the variability in foreign-currency-equivalent cash flows has been specifically excluded from a foreign currency cash flow hedge and the hedging instrument is highly effective at providing the necessary offset in the variability of all cash flows, a less-than-perfect hedge would meet the requirement in (d) in the preceding paragraph. That criterion does not require that the derivative instrument used to hedge the foreign currency exposure of the forecasted foreign-currency-equivalent cash flows associated with a recognized asset or liability be perfectly effective, rather it is intended to ensure that the hedging relationship is highly effective at offsetting all risks that impact the variability of cash flows.
","snippet":"For purposes of item (d) in the preceding paragraph, an entity shall not specifically exclude a risk from the hedge that will affect the variability in cash flows. For example, a cash flow hedge cannot be used with a var…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1c6f4866d8fa2de05d4c727cc05df6ed22731c58774df43983f9b993d1879681","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-41","para":"25-41","html":"
If all of the variability of the functional-currency-equivalent cash flows is eliminated as a result of the hedge (as required by paragraph 815-20-25-39(d)), an entity can use cash flow hedge accounting to hedge the variability in the functional-currency-equivalent cash flows associated with any of the following:
  1. a
    All of the payments of both principal and interest of a foreign-currency-denominated asset or liability
  2. b
    All of the payments of principal of a foreign-currency-denominated asset or liability
  3. c
    All or a fixed portion of selected payments of either principal or interest of a foreign-currency-denominated asset or liability
  4. d
    Selected payments of both principal and interest of a foreign-currency-denominated asset or liability (for example, principal and interest payments on December 31, 20X1, and December 31, 20X3).
","snippet":"If all of the variability of the functional-currency-equivalent cash flows is eliminated as a result of the hedge (as required by paragraph 815-20-25-39(d)), an entity can use cash flow hedge accounting to hedge the vari…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d1eb7fc7e764b297a88fc05b083c076fd05d1dffc83b7880b32c5231f3646c56","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-42","para":"25-42","html":"
The reference in the definition of a forecasted transaction indicating that a forecasted transaction is not a firm commitment focuses on firm commitments that have no variability. The reference does not preclude a cash flow hedge of the variability in functional-currency-equivalent cash flows if the commitment's fixed price is denominated in a foreign currency. Although that definition of a firm commitment requires a fixed price, it permits the fixed price to be denominated in a foreign currency. A firm commitment can expose the parties to variability in their functional-currency-equivalent cash flows. The definition of a forecasted transaction also indicates that the transaction or event will occur at the prevailing market price. From the perspective of the hedged risk (foreign exchange risk), the translation of the foreign currency proceeds from the sale of the nonfinancial assets will occur at the prevailing market price (that is, current exchange rate). Example 14 (see paragraph 815-20-55-136) illustrates the application of this guidance.
","snippet":"The reference in the definition of a forecasted transaction indicating that a forecasted transaction is not a firm commitment focuses on firm commitments that have no variability. The reference does not preclude a cash f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4caf98997acf832bd8549a3f43df52e213235b5539e9770f5edf2fbf061eab7b","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-43","para":"25-43","html":"
Besides those hedged items and transactions that fail to meet the specified eligibility criteria, none of the following shall be designated as a hedged item or transaction in the respective hedges:
  1. a
    Subparagraph not used.
  2. b
    With respect to both fair value hedges and cash flow hedges:
    1. 1
      An investment accounted for by the equity method in accordance with the requirements of Subtopic 323-10 or in accordance with the requirements of Topic 321
    2. 2
      A noncontrolling interest in one or more consolidated subsidiaries
    3. 3
      Transactions with stockholders as stockholders, such as either of the following:
      1. i
        Projected purchases of treasury stock
      2. ii
        Payments of dividends.
    4. 4
      Intra-entity transactions (except for foreign-currency-denominated forecasted intra-entity transactions) between entities included in consolidated financial statements
    5. 5
      The price of stock expected to be issued pursuant to a stock option plan for which recognized compensation expense is not based on changes in stock prices after the date of grant.
  3. c
    With respect to fair value hedges only:
    1. 1
      If the entire asset or liability is an instrument with variable cash flows, an implicit fixed-to-variable swap (or similar instrument) perceived to be embedded in a host contract with fixed cash flows
    2. 2
      For a held-to-maturity debt security, the risk of changes in its fair value attributable to interest rate risk
    3. 3
      An asset or liability that is remeasured with the changes in fair value attributable to the hedged risk reported currently in earnings
    4. 4
      An equity investment in a consolidated subsidiary
    5. 5
      A firm commitment either to enter into a business combination or to acquire or dispose of a subsidiary, a noncontrolling interest, or an equity method investee
    6. 6
      An equity instrument issued by the entity and classified in stockholders' equity in the statement of financial position
    7. 7
      A component of an embedded derivative in a hybrid instrument—for example, embedded options in a hybrid instrument that are required to be considered a single forward contract under paragraph 815-10-25-10 cannot be designated as items hedged individually in a fair value hedge in which the hedging instrument is a separate, unrelated freestanding option.
  4. d
    With respect to cash flow hedges only:
    1. 1
      Subparagraph not used.
    2. 2
      If variable cash flows of the forecasted transaction relate to a debt security that is classified as held-to-maturity under Topic 320, the risk of changes in its cash flows attributable to interest rate risk
    3. 3
      Subparagraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Besides those hedged items and transactions that fail to meet the specified eligibility criteria, none of the following shall be designated as a hedged item or transaction in the respective hedges:\n(a) Subparagraph not u…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c2005f6e9758fa878af12f35bab8392d898f7d61832cc16527f2b4ecbe972479","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-44","para":"25-44","html":"
The earnings exposure criterion specifically precludes hedge accounting for derivative instruments used to hedge items in (b)(3) through (b)(5) in the preceding paragraph. However, intra-entity transactions may present an earnings exposure for a subsidiary in its freestanding financial statements; a hedge of an intra-entity transaction would be eligible for hedge accounting for purposes of those statements.
","snippet":"The earnings exposure criterion specifically precludes hedge accounting for derivative instruments used to hedge items in (b)(3) through (b)(5) in the preceding paragraph. However, intra-entity transactions may present a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ea1b2b900c8dda756ff99187a7914861ad2600286ff89575b00a6d9dd1a22d9","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0163a84030cd79da00755a868580bf12ef8346cc0995e3f235f6ecc9c9325d00","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"block":null,"heading":"Eligibility of Hedging Instruments","paragraphs":[{"citation":"815-20-25-45","para":"25-45","html":"
Either all or a proportion of a derivative instrument (including a compound embedded derivative that is accounted for separately) may be designated as a hedging instrument. Two or more derivative instruments, or proportions thereof, may also be viewed in combination and jointly designated as the hedging instrument. A proportion of a derivative instrument or derivative instruments designated as the hedging instrument shall be expressed as a percentage of the entire derivative instrument(s) so that the profile of risk exposures in the hedging portion of the derivative instrument(s) is the same as that in the entire derivative instrument(s). Subsequent references in the Derivatives and Hedging Topic to a derivative instrument as a hedging instrument include the use of only a proportion of a derivative instrument as a hedging instrument. Whether a written option may be designated as a hedging instrument depends on the terms of both the hedging instrument and the hedged item as discussed beginning in paragraph 815-20-25-94.
","snippet":"Either all or a proportion of a derivative instrument (including a compound embedded derivative that is accounted for separately) may be designated as a hedging instrument. Two or more derivative instruments, or proporti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:34da35f43183011a1c3fc6c6ad75c9933b4b94248c65e90184df2b9052abcd30","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-46","para":"25-46","html":"
The eligibility criteria for hedging instruments are organized as follows:
  1. a
    Intra-entity derivatives
  2. b
    Subparagraph not used.
  3. c
    Hedging instrument in a cash flow hedge of basis risk
  4. d
    Hedging instruments in hedges of foreign exchange risk
  5. e
    Instruments specifically ineligible for designation as hedging instruments.
","snippet":"The eligibility criteria for hedging instruments are organized as follows:\n(a) Intra-entity derivatives\n(b) Subparagraph not used.\n(c) Hedging instrument in a cash flow hedge of basis risk\n(d) Hedging instruments in hedg…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:48481c80b5fcd04f84c13a1f9c60dfc5bbe1007306803fc02716b12231943cb3","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-46A","para":"25-46A","html":"
There is no requirement in this Subtopic that the operating unit with the interest rate, market price, or credit risk exposure be a party to the hedging instrument. Thus, for example, a parent entity's central treasury function can enter into a derivative instrument with a third party and designate it as the hedging instrument in a hedge of a subsidiary's interest rate risk for purposes of the consolidated financial statements. However, if the subsidiary wishes to qualify for hedge accounting of the interest rate exposure in its separate-entity financial statements, the subsidiary (as the reporting entity) shall be a party to the hedging instrument, which can be an intra-entity derivative obtained from the central treasury function. Thus, an intra-entity derivative for interest rate risk can qualify for designation as the hedging instrument in separate-entity financial statements but not in consolidated financial statements. (As used in this guidance, the term subsidiary refers only to a consolidated subsidiary. This guidance shall not be applied directly or by analogy to an equity method investee.)
","snippet":"There is no requirement in this Subtopic that the operating unit with the interest rate, market price, or credit risk exposure be a party to the hedging instrument. Thus, for example, a parent entity's central treasury f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba118a04de21a4b8d1878b11038860a6dc1ecca5ca8a435ed1cfb9f2af5e8253","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-46B","para":"25-46B","html":"
An intra-entity derivative shall not be designated as the hedging instrument if the hedged risk is any of the following:
  1. a
    The risk of changes in the overall fair value or cash flows of the entire hedged item or transaction
  2. b
    The risk of changes in hedged item's or transaction's fair value attributable to changes in the designated benchmark interest rate or cash flows attributable to changes in the contractually specified interest rate or designated benchmark interest rate
  3. c
    The risk of changes in hedged item's or transaction's fair value or cash flows attributable to changes in credit risk.
  4. d
    The risk of variability in cash flows attributable to changes in a contractually specified component to purchase or sell a nonfinancial asset.
Similarly, a derivative instrument contract between operating units within a single legal entity shall not be designated as the hedging instrument in a hedge of those risks. Only a derivative instrument with an unrelated third party can be designated as the hedging instrument in a hedge of those risks in consolidated financial statements.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7An intra-entity derivative shall not be designated as the hedging instrument if the hedged risk is any of the following:
  1. a
    The risk of changes in the overall fair value or cash flows of the entire hedged item or transaction
  2. b
    The risk of changes in hedged item's or transaction's fair value attributable to changes in the designated benchmark interest rate or cash flows attributable to changes in the contractually specified interest rate or designated benchmark interest rate
  3. c
    The risk of changes in hedged item's or transaction's fair value or cash flows attributable to changes in credit risk.
  4. d
    The risk of variability in cash flows attributable to changes in a component (or subcomponent) of the price to purchase or sell a nonfinancial asset that meets the conditions in paragraph 815-20-25-22C.
Similarly, a derivative instrument contract between operating units within a single legal entity shall not be designated as the hedging instrument in a hedge of those risks. Only a derivative instrument with an unrelated third party can be designated as the hedging instrument in a hedge of those risks in consolidated financial statements.
","snippet":"An intra-entity derivative shall not be designated as the hedging instrument if the hedged risk is any of the following:\n(a) The risk of changes in the overall fair value or cash flows of the entire hedged item or transa…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cf1fd020c06447d821dab308e35b515a6419225f9ad42bdec8c8d55a77929285","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-47","para":"25-47","html":"
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Paragraph not used.
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If a hedging instrument is used to modify the contractually specified interest receipts or payments associated with a recognized financial asset or liability from one variable rate to another variable rate, the hedging instrument shall meet both of the following criteria:
  1. a
    It is a link between both of the following:
    1. 1
      An existing designated asset (or group of similar assets) with variable cash flows
    2. 2
      An existing designated liability (or group of similar liabilities) with variable cash flows.
  2. b
    It is highly effective at achieving offsetting cash flows.
","snippet":"If a hedging instrument is used to modify the contractually specified interest receipts or payments associated with a recognized financial asset or liability from one variable rate to another variable rate, the hedging i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9b1ffdd3c02cf558452cee32a6ec33298b3d60e023ab8a6f3f5127db4331c1c1","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-51","para":"25-51","html":"
For purposes of paragraph 815-20-25-50, a link exists if both of the following criteria are met:
  1. a
    The basis (that is, the rate index on which the interest rate is based) of one leg of an interest rate swap is the same as the basis of the contractually specified interest receipts for the designated asset.
  2. b
    The basis of the other leg of the swap is the same as the basis of the contractually specified interest payments for the designated liability.
In this situation, the criterion in paragraph 815-20-25-15(a) is applied separately to the designated asset and the designated liability.
","snippet":"For purposes of paragraph 815-20-25-50, a link exists if both of the following criteria are met:\n(a) The basis (that is, the rate index on which the interest rate is based) of one leg of an interest rate swap is the same…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:abb0cd9cf5f763cb0dbfc433621a2454173f95c175728c2d0d922e98ac9dd947","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-51A","para":"25-51A","html":"
The guidance on hedging instruments in hedges of foreign exchange risk is organized as follows:
  1. a
    Intra-entity derivatives
  2. b
    Hedging instruments in fair value hedges involving foreign exchange risk
  3. c
    Internal derivatives as hedging instruments in cash flow hedges of foreign exchange risk
  4. d
    Hedging instruments in net investment hedges.
","snippet":"The guidance on hedging instruments in hedges of foreign exchange risk is organized as follows:\n(a) Intra-entity derivatives\n(b) Hedging instruments in fair value hedges involving foreign exchange risk\n(c) Internal deriv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:01bb24194b23841f037173fc01532159b73641d74077d35fb4255a4c97611cf0","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-52","para":"25-52","html":"
A foreign currency derivative instrument that has been entered into with another member of a consolidated group can be a hedging instrument in any of the following hedging relationships only if that other member of the consolidated group has entered into an offsetting contract with an unrelated third party to hedge the exposure it acquired from issuing the derivative instrument to the affiliate that initiated the hedge:
  1. a
    A fair value hedge
  2. b
    A cash flow hedge of a recognized foreign-currency-denominated asset or liability
  3. c
    A net investment hedge in the consolidated financial statements.
","snippet":"A foreign currency derivative instrument that has been entered into with another member of a consolidated group can be a hedging instrument in any of the following hedging relationships only if that other member of the c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3efcaf5a5db691d7a34e76ddab121d4a59ea2f1f029e7f4aad4684248df7fffe","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-53","para":"25-53","html":"
Paragraph 815-20-25-46A states that there is no requirement in this Subtopic that the operating unit with the interest rate, market price, or credit risk exposure be a party to the hedging instrument and provides related guidance.
","snippet":"Paragraph 815-20-25-46A states that there is no requirement in this Subtopic that the operating unit with the interest rate, market price, or credit risk exposure be a party to the hedging instrument and provides related…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c432ba5513cebce6768afbb40a110af6ab9bdb1d48c4c47073cda4787d9f4ff","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-54","para":"25-54","html":"
An intra-entity derivative can be designated as a hedging instrument in consolidated financial statements if condition (a) is met and either condition (b) or (c) is met:
  1. a
    The hedged risk is either of the following:
    1. 1
      The risk of changes in fair value or cash flows attributable to changes in a foreign currency exchange rate
    2. 2
      The foreign exchange risk for a net investment in a foreign operation.
  2. b
    In a fair value hedge or in a cash flow hedge of a recognized foreign-currency-denominated asset or liability or in a net investment hedge in the consolidated financial statements the counterparty (that is, the other member of the consolidated group) has entered into a contract with an unrelated third party that offsets the intra-entity derivative completely, thereby hedging the exposure it acquired from issuing the intra-entity derivative to the affiliate that designated the hedge.
  3. c
    In a foreign currency cash flow hedge of a forecasted borrowing, purchase, or sale or an unrecognized firm commitment the counterparty has entered into a derivative instrument with an unrelated third party to offset the exposure that results from that internal derivative or, if the conditions in paragraphs
    815-20-25-62 through 25-63
    are met, entered into derivative instruments with unrelated third parties that would offset, on a net basis for each foreign currency, the foreign exchange risk arising from multiple internal derivative instruments.
","snippet":"An intra-entity derivative can be designated as a hedging instrument in consolidated financial statements if condition (a) is met and either condition (b) or (c) is met:\n(a) The hedged risk is either of the following:\n(1…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a66961ca579ef7eefbde1ff1443cf043fcd6b698bc39143a1736968b7df7eee7","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-55","para":"25-55","html":"
The designation of intra-entity derivatives as hedging instruments for hedges of foreign exchange risk enables entities to continue using a central treasury function for derivative instruments with third parties and still comply with the requirement in paragraph 815-20-25-30(a) that the operating unit with the foreign currency exposure be a party to the hedging instrument.
","snippet":"The designation of intra-entity derivatives as hedging instruments for hedges of foreign exchange risk enables entities to continue using a central treasury function for derivative instruments with third parties and stil…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cd6f47f31873284caba4b933cfbbc1db27300e45d92ff008c4f3891d8441682e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-56","para":"25-56","html":"
Paragraph 815-20-25-46B states that an intra-entity derivative shall not be designated as the hedging instrument in other circumstances and provides related guidance.
","snippet":"Paragraph 815-20-25-46B states that an intra-entity derivative shall not be designated as the hedging instrument in other circumstances and provides related guidance.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2316f6a5da755ab88bd38765cc32000c511fcc427676e781a96e0db6623a0f27","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-57","para":"25-57","html":"
Paragraph not used.
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A derivative instrument or a nonderivative financial instrument that may give rise to a foreign currency transaction gain or loss under Topic 830 can be designated as hedging changes in the fair value of an unrecognized firm commitment, or a specific portion thereof, attributable to foreign currency exchange rates. The designated hedging relationship qualifies for the accounting specified in Subtopic 815-25 if all the fair value hedge conditions in this Section and the conditions in paragraph 815-20-25-30 are met.
","snippet":"A derivative instrument or a nonderivative financial instrument that may give rise to a foreign currency transaction gain or loss under Topic 830 can be designated as hedging changes in the fair value of an unrecognized …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:26aaa492d744677c94a502ae06a0bcaaf77b0adeba450181b89c7d22137370a1","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-59","para":"25-59","html":"
The carrying basis for a nonderivative financial instrument that gives rise to a foreign currency transaction gain or loss under Subtopic 830-20 is not addressed by this Subtopic.
","snippet":"The carrying basis for a nonderivative financial instrument that gives rise to a foreign currency transaction gain or loss under Subtopic 830-20 is not addressed by this Subtopic.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:68b35762f5fc6708055e59199fe156a2286bad63a732f3789bb9fdeb19c68b0e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-60","para":"25-60","html":"
An entity may designate an intra-entity loan or other payable as the hedging instrument in a foreign currency fair value hedge of an unrecognized firm commitment and qualify for hedge accounting in the consolidated financial statements. That designation is consistent with the ability under paragraphs
815-20-25-58 through 25-59
to designate nonderivative instruments as hedging instruments in foreign currency fair value hedges of firm commitments. However, hedge accounting in the consolidated financial statements shall only be applied if the member of the consolidated entity that is the counterparty to the intra-entity loan has entered into a third-party contract that offsets the foreign exchange exposure of that entity's intra-entity loan receivable. That is, the requirement in paragraphs
815-20-25-28 through 25-29
that an intra-entity derivative instrument designated as a hedging instrument in a foreign currency fair value hedge be offset by a third-party contract would also apply to intra-entity nonderivative instruments designated as hedging instruments. To remain consistent with the notion that the intra-entity contract is simply a conduit for the third-party exposure, an intra-entity loan designated as a hedging instrument shall be offset by a third-party loan (that is, it shall not be offset by a derivative instrument). Hedge accounting shall be applied in consolidation only to those gains and losses occurring during the period that the offsetting third-party loan is in place.
","snippet":"An entity may designate an intra-entity loan or other payable as the hedging instrument in a foreign currency fair value hedge of an unrecognized firm commitment and qualify for hedge accounting in the consolidated finan…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fd934e0f11e75faa53702f07216530867bb8222f9ce8c67f2f888f5d25d1eda9","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-61","para":"25-61","html":"
An internal derivative can be a hedging instrument in a foreign currency cash flow hedge of a forecasted borrowing, purchase, or sale or an unrecognized firm commitment in the consolidated financial statements only if both of the following conditions are satisfied:
  1. a
    From the perspective of the member of the consolidated group using the derivative instrument as a hedging instrument (the hedging affiliate), the criteria for foreign currency cash flow hedge accounting otherwise specified in this Section are satisfied.
  2. b
    The member of the consolidated group not using the derivative instrument as a hedging instrument (the issuing affiliate) either:
    1. 1
      Enters into a derivative instrument with an unrelated third party to offset the exposure that results from that internal derivative
    2. 2
      If the conditions in paragraphs
      815-20-25-62 through 25-63
      are met, enters into derivative instruments with unrelated third parties that would offset, on a net basis for each foreign currency, the foreign exchange risk arising from multiple internal derivative instruments.       In complying with this guidance the issuing affiliate could enter into a third-party position with neither leg of the third-party position being the issuing affiliate's functional currency to offset its exposure if the amount of the respective currencies of each leg are equivalent with respect to each other based on forward exchange rates.
","snippet":"An internal derivative can be a hedging instrument in a foreign currency cash flow hedge of a forecasted borrowing, purchase, or sale or an unrecognized firm commitment in the consolidated financial statements only if bo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:52826f2fe4230b2fdcd91b722c23a09cddc095abaf60cca5b7c419f46ffcbd7e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-62","para":"25-62","html":"
If an issuing affiliate chooses to offset exposure arising from multiple internal derivatives on an aggregate or net basis, the derivative instruments issued to hedging affiliates shall qualify as cash flow hedges in the consolidated financial statements only if all of the following conditions are satisfied:
  1. a
    The issuing affiliate enters into a derivative instrument with an unrelated third party to offset, on a net basis for each foreign currency, the foreign exchange risk arising from multiple internal derivatives.
  2. b
    The derivative instrument with the unrelated third party generates equal or closely approximating gains and losses when compared with the aggregate or net losses and gains generated by the derivative instruments issued to affiliates.
  3. c
    Internal derivatives that are not designated as hedging instruments are excluded from the determination of the foreign currency exposure on a net basis that is offset by the third-party derivative instrument. Nonderivative contracts shall not be used as hedging instruments to offset exposures arising from internal derivatives.
  4. d
    Foreign currency exposure that is offset by a single net third-party contract arises from internal derivatives that mature within the same 31-day period and that involve the same currency exposure as the net third-party derivative instrument. The offsetting net third-party derivative instrument related to that group of contracts shall meet all of the following criteria:
    1. 1
      It offsets the aggregate or net exposure to that currency.
    2. 2
      It matures within the same 31-day period.
    3. 3
      It is entered into within three business days after the designation of the internal derivatives as hedging instruments.
  5. e
    The issuing affiliate meets both of the following conditions:
    1. 1
      It tracks the exposure that it acquires from each hedging affiliate.
    2. 2
      It maintains documentation supporting linkage of each internal derivative and the offsetting aggregate or net derivative instrument with an unrelated third party.
  6. f
    The issuing affiliate does not alter or terminate the offsetting derivative instrument with an unrelated third party unless the hedging affiliate initiates that action.
","snippet":"If an issuing affiliate chooses to offset exposure arising from multiple internal derivatives on an aggregate or net basis, the derivative instruments issued to hedging affiliates shall qualify as cash flow hedges in the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:690be9c93daded6fd2f420457dd980d70cdd3fc02f2eaba6ca29817a68f3aa71","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-63","para":"25-63","html":"
If the issuing affiliate alters or terminates any offsetting third-party derivative (which should be rare), the hedging affiliate shall prospectively cease hedge accounting for the internal derivatives that are offset by that third-party derivative instrument.
","snippet":"If the issuing affiliate alters or terminates any offsetting third-party derivative (which should be rare), the hedging affiliate shall prospectively cease hedge accounting for the internal derivatives that are offset by…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:875c9385a2b09d4c085b6a2f81d52b85943b387086be16dae7face92d79fbf93","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-64","para":"25-64","html":"
A member of a consolidated group cannot meet the offsetting criteria by offsetting exposures arising from multiple internal derivative contracts on a net basis for foreign currency cash flow exposures related to recognized foreign-currency-denominated assets or liabilities. That prohibition includes situations in which a recognized foreign-currency-denominated asset or liability in a fair value hedge or cash flow hedge results from the occurrence of a specifically identified forecasted transaction initially designated as a cash flow hedge.
","snippet":"A member of a consolidated group cannot meet the offsetting criteria by offsetting exposures arising from multiple internal derivative contracts on a net basis for foreign currency cash flow exposures related to recogniz…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0777370bb65650c6d6ec32d9c8072f6e90337026b62b3cb50c5fa10912fef39d","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-65","para":"25-65","html":"
A qualifying foreign currency cash flow hedge shall be accounted for as specified in Subtopic 815-30.
","snippet":"A qualifying foreign currency cash flow hedge shall be accounted for as specified in Subtopic 815-30.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a5926a4d323c80986a227d07677e22564b0ee4ae5974e9b9d6b2197f4279421","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-66","para":"25-66","html":"
A derivative instrument or a nonderivative financial instrument that may give rise to a foreign currency transaction gain or loss under Subtopic 830-20 can be designated as hedging the foreign currency exposure of a net investment in a foreign operation provided the conditions in paragraph 815-20-25-30 are met. A nonderivative financial instrument that is reported at fair value does not give rise to a foreign currency transaction gain or loss under Subtopic 830-20 and, thus, cannot be designated as hedging the foreign currency exposure of a net investment in a foreign operation.
","snippet":"A derivative instrument or a nonderivative financial instrument that may give rise to a foreign currency transaction gain or loss under Subtopic 830-20 can be designated as hedging the foreign currency exposure of a net …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e3a45140a39de68d36ab4f0340923ec8caa02941a37095f1e619aeef3f0b2948","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-67","para":"25-67","html":"
Hedging instruments that are eligible for designation in a net investment hedge include, among others, both of the following:
  1. a
    A receive-variable-rate, pay-variable-rate cross-currency interest rate swap, provided both of the following conditions are met:
    1. 1
      The interest rates are based on the same currencies contained in the swap.
    2. 2
      Both legs of the swap have the same repricing intervals and dates.
  2. b
    A receive-fixed-rate, pay-fixed-rate cross-currency interest rate swap. A cross-currency interest rate swap that has two fixed legs is not a compound derivative instrument and, therefore, is not subject to the criteria in (a).
","snippet":"Hedging instruments that are eligible for designation in a net investment hedge include, among others, both of the following:\n(a) A receive-variable-rate, pay-variable-rate cross-currency interest rate swap, provided bot…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f9c5ac8d59f30f6787e6015f95265799c84734df32bc788b594e5e5c85242d53","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-68","para":"25-68","html":"
A cross-currency interest rate swap that has either two variable legs or two fixed legs has a fair value that is primarily driven by changes in foreign exchange rates rather than changes in interest rates. Therefore, foreign exchange risk, rather than interest rate risk, is the dominant risk exposure in such a swap.
","snippet":"A cross-currency interest rate swap that has either two variable legs or two fixed legs has a fair value that is primarily driven by changes in foreign exchange rates rather than changes in interest rates. Therefore, for…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b90f8deb9cd7f6d41eb11a86435daa36420c7a9e7b386a51c5e8df7ccceb8504","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-68A","para":"25-68A","html":"
Under the guidance in paragraph 815-20-25-71(d)(1), a cross-currency interest rate swap with one fixed-rate leg and one floating-rate leg cannot be designated as the hedging instrument in a net investment hedge.
","snippet":"Under the guidance in paragraph 815-20-25-71(d)(1), a cross-currency interest rate swap with one fixed-rate leg and one floating-rate leg cannot be designated as the hedging instrument in a net investment hedge.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:664f3be325257ce16cc3862540ee30e7ac6a92d2c122140da54899df8c2595cb","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-69","para":"25-69","html":"
To designate a derivative instrument as a hedge of a net investment, an entity shall have an expectation that the derivative instrument will be effective as an economic hedge of foreign exchange risk associated with the hedged net investment. Accordingly, if any difference in notional amount, currencies, or underlyings is present, the entity shall establish an expectation that the actual derivative instrument designated as the hedging instrument will be effective as an economic hedge.
","snippet":"To designate a derivative instrument as a hedge of a net investment, an entity shall have an expectation that the derivative instrument will be effective as an economic hedge of foreign exchange risk associated with the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:141d83308fe708628a917ee6ffa111f9ddf604254493f268d98b8387b713df8e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-70","para":"25-70","html":"
For example, if an entity designates a derivative instrument that has an underlying exchange rate involving a currency other than the functional currency of the net investment, that exchange rate shall be expected to move in tandem with the exchange rate between the functional currency of the hedged net investment and the investor's functional currency. Use of a currency different from the exposed currency is not limited to cases in which it is not practical or feasible to hedge in the exposed currency if all other qualifying criteria are met.
","snippet":"For example, if an entity designates a derivative instrument that has an underlying exchange rate involving a currency other than the functional currency of the net investment, that exchange rate shall be expected to mov…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a2f3fea8d5128412cf7522c50c775a0a0e77e5d3bf0d0311786eb7b2315ce71c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-71","para":"25-71","html":"
Besides those hedging instruments that fail to meet the specified eligibility criteria, none of the following shall be designated as a hedging instrument for the respective hedges:
  1. a
    With respect to fair value hedges, cash flow hedges, and net investment hedges:
    1. 1
      A nonderivative instrument, such as a U.S. Treasury note, except as provided in paragraphs
      815-20-25-58 through 25-59
      and 815-20-25-66
    2. 2
      Components of a compound derivative instrument representing different risks
    3. 3
      A hybrid financial instrument that an entity irrevocably elects under paragraph 815-15-25-4 to initially and subsequently measure in its entirety at fair value (with changes in fair value recognized in earnings)
    4. 4
      A hybrid instrument for which an entity cannot reliably identify and measure the embedded derivative instrument that paragraph 815-15-25-1 requires be separated from the host contract
    5. 5
      Any of the individual components of a compound embedded derivative that is separated from the host contract.
  2. b
    With respect to fair value hedges only:
    1. 1
      A nonderivative financial instrument as the hedging instrument in a fair value hedge of the foreign currency exposure of a recognized asset or liability.
    2. 2
      A nonderivative financial instrument as the hedging instrument in a fair value hedge of the foreign currency exposure of an available-for-sale debt security.
  3. c
    With respect to cash flow hedges only:
    1. 1
      A nonderivative financial instrument as a hedging instrument in a foreign currency cash flow hedge.
  4. d
    With respect to net investment hedges only:
    1. 1
      A compound derivative instrument that has multiple underlyings—one based on foreign exchange risk and one or more not based on foreign exchange (for example, the price of gold or the price of an S&P 500 contract), except as indicated in paragraph 815-20-25-67 for certain cross-currency interest rate swaps
    2. 2
      A derivative instrument and a cash instrument in combination as a single hedging instrument (that is, an entity shall not consider a separate derivative instrument and a cash instrument as a single synthetic instrument for accounting purposes)
    3. 3
      Subparagraph not used.
","snippet":"Besides those hedging instruments that fail to meet the specified eligibility criteria, none of the following shall be designated as a hedging instrument for the respective hedges:\n(a) With respect to fair value hedges, …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e64aa2d718335f0e86d7bdbb2c26f36350e8baf87b09c2a42ddadfb7a54a7179","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8ff3242f1c95e06906546a3a2077cb2e673e565b23e52faca34bc3bf35a0283","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"block":null,"heading":"Hedge Effectiveness","paragraphs":[{"citation":"815-20-25-72","para":"25-72","html":"
The hedge effectiveness criteria are organized as follows:
  1. a
    Hedge effectiveness criteria applicable to both fair value hedges and cash flow hedges
  2. b
    Hedge effectiveness criterion applicable to fair value hedges only
  3. c
    Hedge effectiveness criteria applicable to cash flow hedges only
  4. d
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"The hedge effectiveness criteria are organized as follows:\n(a) Hedge effectiveness criteria applicable to both fair value hedges and cash flow hedges\n(b) Hedge effectiveness criterion applicable to fair value hedges only…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eb74b327bc6fa212ff30257d76d58b4ed535e08f0a0a57fc17b4c8106828d17c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-73","para":"25-73","html":"
Sections 815-25-55 and 815-30-55 illustrate some ways in which an entity may assess hedge effectiveness for specific strategies. The Examples are not intended to imply that other reasonable methods are precluded. However, not all possible methods are reasonable or consistent with this Subtopic. Those Sections also discuss some methods of assessing hedge effectiveness that are not consistent with this Subtopic and thus may not be used.
","snippet":"Sections 815-25-55 and 815-30-55 illustrate some ways in which an entity may assess hedge effectiveness for specific strategies. The Examples are not intended to imply that other reasonable methods are precluded. However…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5e112096713f1e905e6791b038b288b3b2e5a353b08bf92582d563542fcfbc9","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-74","para":"25-74","html":"
This guidance addresses hedge effectiveness criteria applicable to both fair value hedges and cash flow hedges.
","snippet":"This guidance addresses hedge effectiveness criteria applicable to both fair value hedges and cash flow hedges.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e9f5690d9d43b997df8857a1d4101cfc4a5806186f7ffb1874eba61ae26cbc09","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-75","para":"25-75","html":"
To qualify for hedge accounting, the hedging relationship, both at inception of the hedge and on an ongoing basis, shall be expected to be highly effective in achieving either of the following:
  1. a
    Offsetting changes in fair value attributable to the hedged risk during the period that the hedge is designated (if a fair value hedge)
  2. b
    Offsetting cash flows attributable to the hedged risk during the term of the hedge (if a cash flow hedge), except as indicated in paragraph 815-20-25-50.
","snippet":"To qualify for hedge accounting, the hedging relationship, both at inception of the hedge and on an ongoing basis, shall be expected to be highly effective in achieving either of the following:\n(a) Offsetting changes in …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e9d19b9a596193d6b62e33588d2302ad15083e7423bdbfdf2024c3daf7379fb","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-76","para":"25-76","html":"
If the hedging instrument (such as an at-the-money option contract) provides only one-sided offset of the hedged risk, either of the following conditions shall be met:
  1. a
    The increases (or decreases) in the fair value of the hedging instrument are expected to be highly effective in offsetting the decreases (or increases) in the fair value of the hedged item (if a fair value hedge).
  2. b
    The cash inflows (outflows) from the hedging instrument are expected to be highly effective in offsetting the corresponding change in the cash outflows or inflows of the hedged transaction (if a cash flow hedge).
","snippet":"If the hedging instrument (such as an at-the-money option contract) provides only one-sided offset of the hedged risk, either of the following conditions shall be met:\n(a) The increases (or decreases) in the fair value o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5377f887b5d0146838dc0392c95a61b0c3f6bea87f4d137f60cb8ae9a6855645","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-77","para":"25-77","html":"
There would be a mismatch between the change in fair value or cash flows of the hedging instrument and the change in fair value or cash flows of the hedged item or hedged transaction in any of the following circumstances, among others:
  1. a
    A difference between the basis of the hedging instrument and the hedged item or hedged transaction, to the extent that those bases do not move in tandem
  2. b
    Differences in critical terms of the hedging instrument and hedged item or hedged transaction, such as differences in any of the following:
    1. 1
      Notional amounts
    2. 2
      Maturities
    3. 3
      Quantity
    4. 4
      Location (not applicable for hedging relationships in which the variability in cash flows attributable to changes in a contractually specified component is designated as the hedged risk)
    5. 5
      Delivery dates.
  3. c
    A change in the counterparty's creditworthiness.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7There would be a mismatch between the change in fair value or cash flows of the hedging instrument and the change in fair value or cash flows of the hedged item or hedged transaction in any of the following circumstances, among others:
  1. a
    A difference between the basis of the hedging instrument and the hedged item or hedged transaction, to the extent that those bases do not move in tandem
  2. b
    Differences in critical terms of the hedging instrument and hedged item or hedged transaction, such as differences in any of the following:
    1. 1
      Notional amounts
    2. 2
      Maturities
    3. 3
      Quantity
    4. 4
      Location (not applicable if the hedging instrument’s underlying and the designated hedged risk are the same)
    5. 5
      Delivery dates.
  3. c
    A change in the counterparty's creditworthiness.
","snippet":"There would be a mismatch between the change in fair value or cash flows of the hedging instrument and the change in fair value or cash flows of the hedged item or hedged transaction in any of the following circumstances…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5aa976eadc917a70de037d91484855d71831348ebd484b3974ee4d451432704b","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-78","para":"25-78","html":"
Paragraph 815-20-55-62 discusses basis differences in cash flow hedges of interest rate risk.
","snippet":"Paragraph 815-20-55-62 discusses basis differences in cash flow hedges of interest rate risk.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:60e19f449f97c5d0d5a18b92cc73b88c47cd8851506da30eb74ce6e79694d385","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-79","para":"25-79","html":"
An entity shall consider hedge effectiveness in two different ways—in prospective considerations and in retrospective evaluations:
  1. a
    Prospective considerations. The entity's expectation that the relationship will be highly effective over future periods in achieving offsetting changes in fair value or cash flows, which is forward looking, must be assessed on a quantitative basis at hedge inception unless one of the exceptions in paragraph 815-20-25-3(b)(2)(iv)(01) is met. Prospective assessments shall be subsequently performed whenever financial statements or earnings are reported and at least every three months. The entity shall elect at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(03) whether to perform subsequent assessments on a quantitative or qualitative basis. See paragraphs
    815-20-35-2A through 35-2F
    for additional guidance on qualitative assessments of hedge effectiveness. A quantitative assessment     can be based on regression or other statistical analysis of past changes in fair values or cash flows as well as on other relevant information. The quantitative prospective assessment of hedge effectiveness shall consider all reasonably possible changes in fair value (if a fair value hedge) or in fair value or cash flows (if a cash flow hedge) of the derivative instrument and the hedged items for the period used to assess whether the requirement for expectation of highly effective offset is satisfied. The quantitative prospective assessment may not be limited only to the likely or expected changes in fair value (if a fair value hedge) or in fair value or cash flows (if a cash flow hedge) of the derivative instrument or the hedged items. Generally, the process of formulating an expectation regarding the effectiveness of a proposed hedging relationship involves a probability-weighted analysis of the possible changes in fair value (if a fair value hedge) or in fair value or cash flows (if a cash flow hedge) of the derivative instrument and the hedged items for the hedge period. Therefore, a probable future change in fair value will be more heavily weighted than a reasonably possible future change. That calculation technique is consistent with the definition of the term expected cash flow in FASB Concepts Statement No. 7, Using Cash Flow Information and Present Value in Accounting Measurements.
  2. b
    Retrospective evaluations. An assessment of effectiveness may be performed on a quantitative or qualitative basis on the basis of the entity's election at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(03). That assessment shall be performed whenever financial statements or earnings are reported, and at least every three months. See paragraphs
    815-20-35-2 through 35-4
    for further guidance. At inception of the hedge, an entity electing a dollar-offset approach to perform retrospective evaluations on a quantitative basis may choose either a period-by-period approach or a cumulative approach in designating how effectiveness of a fair value hedge or of a cash flow hedge will be assessed retrospectively under that approach, depending on the nature of the hedge documented in accordance with paragraph 815-20-25-3. For example, an entity may decide that the cumulative approach is generally preferred, yet may wish to use the period-by-period approach in certain circumstances. See paragraphs
    815-20-35-5 through 35-6
    for further guidance.
Transition date:(P) December 16, 2024; (N) December 16, 2025Transition guidance:
105-10-65-9An entity shall consider hedge effectiveness in two different ways—in prospective considerations and in retrospective evaluations:
  1. a
    Prospective considerations. The entity's expectation that the relationship will be highly effective over future periods in achieving offsetting changes in fair value or cash flows, which is forward looking, must be assessed on a quantitative basis at hedge inception unless one of the exceptions in paragraph 815-20-25-3(b)(2)(iv)(01) is met. Prospective assessments shall be subsequently performed whenever financial statements or earnings are reported and at least every three months. The entity shall elect at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(03) whether to perform subsequent assessments on a quantitative or qualitative basis. See paragraphs
    815-20-35-2A through 35-2F
    for additional guidance on qualitative assessments of hedge effectiveness. A quantitative assessment     can be based on regression or other statistical analysis of past changes in fair values or cash flows as well as on other relevant information. The quantitative prospective assessment of hedge effectiveness shall consider all reasonably possible changes in fair value (if a fair value hedge) or in fair value or cash flows (if a cash flow hedge) of the derivative instrument and the hedged items for the period used to assess whether the requirement for expectation of highly effective offset is satisfied. The quantitative prospective assessment may not be limited only to the likely or expected changes in fair value (if a fair value hedge) or in fair value or cash flows (if a cash flow hedge) of the derivative instrument or the hedged items. Generally, the process of formulating an expectation regarding the effectiveness of a proposed hedging relationship involves a probability-weighted analysis of the possible changes in fair value (if a fair value hedge) or in fair value or cash flows (if a cash flow hedge) of the derivative instrument and the hedged items for the hedge period. Therefore, a probable future change in fair value will be more heavily weighted than a reasonably possible future change. That calculation technique is consistent with the definition of the term expected cash flow.
  2. b
    Retrospective evaluations. An assessment of effectiveness may be performed on a quantitative or qualitative basis on the basis of the entity's election at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(03). That assessment shall be performed whenever financial statements or earnings are reported, and at least every three months. See paragraphs
    815-20-35-2 through 35-4
    for further guidance. At inception of the hedge, an entity electing a dollar-offset approach to perform retrospective evaluations on a quantitative basis may choose either a period-by-period approach or a cumulative approach in designating how effectiveness of a fair value hedge or of a cash flow hedge will be assessed retrospectively under that approach, depending on the nature of the hedge documented in accordance with paragraph 815-20-25-3. For example, an entity may decide that the cumulative approach is generally preferred, yet may wish to use the period-by-period approach in certain circumstances. See paragraphs
    815-20-35-5 through 35-6
    for further guidance.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7An entity shall consider hedge effectiveness in two different ways—in prospective considerations and in retrospective evaluations:
  1. a
    Prospective considerations. The entity's expectation that the relationship will be highly effective over future periods in achieving offsetting changes in fair value or cash flows, which is forward looking, must be assessed on a quantitative basis at hedge inception unless one of the exceptions in paragraph 815-20-25-3(b)(2)(iv)(01) is met. Prospective assessments shall be subsequently performed whenever financial statements or earnings are reported and at least every three months. The entity shall elect at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(03) whether to perform subsequent assessments on a quantitative or qualitative basis. See paragraphs
    815-20-35-2A through 35-2F
    for additional guidance on qualitative assessments of hedge effectiveness. A quantitative assessment     can be based on regression or other statistical analysis of past changes in fair values or cash flows as well as on other relevant information. Except as described in paragraph 815-20-25-79B, the quantitative prospective assessment of hedge effectiveness shall consider all reasonably possible changes in fair value (if a fair value hedge) or in fair value or cash flows (if a cash flow hedge) of the derivative instrument and the hedged items for the period used to assess whether the requirement for expectation of highly effective offset is satisfied. The quantitative prospective assessment may not be limited only to the likely or expected changes in fair value (if a fair value hedge) or in fair value or cash flows (if a cash flow hedge) of the derivative instrument or the hedged items. Generally, the process of formulating an expectation regarding the effectiveness of a proposed hedging relationship involves a probability-weighted analysis of the possible changes in fair value (if a fair value hedge) or in fair value or cash flows (if a cash flow hedge) of the derivative instrument and the hedged items for the hedge period. Therefore, a probable future change in fair value will be more heavily weighted than a reasonably possible future change. That calculation technique is consistent with the definition of the term expected cash flow.
  2. b
    Retrospective evaluations. An assessment of effectiveness may be performed on a quantitative or qualitative basis on the basis of the entity's election at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(03). That assessment shall be performed whenever financial statements or earnings are reported, and at least every three months. See paragraphs
    815-20-35-2 through 35-4
    for further guidance. At inception of the hedge, an entity electing a dollar-offset approach to perform retrospective evaluations on a quantitative basis may choose either a period-by-period approach or a cumulative approach in designating how effectiveness of a fair value hedge or of a cash flow hedge will be assessed retrospectively under that approach, depending on the nature of the hedge documented in accordance with paragraph 815-20-25-3. For example, an entity may decide that the cumulative approach is generally preferred, yet may wish to use the period-by-period approach in certain circumstances. See paragraphs
    815-20-35-5 through 35-6
    for further guidance. See paragraphs 815-30-35-37F and
    815-30-35-37L through 35-37M
    for guidance on the retrospective effectiveness assessment for a cash flow hedge within the scope of paragraph 815-30-35-37B related to choose-your-rate debt.
","snippet":"An entity shall consider hedge effectiveness in two different ways—in prospective considerations and in retrospective evaluations:\n(a) Prospective considerations. The entity's expectation that the relationship will be hi…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d040771907845b4778b4928c97290e64b8305bb4eb31a0ba2f7b8cd3e60186ec","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-79A","para":"25-79A","html":"
See paragraphs
815-20-25-139 through 25-142
about the timing of hedge effectiveness assessments required by paragraph 815-20-25-79 for a private company that is not a financial institution or a not-for-profit entity (except for a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market).
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7See paragraphs
815-20-25-139 through 25-143
 about the timing of hedge effectiveness assessments required by paragraph 815-20-25-79 for a private company that is not a financial institution or a not-for-profit entity (except for a not-for-profit entity that has issued, or is a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market).
","snippet":"See paragraphs 815-20-25-139 through 25-142 about the timing of hedge effectiveness assessments required by paragraph 815-20-25-79 for a private company that is not a financial institution or a not-for-profit entity (exc…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bda0bbf3b633a36d612cc1146bbc054f9546a09fa7913cb11737c2a577807fa1","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-79B","para":"25-79B","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7For a cash flow hedge of forecasted interest payments on a choose-your-rate debt instrument for which an entity chooses to apply the guidance in paragraphs
815-30-35-37B through 35-37M
, the quantitative prospective assessment of hedge effectiveness shall consider all reasonably possible changes in cash flows of the forecasted transaction attributable to only the then-designated contractually specified interest rate. An entity shall not consider possible changes in cash flows of the forecasted transaction attributable to a contractually specified interest rate that may be designated in the future. The quantitative prospective assessment of hedge effectiveness shall consider all reasonably possible changes in cash flows of the derivative instrument in accordance with paragraph 815-20-25-79(a).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7For a cash flow hedge of forecasted interest payments on a choose-your-rate debt instrument for which an entity chooses to apply …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:537e5d759f8d2a9499460b6a1608c5f4f6de988c9d5fb81742d33c6e44be7758","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-80","para":"25-80","html":"
All assessments of effectiveness shall be consistent with the originally documented risk management strategy for that particular hedging relationship. An entity shall use the quantitative effectiveness assessment method defined at hedge inception consistently for the periods that the entity either elects or is required to assess hedge effectiveness on a quantitative basis.
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  2. b
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"All assessments of effectiveness shall be consistent with the originally documented risk management strategy for that particular hedging relationship. An entity shall use the quantitative effectiveness assessment method …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ac8d5cc2cf5421e2b1810ea863f7c78e7690b67a773c965c1705c12787486d37","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-81","para":"25-81","html":"
This Subtopic does not specify a single method for assessing whether a hedge is expected to be highly effective. The method of assessing effectiveness shall be reasonable. The appropriateness of a given method of assessing hedge effectiveness depends on the nature of the risk being hedged and the type of hedging instrument used. Ordinarily, an entity shall assess effectiveness for similar hedges in a similar manner, including whether a component of the gain or loss on a derivative instrument is excluded in assessing effectiveness for similar hedges. Use of different methods for similar hedges shall be justified. The mechanics of isolating the change in time value of an option discussed beginning in paragraph 815-20-25-98 also shall be applied consistently.
","snippet":"This Subtopic does not specify a single method for assessing whether a hedge is expected to be highly effective. The method of assessing effectiveness shall be reasonable. The appropriateness of a given method of assessi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:40033f69337bbb43358a94b34357ef8bb1c596b4c197415fae9e6ee69eb43d9c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-82","para":"25-82","html":"
In defining how hedge effectiveness will be assessed, an entity shall specify whether it will include in that assessment all of the gain or loss on a hedging instrument. An entity may exclude all or a part of the hedging instrument's time value from the assessment of hedge effectiveness, as follows:
  1. a
    If the effectiveness of a hedge with an option is assessed based on changes in the option's intrinsic value, the change in the time value of the option would be excluded from the assessment of hedge effectiveness.
  2. b
    If the effectiveness of a hedge with an option is assessed based on changes in the option's minimum value, that is, its intrinsic value plus the effect of discounting, the change in the volatility value of the contract shall be excluded from the assessment of hedge effectiveness.
  3. c
    An entity may exclude any of the following components of the change in an option's time value from the assessment of hedge effectiveness:
    1. 1
      The portion of the change in time value attributable to the passage of time (theta)
    2. 2
      The portion of the change in time value attributable to changes due to volatility (vega)
    3. 3
      The portion of the change in time value attributable to changes due to interest rates (rho).
  4. d
    If the effectiveness of a hedge with a forward contract or futures contract is assessed based on changes in fair value attributable to changes in spot prices, the change in the fair value of the contract related to the changes in the difference between the spot price and the forward or futures price shall be excluded from the assessment of hedge effectiveness.
  5. e
    An entity may exclude the portion of the change in fair value of a currency swap attributable to a cross-currency basis spread.
","snippet":"In defining how hedge effectiveness will be assessed, an entity shall specify whether it will include in that assessment all of the gain or loss on a hedging instrument. An entity may exclude all or a part of the hedging…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2b9bfbbd742fe827d8794e4876f2a6f7545781a03c76eb1b1ead79751683b691","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-83","para":"25-83","html":"
No other components of a gain or loss on the designated hedging instrument shall be excluded from the assessment of hedge effectiveness nor shall an entity exclude any aspect of a change in an option's value from the assessment of hedge effectiveness that is not one of the permissible components of the change in an option's time value. For example, an entity shall not exclude from the assessment of hedge effectiveness the portion of the change in time value attributable to changes in other market variables (that is, other than rho and vega).
","snippet":"No other components of a gain or loss on the designated hedging instrument shall be excluded from the assessment of hedge effectiveness nor shall an entity exclude any aspect of a change in an option's value from the ass…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4043837c3bd320e8ee1e5a97c2307790342c28f347532ede0f794084339d31db","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-83A","para":"25-83A","html":"
For fair value and cash flow hedges, the initial value of the component excluded from the assessment of effectiveness shall be recognized in earnings using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in earnings under that systematic and rational method shall be recognized in other comprehensive income. Example 31 beginning in paragraph 815-20-55-235 illustrates this approach for a cash flow hedge in which the hedging instrument is an option and the entire time value is excluded from the assessment of effectiveness.
","snippet":"For fair value and cash flow hedges, the initial value of the component excluded from the assessment of effectiveness shall be recognized in earnings using a systematic and rational method over the life of the hedging in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8feccd926d0f927faf6dee1b979cfe8838a63454395f5e4f740e0355687d13a8","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-83B","para":"25-83B","html":"
For fair value and cash flow hedges, an entity alternatively may elect to record changes in the fair value of the excluded component currently in earnings. This election shall be applied consistently to similar hedges in accordance with paragraph 815-20-25-81 and shall be disclosed in accordance with paragraph 815-10-50-4EEEE.
","snippet":"For fair value and cash flow hedges, an entity alternatively may elect to record changes in the fair value of the excluded component currently in earnings. This election shall be applied consistently to similar hedges in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6c0cd81a8d1a848bc97f4d6fd432f39f054760b1c575652575d21befcbef70c1","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-84","para":"25-84","html":"
If the critical terms of the hedging instrument and of the hedged item or hedged forecasted transaction are the same, the entity could conclude that changes in fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. For example, an entity may assume that a hedge of a forecasted purchase of a commodity with a forward contract will be perfectly effective if all of the following criteria are met:
  1. a
    The forward contract is for purchase of the same quantity of the same commodity at the same time and location as the hedged forecasted purchase. Location differences do not need to be considered if an entity designates the variability in cash flows attributable to changes in a contractually specified component as the hedged risk and the requirements in paragraphs
    815-20-25-22A through 25-22B
    are met.
  2. b
    The fair value of the forward contract at inception is zero.
  3. c
    Either of the following criteria is met:
    1. 1
      The change in the discount or premium on the forward contract is excluded from the assessment of effectiveness pursuant to paragraphs
      815-20-25-81 through 25-83
      .
    2. 2
      The change in expected cash flows on the forecasted transaction is based on the forward price for the commodity.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If the critical terms of the hedging instrument and of the hedged item or hedged forecasted transaction are the same, the entity could conclude that changes in fair value or cash flows attributable to the risk being hedged are expected to completely offset at inception and on an ongoing basis. For example, an entity may assume that a hedge of a forecasted purchase of a commodity with a forward contract will be perfectly effective if all of the following criteria are met:
  1. a
    The forward contract is for purchase of the same quantity of the same commodity at the same time and location as the hedged forecasted purchase. Location differences do not need to be considered if the forward contract’s underlying and the designated hedged risk are the same.
  2. b
    The fair value of the forward contract at inception is zero.
  3. c
    Either of the following criteria is met:
    1. 1
      The change in the discount or premium on the forward contract is excluded from the assessment of effectiveness pursuant to paragraphs
      815-20-25-81 through 25-83
      .
    2. 2
      The change in expected cash flows on the forecasted transaction is based on the forward price for the commodity.
","snippet":"If the critical terms of the hedging instrument and of the hedged item or hedged forecasted transaction are the same, the entity could conclude that changes in fair value or cash flows attributable to the risk being hedg…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fa5884cc573fd2532416b76c7599cd4a8c7c566342bf8565cb12b20f28241b6a","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-84A","para":"25-84A","html":"
In a cash flow hedge of a group of forecasted transactions in accordance with paragraph 815-20-25-15(a)(2), an entity may assume that the timing in which the hedged transactions are expected to occur and the maturity date of the hedging instrument match in accordance with paragraph 815-20-25-84(a) if those forecasted transactions occur and the derivative matures within the same 31-day period or fiscal month.
","snippet":"In a cash flow hedge of a group of forecasted transactions in accordance with paragraph 815-20-25-15(a)(2), an entity may assume that the timing in which the hedged transactions are expected to occur and the maturity dat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09e68f61b8cdfb0d6b8cce6d28906ba6568233a3bcbd91581f4126ed2ea32f7a","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-85","para":"25-85","html":"
If all of the criteria in paragraphs 815-20-25-84 through 25-84A are met, an entity shall still perform and document an assessment of hedge effectiveness at the inception of the hedging relationship and, as discussed beginning in paragraph 815-20-35-9, on an ongoing basis throughout the hedge period. No quantitative effectiveness assessment is required at hedge inception if the criteria in paragraphs 815-20-25-84 through 25-84A are met (see paragraph 815-20-25-3(b)(2)(iv)(01)).
","snippet":"If all of the criteria in paragraphs 815-20-25-84 through 25-84A are met, an entity shall still perform and document an assessment of hedge effectiveness at the inception of the hedging relationship and, as discussed beg…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:538f7c852a10550a4b10ccd47106201cd86a19e8874e68d6df2cca8ae4b8891b","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-86","para":"25-86","html":"
The remainder of this guidance on hedge effectiveness criteria applicable to both fair value hedges and cash flow hedges is organized as follows:
  1. a
    Hedge effectiveness when the hedging instrument is an option or combination of options
  2. b
    Hedge effectiveness when hedged exposure is more limited than hedging instrument
  3. c
    Hedge effectiveness during designated hedge period
  4. d
    Assuming perfect effectiveness in a hedge with an interest rate swap (the shortcut method).
","snippet":"The remainder of this guidance on hedge effectiveness criteria applicable to both fair value hedges and cash flow hedges is organized as follows:\n(a) Hedge effectiveness when the hedging instrument is an option or combin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f40573f3b119d0a694123795fe27577afa69e9f744ed5f3ef086cb13967686d7","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-87","para":"25-87","html":"
The hedge effectiveness criteria applicable to options and combinations of options are organized as follows:
  1. a
    Determining whether a combination of options is net written
  2. b
    Hedge effectiveness of written options
  3. c
    Hedge effectiveness of options in general.
","snippet":"The hedge effectiveness criteria applicable to options and combinations of options are organized as follows:\n(a) Determining whether a combination of options is net written\n(b) Hedge effectiveness of written options\n(c) …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0dd6aaa1d29fc8b5ea27f42c0054009a3e69bd24fc3cdff97c143858accdfe59","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-88","para":"25-88","html":"
This guidance addresses how an entity shall determine whether a combination of options is considered a net written option subject to the requirements of paragraph 815-20-25-94. A combination of options (for example, an interest rate collar) entered into contemporaneously shall be considered a written option if either at inception or over the life of the contracts a net premium is received in cash or as a favorable rate or other term. Furthermore, a derivative instrument that results from combining a written option and any other non-option derivative instrument shall be considered a written option. The determination of whether a combination of options is considered a net written option depends in part on whether strike prices and notional amounts of the options remain constant.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7
Editor's Note: Paragraph 815-20-25-88 will be amended upon transition, together with the preceding headings:
• • > Hedge Effectiveness When the Hedging Instrument Is an Option or Combination of Instruments
• • • > Determining Whether a Combination of Instruments Is Net Written
This guidance addresses how an entity shall determine whether a combination of options is considered a net written option subject to the requirements of paragraph 815-20-25-94. A combination of options (for example, an interest rate collar) entered into contemporaneously shall be considered a written option if either at inception or over the life of the contracts a net premium is received in cash or as a favorable rate or other term. The determination of whether a combination of options is considered a net written option depends in part on whether strike prices and notional amounts of the options remain constant. Furthermore, a derivative instrument that results from combining a written option and any other non-option derivative instrument shall be considered a written option unless all of the following criteria are satisfied:
  1. a
    The derivative is designated as the hedging instrument in a cash flow hedge or fair value hedge of interest rate risk (including the interest rate risk portion of a hedge of both interest rate risk and foreign exchange risk).
  2. b
    The hedging instrument is a combination of a written option and a swap.
  3. c
    The notional amount of the written option matches the notional amount of the swap.
For example, an entity designates a receive-fixed, pay-variable interest rate swap with a 1 percent floor and a variable leg that is indexed to Daily SOFR as the hedging instrument in a cash flow hedge of interest rate risk. The notional amounts of the interest rate swap and the interest rate floor match. The forecasted transactions are designated as the interest payments on a portfolio of variable-rate loans that are indexed to 1-Month Term SOFR with a 1 percent floor. The combination of the interest rate swap and the interest rate floor is not considered a net written option. Therefore, the entity would not apply the net written option test to that hedging relationship.
","snippet":"This guidance addresses how an entity shall determine whether a combination of options is considered a net written option subject to the requirements of paragraph 815-20-25-94. A combination of options (for example, an i…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f532469c96202e2633164c7b2440a2ff1c46956fe138e6ffe9e2ea80f39f2ad5","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-89","para":"25-89","html":"
For a combination of options in which the strike price and the notional amount in both the written option component and the purchased option component remain constant over the life of the respective component, that combination of options would be considered a net purchased option or a zero cost collar (that is, the combination shall not be considered a net written option subject to the requirements of paragraph 815-20-25-94) provided all of the following conditions are met:
  1. a
    No net premium is received.
  2. b
    The components of the combination of options are based on the same underlying.
  3. c
    The components of the combination of options have the same maturity date.
  4. d
    The notional amount of the written option component is not greater than the notional amount of the purchased option component.
","snippet":"For a combination of options in which the strike price and the notional amount in both the written option component and the purchased option component remain constant over the life of the respective component, that combi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f0edcc420ecf7b10ed1b44a24f64324c8476f758495c188461f3f14e30a388e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-90","para":"25-90","html":"
If the combination of options does not meet all of those conditions, it shall be subject to the test in paragraph 815-20-25-94. For example, a combination of options having different underlying indexes, such as a collar containing a written floor based on three-month U.S. Treasury rates and a purchased cap based on three-month London Interbank Offered Rate (LIBOR), shall not be considered a net purchased option or a zero cost collar even though those rates may be highly correlated.
","snippet":"If the combination of options does not meet all of those conditions, it shall be subject to the test in paragraph 815-20-25-94. For example, a combination of options having different underlying indexes, such as a collar …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4d54d733fc4fcc40719cf41c2c336a475b0e50cd46bad3b98e670d6ee9b7fc3e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-91","para":"25-91","html":"
If either the written option component or the purchased option component for a combination of options has either strike prices or notional amounts that do not remain constant over the life of the respective component, the assessment to determine whether that combination of options can be considered not to be a written option under paragraph 815-20-25-88 shall be evaluated with respect to each date that either the strike prices or the notional amounts change within the contractual term from inception to maturity.
","snippet":"If either the written option component or the purchased option component for a combination of options has either strike prices or notional amounts that do not remain constant over the life of the respective component, th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:02b8fe12e98c699c7c19b94b07650421c887574c80db61751e5ce9dd946b7cb5","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-92","para":"25-92","html":"
Even though that assessment is made on the date that a combination of options is designated as a hedging instrument (to determine the applicability of paragraph 815-20-25-94), it shall consider the receipt of a net premium (in cash or as a favorable rate or other term) from that combination of options at each point in time that either the strike prices or the notional amounts change, such as either of the following circumstances:
  1. a
    If strike prices fluctuate over the life of a combination of options and no net premium is received at inception, a net premium will typically be received as a favorable term in one or more reporting periods within the contractual term from inception to maturity.
  2. b
    If notional amounts fluctuate over the life of a combination of options and no net premium is received at inception, a net premium or a favorable term will typically be received in one or more periods within the contractual term from inception to maturity.
","snippet":"Even though that assessment is made on the date that a combination of options is designated as a hedging instrument (to determine the applicability of paragraph 815-20-25-94), it shall consider the receipt of a net premi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dfe2fc1fee2ab420b93845089145b9afdf7fc5bbe5bd82620cd8f53bbf6c6b31","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-93","para":"25-93","html":"
In addition, a combination of options in which either the written option component or the purchased option component has either strike prices or notional amounts that do not remain constant over the life of the respective component shall satisfy all of the conditions in paragraph 815-20-25-89 to be considered not to be a written option (that is, to be considered to be a net purchased option or zero cost collar) under paragraph 815-20-25-88. For example, if the notional amount of the written option component is greater than the notional amount of the purchased option component at any date that the notional amount changes within the contractual term from inception to maturity, the combination of options shall be considered to be a written option under paragraph 815-20-25-88 and, thus, subject to the criteria in the following paragraph.
","snippet":"In addition, a combination of options in which either the written option component or the purchased option component has either strike prices or notional amounts that do not remain constant over the life of the respectiv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b0447cf22efaf638a3db8e96add10171ca65d69d73b8fc492545b663b716d5ff","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-94","para":"25-94","html":"
If a written option is designated as hedging a recognized asset or liability or an unrecognized firm commitment (if a fair value hedge) or the variability in cash flows for a recognized asset or liability or an unrecognized firm commitment (if a cash flow hedge), the combination of the hedged item and the written option provides either of the following:
  1. a
    At least as much potential for gains as a result of a favorable change in the fair value of the combined instruments (that is, the written option and the hedged item, such as an embedded purchased option) as exposure to losses from an unfavorable change in their combined fair value (if a fair value hedge)
  2. b
    At least as much potential for favorable cash flows as exposure to unfavorable cash flows (if a cash flow hedge).
","snippet":"If a written option is designated as hedging a recognized asset or liability or an unrecognized firm commitment (if a fair value hedge) or the variability in cash flows for a recognized asset or liability or an unrecogni…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2053e6e40fb4103cc053c53030b419c6b812c5feca6f2699134ea168b2855183","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-95","para":"25-95","html":"
The written-option test in the preceding paragraph shall be applied only at inception of the hedging relationship and is met if all possible percentage favorable changes in the underlying (from zero percent to 100 percent) would provide either of the following:
  1. a
    At least as much gain as the loss that would be incurred from an unfavorable change in the underlying of the same percentage (if a fair value hedge)
  2. b
    At least as much favorable cash flows as the unfavorable cash flows that would be incurred from an unfavorable change in the underlying of the same percentage (if a cash flow hedge).
","snippet":"The written-option test in the preceding paragraph shall be applied only at inception of the hedging relationship and is met if all possible percentage favorable changes in the underlying (from zero percent to 100 percen…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9bbdaf155e8f8f85805bd616a72ef64664858323cb44211fb6a2f33330c03806","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-96","para":"25-96","html":"
The time value of a written option (or net written option) may be excluded from the written-option test if, in defining how hedge effectiveness will be assessed, the entity specifies that it will base that assessment on only changes in the option's intrinsic value. In that circumstance, the change in the time value of the options would be excluded from the assessment of hedge effectiveness in accordance with paragraph 815-20-25-82(a).
","snippet":"The time value of a written option (or net written option) may be excluded from the written-option test if, in defining how hedge effectiveness will be assessed, the entity specifies that it will base that assessment on …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:17c837c1c071484bf771f8e1c91fd25a01c6a14205db98f513a0640cdfcbd560","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-97","para":"25-97","html":"
When applying the written-option test to determine whether there is symmetry of the gain and loss potential of the combined hedged position for all possible percentage changes in the underlying, an entity is permitted to measure the change in the intrinsic value of the written option (or net written option) combined with the change in fair value of the hedged item.
","snippet":"When applying the written-option test to determine whether there is symmetry of the gain and loss potential of the combined hedged position for all possible percentage changes in the underlying, an entity is permitted to…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f9395c364600f0b35fac83cd08e6e70e57325d9cec7f3a1edf259a126da17d4c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-98","para":"25-98","html":"
In computing the changes in an option's time value that would be excluded from the assessment of hedge effectiveness, an entity shall use a technique that appropriately isolates those aspects of the change in time value. Generally, to allocate the total change in an option's time value to its different aspects—the passage of time and the market variables—the change in time value attributable to the first aspect to be isolated is determined by holding all other aspects constant as of the beginning of the period. Each remaining aspect of the change in time value is then determined in turn in a specified order based on the ending values of the previously isolated aspects.
","snippet":"In computing the changes in an option's time value that would be excluded from the assessment of hedge effectiveness, an entity shall use a technique that appropriately isolates those aspects of the change in time value.…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4f5f893e0ff85e7d0389e6191629a04b219063ad2c233c3343371fb7937306b9","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-99","para":"25-99","html":"
Based on that general methodology, if only one aspect of the change in time value is excluded from the assessment of hedge effectiveness (for example, theta), that aspect shall be the first aspect for which the change in time value is computed and would be determined by holding all other parameters constant for the period used for assessing hedge effectiveness. However, if more than one aspect of the change in time value is excluded from the assessment of hedge effectiveness (for example, theta and vega), an entity shall determine the amount of that change in time value by isolating each of those two aspects in turn in a prespecified order (one first, the other second). The second aspect to be isolated would be based on the ending value of the first isolated aspect and the beginning values of the remaining aspects. The portion of the change in time value that is included in the assessment of effectiveness shall be determined by deducting from the total change in time value the portion of the change in time value attributable to excluded components.
","snippet":"Based on that general methodology, if only one aspect of the change in time value is excluded from the assessment of hedge effectiveness (for example, theta), that aspect shall be the first aspect for which the change in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:20adb86ece2bd376fd96d28b0c6c0ff34aae6c83eb3535330c84ca8676431b91","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-100","para":"25-100","html":"
An entity may designate as the hedging instrument in a fair value hedge or cash flow hedge a derivative instrument that does not have a limited exposure comparable to the limited exposure of the hedged item to the risk being hedged. However, to make that designation, in accordance with paragraph 815-20-25-75, the entity shall establish that the hedging relationship is expected to be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk during the period that the hedge is designated. See paragraph 815-20-25-79(a) for additional guidance on prospective considerations of hedge effectiveness in this circumstance.
","snippet":"An entity may designate as the hedging instrument in a fair value hedge or cash flow hedge a derivative instrument that does not have a limited exposure comparable to the limited exposure of the hedged item to the risk b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6090095690e93f72a3b42a66cef62f52870ec89e51cbe407280a03cf17697e1c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-101","para":"25-101","html":"
It is inappropriate under this Subtopic for an entity to designate a derivative instrument as the hedging instrument if the entity expects that the derivative instrument will not be highly effective in achieving offsetting changes in fair value or cash flows attributable to the hedged risk during the period that the hedge is designated, unless the entity has documented undertaking a dynamic hedging strategy in which it has committed itself to an ongoing repositioning strategy for its hedging relationship.
","snippet":"It is inappropriate under this Subtopic for an entity to designate a derivative instrument as the hedging instrument if the entity expects that the derivative instrument will not be highly effective in achieving offsetti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8fb77f6e1a4710965b8c67867b999fb71a371212507c00ace2aea50b9530fdba","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-102","para":"25-102","html":"
The conditions for the shortcut method do not determine which hedging relationships qualify for hedge accounting; rather, those conditions determine which hedging relationships qualify for a shortcut version of hedge accounting that assumes perfect hedge effectiveness. If all of the applicable conditions in the list in paragraph 815-20-25-104 are met, an entity may assume perfect effectiveness in a hedging relationship of interest rate risk involving a recognized interest-bearing asset or liability (or a firm commitment arising on the trade [pricing] date to purchase or issue an interest-bearing asset or liability) and an interest rate swap (or a compound hedging instrument composed of an interest rate swap and a mirror-image call or put option as discussed in paragraph 815-20-25-104[e]) provided that, in the case of a firm commitment, the trade date of the asset or liability differs from its settlement date due to generally established conventions in the marketplace in which the transaction is executed. The shortcut method's application shall be limited to hedging relationships that meet each and every applicable condition. That is, all the conditions applicable to fair value hedges shall be met to apply the shortcut method to a fair value hedge, and all the conditions applicable to cash flow hedges shall be met to apply the shortcut method to a cash flow hedge. A hedging relationship cannot qualify for application of the shortcut method based on an assumption of perfect effectiveness justified by applying other criteria. The verb match is used in the specified conditions in the list to mean be exactly the same or correspond exactly.
","snippet":"The conditions for the shortcut method do not determine which hedging relationships qualify for hedge accounting; rather, those conditions determine which hedging relationships qualify for a shortcut version of hedge acc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bb20404f469747199dafb31023810a175943e0187f90bbb27d4fd2d84339514e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-103","para":"25-103","html":"
Implicit in the conditions for the shortcut method is the requirement that a basis exist for concluding on an ongoing basis that the hedging relationship is expected to be highly effective in achieving offsetting changes in fair values or cash flows. In applying the shortcut method, an entity shall consider the likelihood of the counterparty's compliance with the contractual terms of the hedging derivative that require the counterparty to make payments to the entity.
","snippet":"Implicit in the conditions for the shortcut method is the requirement that a basis exist for concluding on an ongoing basis that the hedging relationship is expected to be highly effective in achieving offsetting changes…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c9530a5581728592cc02f3830359278e4a7c4fd3cb1aaab72540d167fdc71d39","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-104","para":"25-104","html":"
All of the following conditions apply to both fair value hedges and cash flow hedges:
  1. a
    The notional amount of the interest rate swap matches the principal amount of the interest-bearing asset or liability being hedged.
  2. b
    If the hedging instrument is solely an interest rate swap, the fair value of that interest rate swap at the inception of the hedging relationship must be zero,with one exception. The fair value of the swap may be other than zero at the inception of the hedging relationship only if the swap was entered into at the relationship's inception, the transaction price of the swap was zero in the entity's principal market (or most advantageous market), and the difference between transaction price and fair value is attributable solely to differing prices within the bid-ask spread between the entry transaction and a hypothetical exit transaction. The guidance in the preceding sentence is applicable only to transactions considered at market (that is, transaction price is zero exclusive of commissions and other transaction costs, as discussed in paragraph 820-10-35-9B). If the hedging instrument is solely an interest rate swap that at the inception of the hedging relationship has a positive or negative fair value, but does not meet the one exception specified in this paragraph, the shortcut method shall not be used even if all the other conditions are met.
  3. c
    If the hedging instrument is a compound derivative composed of an interest rate swap and mirror-image call or put option as discussed in (e), the premium for the mirror-image call or put option shall be paid or received in the same manner as the premium on the call or put option embedded in the hedged item based on the following:
    1. 1
      If the implicit premium for the call or put option embedded in the hedged item is being paid principally over the life of the hedged item (through an adjustment of the interest rate), the fair value of the hedging instrument at the inception of the hedging relationship shall be zero (except as discussed previously in (b) regarding differing prices due to the existence of a bid-ask spread).
    2. 2
      If the implicit premium for the call or put option embedded in the hedged item was principally paid at inception-acquisition (through an original issue discount or premium), the fair value of the hedging instrument at the inception of the hedging relationship shall be equal to the fair value of the mirror-image call or put option.
  4. d
    The formula for computing net settlements under the interest rate swap is the same for each net settlement. That is, both of the following conditions are met:
    1. 1
      The fixed rate is the same throughout the term.
    2. 2
      The variable rate is based on the same index and includes the same constant adjustment or no adjustment. The existence of a stub period and stub rate is not a violation of the criterion in (d) that would preclude application of the shortcut method if the stub rate is the variable rate that corresponds to the length of the stub period.
  5. e
    The interest-bearing asset or liability is not prepayable, that is, able to be settled by either party before its scheduled maturity, or the assumed maturity date if the hedged item is measured in accordance with paragraph 815-25-35-13B, with the following qualifications:
    1. 1
      This criterion does not apply to an interest-bearing asset or liability that is prepayable solely due to an embedded call option (put option) if the hedging instrument is a compound derivative composed of an interest rate swap and a mirror-image call option (put option).
    2. 2
      The call option embedded in the interest rate swap is considered a mirror image of the call option embedded in the hedged item if all of the following conditions are met:
      1. i
        The terms of the two call options match exactly, including all of the following:
        1. 01
          Maturities
        2. 02
          Strike price (that is, the actual amount for which the debt instrument could be called) and there is no termination payment equal to the deferred debt issuance costs that remain unamortized on the date the debt is called
        3. 03
          Related notional amounts
        4. 04
          Timing and frequency of payments
        5. 05
          Dates on which the instruments may be called.
      2. ii
        The entity is the writer of one call option and the holder (purchaser) of the other call option.
      3. iii
        Subparagraph not used.
  6. f
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  7. g
    Any other terms in the interest-bearing financial instruments or interest rate swaps meet both of the following conditions:
    1. 1
      The terms are typical of those instruments.
    2. 2
      The terms do not invalidate the assumption of perfect effectiveness.
","snippet":"All of the following conditions apply to both fair value hedges and cash flow hedges:\n(a) The notional amount of the interest rate swap matches the principal amount of the interest-bearing asset or liability being hedged…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:27e1b964d1e7d9cbc0f08a5b16434c897bb6d38b328f002e13dc1b81926dde41","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-105","para":"25-105","html":"
All of the following incremental conditions apply to fair value hedges only:
  1. a
    The expiration date of the interest rate swap matches the maturity date of the interest-bearing asset or liability or the assumed maturity date if the hedged item is measured in accordance with paragraph 815-25-35-13B.
  2. b
    There is no floor or cap on the variable interest rate of the interest rate swap.
  3. c
    The interval between repricings of the variable interest rate in the interest rate swap is frequent enough to justify an assumption that the variable payment or receipt is at a market rate (generally three to six months or less).
  4. d
    For fair value hedges of a proportion of the principal amount of the interest-bearing asset or liability, the notional amount of the interest rate swap designated as the hedging instrument (see (a) in paragraph 815-20-25-104) matches the portion of the asset or liability being hedged.
  5. e
    For fair value hedges of portfolios (or proportions thereof) of similar interest-bearing assets or liabilities, both of the following criteria are met:
    1. 1
      The notional amount of the interest rate swap designated as the hedging instrument matches the aggregate notional amount of the hedged item (whether it is all or a proportion of the total portfolio).
    2. 2
      The remaining criteria for the shortcut method are met with respect to the interest rate swap and the individual assets or liabilities in the portfolio.
  6. f
    The index on which the variable leg of the interest rate swap is based matches the benchmark interest rate designated as the interest rate risk being hedged for that hedging relationship.
","snippet":"All of the following incremental conditions apply to fair value hedges only:\n(a) The expiration date of the interest rate swap matches the maturity date of the interest-bearing asset or liability or the assumed maturity …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:782b3ef3fca7f3b4c54f1e53be1ff71a97d3d9fb423d335029a54b7b9efbbb41","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-106","para":"25-106","html":"
All of the following incremental conditions apply to cash flow hedges only:
  1. a
    All interest receipts or payments on the variable-rate asset or liability during the term of the interest rate swap are designated as hedged.
  2. b
    No interest payments beyond the term of the interest rate swap are designated as hedged.
  3. c
    Either of the following conditions is met:
    1. 1
      There is no floor or cap on the variable interest rate of the interest rate swap.
    2. 2
      The variable-rate asset or liability has a floor or cap and the interest rate swap has a floor or cap on the variable interest rate that is comparable to the floor or cap on the variable-rate asset or liability. For purposes of this paragraph, comparable does not necessarily mean equal. For example, if an interest rate swap's variable rate is based on LIBOR and an asset's variable rate is LIBOR plus 2 percent, a 10 percent cap on the interest rate swap would be comparable to a 12 percent cap on the asset.
  4. d
    The repricing dates of the variable-rate asset or liability and the hedging instrument must occur on the same dates and be calculated the same way (that is, both shall be either prospective or retrospective). If the repricing dates of the hedged item occur on the same dates as the repricing dates of the hedging instrument but the repricing calculation for the hedged item is prospective whereas the repricing calculation for the hedging instrument is retrospective, those repricing dates do not match.
  5. e
    For cash flow hedges of the interest payments on only a portion of the principal amount of the interest-bearing asset or liability, the notional amount of the interest rate swap designated as the hedging instrument (see paragraph 815-20-25-104(a)) matches the principal amount of the portion of the asset or liability on which the hedged interest payments are based.
  6. f
    For a cash flow hedge in which the hedged forecasted transaction is a group of individual transactions (as permitted by paragraph 815-20-25-15(a)), if both of the following criteria are met:
    1. 1
      The notional amount of the interest rate swap designated as the hedging instrument (see paragraph 815-20-25-104(a)) matches the notional amount of the aggregate group of hedged transactions.
    2. 2
      The remaining criteria for the shortcut method are met with respect to the interest rate swap and the individual transactions that make up the group. For example, the interest rate repricing dates for the variable-rate assets or liabilities whose interest payments are included in the group of forecasted transactions shall match (that is, be exactly the same as) the reset dates for the interest rate swap.
  7. g
    The index on which the variable leg of the interest rate swap is based matches the contractually specified interest rate designated as the interest rate being hedged for that hedging relationship.
","snippet":"All of the following incremental conditions apply to cash flow hedges only:\n(a) All interest receipts or payments on the variable-rate asset or liability during the term of the interest rate swap are designated as hedged…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a923569dcc13d3324c2a968bcf321acce2e1af1a14dd874b0254a7a75bfaca1","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-107","para":"25-107","html":"
The shortcut method may be applied to a hedging relationship that involves the use of an interest rate swap-in-arrears provided all of the applicable conditions are met.
","snippet":"The shortcut method may be applied to a hedging relationship that involves the use of an interest rate swap-in-arrears provided all of the applicable conditions are met.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:955eb233637200c6c4839392f652f51071e1a9b9885279dccd3687f41fb3d331","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-108","para":"25-108","html":"
Any discount or premium in the hedged debt's carrying amount (including any related deferred issuance costs) is irrelevant to and has no direct impact on the determination of whether an interest rate swap contains a mirror-image call option under paragraph 815-20-25-104(e). Typically, the call price is greater than the par or face amount of the debt instrument. The carrying amount of the debt is economically unrelated to the amount the issuer would be required to pay to exercise the call embedded in the debt.
","snippet":"Any discount or premium in the hedged debt's carrying amount (including any related deferred issuance costs) is irrelevant to and has no direct impact on the determination of whether an interest rate swap contains a mirr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f7e9a177600c13074aa88a591d35506304b68252e2c9b577fb0a5f2a93d1eb8c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-109","para":"25-109","html":"
The fixed interest rate on a hedged item need not exactly match the fixed interest rate on an interest rate swap designated as a fair value hedge. Nor does the variable interest rate on an interest-bearing asset or liability need to be the same as the variable interest rate on an interest rate swap designated as a cash flow hedge. An interest rate swap's fair value comes from its net settlements. The fixed and variable interest rates on an interest rate swap can be changed without affecting the net settlement if both are changed by the same amount. That is, an interest rate swap with a payment based on LIBOR and a receipt based on a fixed rate of 5 percent has the same net settlements and fair value as an interest rate swap with a payment based on LIBOR plus 1 percent and a receipt based on a fixed rate of 6 percent.
","snippet":"The fixed interest rate on a hedged item need not exactly match the fixed interest rate on an interest rate swap designated as a fair value hedge. Nor does the variable interest rate on an interest-bearing asset or liabi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:051c46f9ade8d48ae80705b9681f0ac753728b79b3c20aa01f924370a6e23dca","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-110","para":"25-110","html":"
Paragraph not used.
","snippet":"Paragraph not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e9196d0eb14a9088e8404101273cc517c2feb7fbe2a6e1018fe9080c1a932ea5","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-111","para":"25-111","html":"
Comparable credit risk at inception is not a condition for assuming perfect effectiveness even though actually achieving perfect offset would require that the same discount rate be used to determine the fair value of the swap and of the hedged item or hedged transaction. To justify using the same discount rate, the credit risk related to both parties to the swap as well as to the debtor on the hedged interest-bearing asset (in a fair value hedge) or the variable-rate asset on which the interest payments are hedged (in a cash flow hedge) would have to be the same. However, because that complication is caused by the interaction of interest rate risk and credit risk, which are not easily separable, comparable creditworthiness is not considered a necessary condition for assuming perfect effectiveness in a hedge of interest rate risk.
","snippet":"Comparable credit risk at inception is not a condition for assuming perfect effectiveness even though actually achieving perfect offset would require that the same discount rate be used to determine the fair value of the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9f5849d05f28ddbc8d2e2b78cdaff14e9cb8614a37a4ab8d1e79a86ec38c08a","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-112","para":"25-112","html":"
An interest-bearing asset or liability shall be considered prepayable under the provisions of paragraph 815-20-25-104(e) if one party to the contract has the right to cause the payment of principal before the scheduled payment dates unless either of the following conditions is met:
  1. a
    The debtor has the right to cause settlement of the entire contract before its stated maturity at an amount that is always greater than the then fair value of the contract absent that right.
  2. b
    The creditor has the right to cause settlement of the entire contract before its stated maturity at an amount that is always less than the then fair value of the contract absent that right.
","snippet":"An interest-bearing asset or liability shall be considered prepayable under the provisions of paragraph 815-20-25-104(e) if one party to the contract has the right to cause the payment of principal before the scheduled p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5b2c8aa966d32bc67bd1587ffd4bd297168ae75f27a45997977cbd7424ce99de","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-113","para":"25-113","html":"
However, none of the following shall be considered a prepayment provision:
  1. a
    Any term, clause, or other provision in a debt instrument that gives the debtor or creditor the right to cause prepayment of the debt contingent upon the occurrence of a specific event related to the debtor's credit deterioration or other change in the debtor's credit risk, such as any of the following:
    1. 1
      The debtor's failure to make timely payment, thus making it delinquent
    2. 2
      The debtor's failure to meet specific covenant ratios
    3. 3
      The debtor's disposition of specific significant assets (such as a factory)
    4. 4
      A declaration of cross-default
    5. 5
      A restructuring by the debtor.
  2. b
    Any term, clause, or other provision in a debt instrument that gives the debtor or creditor the right to cause prepayment of the debt contingent upon the occurrence of a specific event that meets all of the following conditions:
    1. 1
      It is not probable at the time of debt issuance.
    2. 2
      It is unrelated to changes in benchmark interest rates, contractually specified interest rates, or any other market variable.
    3. 3
      It is related either to the debtor's or creditor's death or to regulatory actions, legislative actions, or other similar events that are beyond the control of the debtor or creditor.
  3. c
    Contingent acceleration clauses that permit the debtor to accelerate the maturity of an outstanding note only upon the occurrence of a specified event that meets all of the following conditions:
    1. 1
      It is not probable at the time of debt issuance.
    2. 2
      It is unrelated to changes in benchmark interest rates, contractually specified interest rates, or any other market variable.
    3. 3
      It is related to regulatory actions, legislative actions, or other similar events that are beyond the control of the debtor or creditor.
","snippet":"However, none of the following shall be considered a prepayment provision:\n(a) Any term, clause, or other provision in a debt instrument that gives the debtor or creditor the right to cause prepayment of the debt conting…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:45f9a9c04d9118ff21320bfb73b109ead1a13035e9d73d24052159772a58e48c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-114","para":"25-114","html":"
Furthermore, a right to cause a contract to be prepaid at its then fair value would not cause the interest-bearing asset or liability to be considered prepayable because that right would have a fair value of zero at all times and essentially would provide only liquidity to the holder.
","snippet":"Furthermore, a right to cause a contract to be prepaid at its then fair value would not cause the interest-bearing asset or liability to be considered prepayable because that right would have a fair value of zero at all …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c7f34fc5a3e26fdc4771d8f1e443fd452352b23fdeefb8d1fa68a5aaf6a35f06","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-115","para":"25-115","html":"
Application of this guidance to specific debt instruments is illustrated in paragraph 815-20-55-75.
","snippet":"Application of this guidance to specific debt instruments is illustrated in paragraph 815-20-55-75.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fc7c0c16d04bc33f7a4cea734349506beada466bb9e8565dbe4b93a519a3e088","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-116","para":"25-116","html":"
Portfolio hedging cannot be used to circumvent the application of the shortcut method criteria beginning in paragraph 815-20-25-102 to a fair value hedge of an individual interest-bearing asset or liability. A portfolio of interest-bearing assets or interest-bearing liabilities cannot qualify for the shortcut method if it contains an interest-bearing asset or liability that individually cannot qualify for the shortcut method.
","snippet":"Portfolio hedging cannot be used to circumvent the application of the shortcut method criteria beginning in paragraph 815-20-25-102 to a fair value hedge of an individual interest-bearing asset or liability. A portfolio …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b4b6551e5aa983abd891659afebbe7db2e8d0730edd4c051f79d8c5f138bdd3f","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-117","para":"25-117","html":"
The fair value hedge requirements of paragraph 815-20-25-12(b)(1) ensure that the individual items in a portfolio share the same risk exposure and have fair value changes attributable to the hedged risk that are expected to respond in a generally proportionate manner to the overall fair value changes of the entire portfolio. That requirement restricts the types of portfolios that can qualify for portfolio hedging; however, it also permits the existence of a mismatch between the change in the fair value of the individual hedged items and the change in the fair value of the hedged portfolio attributable to the hedged risk in portfolios that do qualify. As a result, the assumption of perfect effectiveness required for the shortcut method generally is inappropriate for portfolio hedges of similar assets or liabilities that are not also nearly identical (except for their notional amounts). Application of the shortcut method to portfolios that meet the requirements of paragraph 815-20-25-12(b)(1) is appropriate only if the assets or liabilities in the portfolio meet the same stringent criteria in paragraphs 815-20-25-104(e), 815-20-25-104(g), and 815-20-25-105(a) as required for hedges of individual assets and liabilities.
","snippet":"The fair value hedge requirements of paragraph 815-20-25-12(b)(1) ensure that the individual items in a portfolio share the same risk exposure and have fair value changes attributable to the hedged risk that are expected…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:355ddaefaf12791e817818d7f80e00d21623d0dfe1b1588499754991467676be","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-117A","para":"25-117A","html":"
In the period in which an entity determines that use of the shortcut method was not or no longer is appropriate, the entity may use a quantitative method to assess hedge effectiveness and measure hedge results without dedesignating the hedging relationship if both of the following criteria are met:
  1. a
    The entity documented at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(04) which quantitative method it would use to assess hedge effectiveness and measure hedge results if the shortcut method was not or no longer is appropriate during the life of the hedging relationship.
  2. b
    The hedging relationship was highly effective on a prospective and retrospective basis in achieving offsetting changes in fair value or cash flows attributable to the hedged risk for the periods in which the shortcut method criteria were not met.
","snippet":"In the period in which an entity determines that use of the shortcut method was not or no longer is appropriate, the entity may use a quantitative method to assess hedge effectiveness and measure hedge results without de…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ae7adc81a991ed2de383359a642927928e7b050ba479a379a96b83723e9453ed","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-117B","para":"25-117B","html":"
If the criterion in paragraph 815-20-25-117A(a) is not met, the hedging relationship shall be considered invalid in the period in which the criteria for the shortcut method were not met and in all subsequent periods. If the criterion in paragraph 815-20-25-117A(a) is met, the hedging relationship shall be considered invalid in all periods in which the criterion in paragraph 815-20-25-117A(b) is not met.
","snippet":"If the criterion in paragraph 815-20-25-117A(a) is not met, the hedging relationship shall be considered invalid in the period in which the criteria for the shortcut method were not met and in all subsequent periods. If …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:398e5fd1e5540d11bebd827876a247f4f727a416be03d567dabfcac669cf618e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-117C","para":"25-117C","html":"
If an entity cannot identify the date on which the shortcut criteria ceased to be met, the entity shall perform the quantitative assessment of effectiveness documented at hedge inception for all periods since hedge inception.
","snippet":"If an entity cannot identify the date on which the shortcut criteria ceased to be met, the entity shall perform the quantitative assessment of effectiveness documented at hedge inception for all periods since hedge incep…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b7aea35b3e107b2cb5e12245e9f5e6d3e5b2f47e42e8b54ea6602479e641fc4d","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-117D","para":"25-117D","html":"
The terms of the hedged item and hedging instrument used to assess effectiveness, in accordance with paragraph 815-20-25-117A(b), shall be those existing as of the date that the shortcut criteria ceased to be met. For cash flow hedges, if the hypothetical derivative method is used as a proxy for the hedged item, the value of the hypothetical derivative shall be set to zero as of hedge inception.
","snippet":"The terms of the hedged item and hedging instrument used to assess effectiveness, in accordance with paragraph 815-20-25-117A(b), shall be those existing as of the date that the shortcut criteria ceased to be met. For ca…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d74e5521b471af9d1ec8ceb8622675d2eb9bce4a9e6d1f8b18c4e03b23b4ff24","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-118","para":"25-118","html":"
In documenting its risk management strategy for a fair value hedge, an entity may specify an intent to consider the possible changes (that is, not limited to the likely or expected changes) in value of the hedging derivative instrument and the hedged item only over a shorter period than the derivative instrument's remaining life in formulating its expectation that the hedging relationship will be highly effective in achieving offsetting changes in fair value for the risk being hedged. The entity does not need to contemplate the offsetting effect for the entire term of the hedging instrument.
","snippet":"In documenting its risk management strategy for a fair value hedge, an entity may specify an intent to consider the possible changes (that is, not limited to the likely or expected changes) in value of the hedging deriva…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c5ccda7c0dc40f4ca97649e9cb2d42a91e6733517241d0028e55fd0d07454e6c","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-118A","para":"25-118A","html":"
In a fair value hedge of interest rate risk designated under the portfolio layer method in accordance with paragraph 815-20-25-12A, an entity may exclude prepayment risk (if applicable) when measuring the change in fair value of the hedged item attributable to interest rate risk.
","snippet":"In a fair value hedge of interest rate risk designated under the portfolio layer method in accordance with paragraph 815-20-25-12A, an entity may exclude prepayment risk (if applicable) when measuring the change in fair …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5d8b8230b9f0580f692962195c506fc26788efa58157d59f62d248fccfa44d88","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-119","para":"25-119","html":"
The hedge effectiveness criteria applicable to cash flow hedges only are organized as follows:
  1. a
    Consideration of the time value of money
  2. b
    Consideration of counterparty credit risk
  3. c
    Additional considerations for options in cash flow hedges
  4. d
    Assuming perfect hedge effectiveness in a cash flow hedge of a variable-rate borrowing with a receive-variable, pay-fixed interest rate swap recorded under the simplified hedge accounting approach.
","snippet":"The hedge effectiveness criteria applicable to cash flow hedges only are organized as follows:\n(a) Consideration of the time value of money\n(b) Consideration of counterparty credit risk\n(c) Additional considerations for …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51e948897d5daa836714742b1e52f2108dbab290bc66cfb91e7bb773a3be9947","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-120","para":"25-120","html":"
In assessing the effectiveness of a cash flow hedge, an entity generally shall consider the time value of money, especially if the hedging instrument involves periodic cash settlements.
","snippet":"In assessing the effectiveness of a cash flow hedge, an entity generally shall consider the time value of money, especially if the hedging instrument involves periodic cash settlements.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:342c8d0e0b3bbfc0ca5f1346eec3f5c24aaa02ff33fd0d3ae3bd3f077c778b05","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-121","para":"25-121","html":"
An example of a situation in which an entity likely would reflect the time value of money is a tailing strategy with futures contracts. When using a tailing strategy, an entity adjusts the size or contract amount of futures contracts used in a hedge so that earnings (or expense) from reinvestment (or funding) of daily settlement gains (or losses) on the futures do not distort the results of the hedge. To assess offset of expected cash flows when a tailing strategy has been used, an entity could reflect the time value of money, perhaps by comparing the present value of the hedged forecasted cash flow with the results of the hedging instrument.
","snippet":"An example of a situation in which an entity likely would reflect the time value of money is a tailing strategy with futures contracts. When using a tailing strategy, an entity adjusts the size or contract amount of futu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:25c5c77bea9ced9ae7cf2195e8138506b475df572d95f85ea3b54aa012a45ea9","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-122","para":"25-122","html":"
For a cash flow hedge, an entity shall consider the likelihood of the counterparty's compliance with the contractual terms of the hedging derivative instrument that require the counterparty to make payments to the entity. Paragraph 815-20-35-14 states that, for an entity to conclude on an ongoing basis that a cash flow hedging relationship is expected to be highly effective in achieving offsetting changes in cash flows, the entity shall not ignore whether it will collect the payments it would be owed under the contractual provisions of the derivative instrument. See paragraphs
815-20-35-14 through 35-18
for further guidance.
","snippet":"For a cash flow hedge, an entity shall consider the likelihood of the counterparty's compliance with the contractual terms of the hedging derivative instrument that require the counterparty to make payments to the entity…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:908f6294fe9babb161ce6cc3729e6b2a667d6024d25f16d988a76571cc46441b","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-123","para":"25-123","html":"
When an entity has documented that the effectiveness of a cash flow hedge will be assessed based on changes in the hedging option's intrinsic value pursuant to paragraph 815-20-25-82(a), that assessment (and the related cash flow hedge accounting) shall be performed for all changes in intrinsic value—that is, for all periods of time when the option has an intrinsic value, such as when the underlying is above the strike price of the call option.
","snippet":"When an entity has documented that the effectiveness of a cash flow hedge will be assessed based on changes in the hedging option's intrinsic value pursuant to paragraph 815-20-25-82(a), that assessment (and the related …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cd4834fd5b52d7af0111f85635b4186a9f1eec079045eb2a5c15e0a2d4ef0395","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-124","para":"25-124","html":"
When a purchased option is designated as a hedging instrument in a cash flow hedge, an entity shall not define only limited parameters for the risk exposure designated as being hedged that would include the time value component of that option. An entity cannot arbitrarily exclude some portion of an option's intrinsic value from the hedge effectiveness assessment simply through an articulation of the risk exposure definition. It is inappropriate to assert that only limited risk exposures are being hedged (for example, exposures related only to currency-exchange-rate changes above $1.65 per pound sterling as illustrated in Example 26 [see paragraph 815-20-55-205]).
","snippet":"When a purchased option is designated as a hedging instrument in a cash flow hedge, an entity shall not define only limited parameters for the risk exposure designated as being hedged that would include the time value co…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4d55c0107bc76e6611e4316894030611794b6b32af3bf96dd103eb484d13d48e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-125","para":"25-125","html":"
If an option is designated as the hedging instrument in a cash flow hedge, an entity may assess hedge effectiveness based on a measure of the difference, as of the end of the period used for assessing hedge effectiveness, between the strike price and forward price of the underlying, undiscounted. Although assessment of cash flow hedge effectiveness with respect to an option designated as the hedging instrument in a cash flow hedge shall be performed by comparing the changes in present value of the expected future cash flows of the forecasted transaction to the change in fair value of the derivative instrument (aside from any excluded component under paragraph 815-20-25-82), that measure of changes in the expected future cash flows of the forecasted transaction based on forward rates, undiscounted, is not prohibited. With respect to an option designated as the hedging instrument in a cash flow hedge, assessing hedge effectiveness based on a similar measure with respect to the hedging instrument eliminates any difference that the effect of discounting may have on the hedging instrument and the hedged transaction. Pursuant to paragraph 815-20-25-3(b)(2)(iv), entities shall document the measure of intrinsic value that will be used in the assessment of hedge effectiveness. As discussed in paragraph 815-20-25-80, that measure must be used consistently for each period following designation of the hedging relationship.
","snippet":"If an option is designated as the hedging instrument in a cash flow hedge, an entity may assess hedge effectiveness based on a measure of the difference, as of the end of the period used for assessing hedge effectiveness…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:945872f9ecb7289246b83648319679bd042fc2545f2cd3dd0b395883ce4892ab","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-126","para":"25-126","html":"
The guidance in paragraph 815-20-25-129 addresses a cash flow hedge that meets all of the following conditions:
  1. a
    The hedging instrument is a purchased option or a combination of only options that comprise either a net purchased option or a zero-cost collar.
  2. b
    The exposure being hedged is the variability in expected future cash flows attributed to a particular rate or price beyond (or within) a specified level (or levels).
  3. c
    The assessment of effectiveness is documented as being based on total changes in the option's cash flows (that is, the assessment will include the hedging instrument's entire change in fair value, not just changes in intrinsic value).
","snippet":"The guidance in paragraph 815-20-25-129 addresses a cash flow hedge that meets all of the following conditions:\n(a) The hedging instrument is a purchased option or a combination of only options that comprise either a net…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:abded50265021ebab2085b6a1711f718333b929002f334d30a2c6170808b234b","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-127","para":"25-127","html":"
This guidance has no effect on the accounting for fair value hedging relationships. In addition, in determining the accounting for seemingly similar cash flow hedging relationships, it would be inappropriate to analogize to this guidance.
","snippet":"This guidance has no effect on the accounting for fair value hedging relationships. In addition, in determining the accounting for seemingly similar cash flow hedging relationships, it would be inappropriate to analogize…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f7fc7b1d4f4ff00abf1ca9caf793d74f6105d9d0a96fce1fa77bf75a0d5c223","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-128","para":"25-128","html":"
For a hedging relationship that meets all of the conditions in paragraph 815-20-25-126, an entity may focus on the hedging instrument's terminal value (that is, its expected future pay-off amount at its maturity date) in determining whether the hedging relationship is expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the hedge. An entity's focus on the hedging instrument's terminal value is not an impediment to the entity's subsequently deciding to dedesignate that cash flow hedge before the occurrence of the hedged transaction. If the hedging instrument is a purchased cap consisting of a series of purchased caplets that are each hedging an individual hedged transaction in a series of hedged transactions (such as caplets hedging a series of hedged interest payments at different monthly or quarterly dates), the entity may focus on the terminal value of each caplet (that is, the expected future pay-off amount at the maturity date of each caplet) in determining whether each of those hedging relationships is expected to be highly effective in achieving offsetting cash flows. The guidance in this paragraph applies to a purchased option regardless of whether at the inception of the cash flow hedging relationship it is at the money, in the money, or out of the money.
","snippet":"For a hedging relationship that meets all of the conditions in paragraph 815-20-25-126, an entity may focus on the hedging instrument's terminal value (that is, its expected future pay-off amount at its maturity date) in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e34f8cb21c75451c587556645bdaecc175d9c1b8bb2193893698290cf886c5f4","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-129","para":"25-129","html":"
A hedging relationship that meets all of the conditions in paragraph 815-20-25-126 may be considered to be perfectly effective if all of the following conditions are met:
  1. a
    The critical terms of the hedging instrument (such as its notional amount, underlying, maturity date, and so forth) completely match the related terms of the hedged forecasted transaction (such as the notional amount, the variable that determines the variability in cash flows, the expected date of the hedged transaction, and so forth).
  2. b
    The strike price (or prices) of the hedging option (or combination of options) matches the specified level (or levels) beyond (or within) which the entity's exposure is being hedged.
  3. c
    The hedging instrument's inflows (outflows) at its maturity date completely offset the change in the hedged transaction's cash flows for the risk being hedged.
  4. d
    The hedging instrument can be exercised only on a single date—its contractual maturity date.
The condition in (d) is consistent with the entity's focus on the hedging instrument's terminal value. If the holder of the option chooses to pay for the ability to exercise the option at dates before the maturity date (for example, by acquiring an American-style option), the hedging relationship would not be perfectly effective.
","snippet":"A hedging relationship that meets all of the conditions in paragraph 815-20-25-126 may be considered to be perfectly effective if all of the following conditions are met:\n(a) The critical terms of the hedging instrument …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ec0d83a54fbe71048dfeb6d4d67c6f6a1ab14d54a33866e61f6882b44e2b519e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-129A","para":"25-129A","html":"
In a hedge of a group of forecasted transactions in accordance with paragraph 815-20-25-15(a)(2), an entity may assume that the timing in which the hedged transactions are expected to occur and the maturity date of the hedging instrument match in accordance with paragraph 815-20-25-129(a) if those forecasted transactions occur and the derivative matures within the same 31-day period or fiscal month.
","snippet":"In a hedge of a group of forecasted transactions in accordance with paragraph 815-20-25-15(a)(2), an entity may assume that the timing in which the hedged transactions are expected to occur and the maturity date of the h…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cf7949bf9924f9103452ac4f82cffeaf614b93d0593f68aa1998ff575b61a840","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-130","para":"25-130","html":"
The guidance in the following paragraph addresses a cash flow hedging relationship that meets both of the following conditions:
  1. a
    A combination of options (deemed to be a net purchased option) is designated as the hedging instrument.
  2. b
    The effectiveness of the hedge is assessed based only on changes in intrinsic value of the hedging instrument (the combination of options).
","snippet":"The guidance in the following paragraph addresses a cash flow hedging relationship that meets both of the following conditions:\n(a) A combination of options (deemed to be a net purchased option) is designated as the hedg…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47475f8f02c68f80b56f01f59ccf8fdaea3bc7cd4488e07c2f98e45668ab5b4b","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-131","para":"25-131","html":"
The assessment of effectiveness of a cash flow hedging relationship meeting the conditions in the preceding paragraph may be based only on changes in the underlying that cause a change in the intrinsic value of the hedging instrument (the combination of options). Thus, the assessment can exclude ranges of changes in the underlying for which there is no change in the hedging instrument's intrinsic value.
","snippet":"The assessment of effectiveness of a cash flow hedging relationship meeting the conditions in the preceding paragraph may be based only on changes in the underlying that cause a change in the intrinsic value of the hedgi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:502cd12340ed09c9e3d96734132921e7ea3532490f3fadb61f2442b73e1e98b7","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-131A","para":"25-131A","html":"
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Paragraphs
815-10-35-1A through 35-1C
, 815-10-50-3, 815-20-25-3A, 815-20-25-119,
815-20-25-134 through 25-138
,
815-20-55-79A through 55-79B
, 825-10-50-3, and 825-10-50-8 provide guidance for an entity electing the simplified hedge accounting approach. See paragraph 815-10-65-6 for transition guidance on applying the simplified hedge accounting approach.
","snippet":"Paragraphs 815-10-35-1A through 35-1C, 815-10-50-3, 815-20-25-3A, 815-20-25-119, 815-20-25-134 through 25-138, 815-20-55-79A through 55-79B, 825-10-50-3, and 825-10-50-8 provide guidance for an entity electing the simpli…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:097123f1af90bd31d62a5674e59db3ffc75c7d24ba281574ba71061335b68dd3","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-134","para":"25-134","html":"
The conditions for the simplified hedge accounting approach determine which cash flow hedging relationships qualify for a simplified version of hedge accounting. If all of the conditions in paragraphs 815-20-25-135 and 815-20-25-137 are met, an entity may assume perfect effectiveness in a cash flow hedging relationship involving a variable-rate borrowing and a receive-variable, pay-fixed interest rate swap.
","snippet":"The conditions for the simplified hedge accounting approach determine which cash flow hedging relationships qualify for a simplified version of hedge accounting. If all of the conditions in paragraphs 815-20-25-135 and 8…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c4c0f8a80f726675ccbd414c0bf4bb0b4a5d541d4d6798d18aa03b62f9b30bfc","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-135","para":"25-135","html":"
Provided all of the conditions in paragraph 815-20-25-137 are met, the simplified hedge accounting approach may be applied by a private company except for a financial institution as described in paragraph 942-320-50-1. An entity may elect the simplified hedge accounting approach for any receive-variable, pay-fixed interest rate swap, provided that all of the conditions for applying the simplified hedge accounting approach specified in paragraph 815-20-25-137 are met. Implementation guidance on the conditions set forth in paragraph 815-20-25-137 is provided in paragraphs
815-20-55-79A through 55-79B
.
","snippet":"Provided all of the conditions in paragraph 815-20-25-137 are met, the simplified hedge accounting approach may be applied by a private company except for a financial institution as described in paragraph 942-320-50-1. A…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:33d0f0a22d08816230709c02ccf6333e47f142ee81c920fe548f94273c7836e1","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-136","para":"25-136","html":"
In applying the simplified hedge accounting approach, the documentation required by paragraph 815-20-25-3 to qualify for hedge accounting must be completed by the date on which the first annual financial statements are available to be issued after hedge inception rather than concurrently at hedge inception.
","snippet":"In applying the simplified hedge accounting approach, the documentation required by paragraph 815-20-25-3 to qualify for hedge accounting must be completed by the date on which the first annual financial statements are a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c23530a712f5cde86bbb25d1f4f86b25eaddbfce900931a0ae1c323dab77255e","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-137","para":"25-137","html":"
An eligible entity under paragraph 815-20-25-135 must meet all of the following conditions to apply the simplified hedge accounting approach to a cash flow hedge of a variable-rate borrowing with a receive-variable, pay-fixed interest rate swap:
  1. a
    Both the variable rate on the swap and the borrowing are based on the same index and reset period (for example, both the swap and borrowing are based on one-month London Interbank Offered Rate [LIBOR] or both the swap and borrowing are based on three-month LIBOR).
  2. b
    The terms of the swap are typical (in other words, the swap is what is generally considered to be a “plain-vanilla” swap), and there is no floor or cap on the variable interest rate of the swap unless the borrowing has a comparable floor or cap.
  3. c
    The repricing and settlement dates for the swap and the borrowing match or differ by no more than a few days.
  4. d
    The swap's fair value at inception (that is, at the time the derivative was executed to hedge the interest rate risk of the borrowing) is at or near zero.
  5. e
    The notional amount of the swap matches the principal amount of the borrowing being hedged. In complying with this condition, the amount of the borrowing being hedged may be less than the total principal amount of the borrowing.
  6. f
    All interest payments occurring on the borrowing during the term of the swap (or the effective term of the swap underlying the forward starting swap) are designated as hedged whether in total or in proportion to the principal amount of the borrowing being hedged.
","snippet":"An eligible entity under paragraph 815-20-25-135 must meet all of the following conditions to apply the simplified hedge accounting approach to a cash flow hedge of a variable-rate borrowing with a receive-variable, pay-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1c7d660b76a6f9752e4641ace5661d04a5cf0919764153af7ead816a8c3beb46","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-138","para":"25-138","html":"
A cash flow hedge established through the use of a forward starting receive-variable, pay-fixed interest rate swap may be permitted in applying the simplified hedge accounting approach only if the occurrence of forecasted interest payments to be swapped is probable. When forecasted interest payments are no longer probable of occurring, a cash flow hedging relationship will no longer qualify for the simplified hedge accounting approach and the General Subsections of this Topic shall apply at the date of change and on a prospective basis.
","snippet":"A cash flow hedge established through the use of a forward starting receive-variable, pay-fixed interest rate swap may be permitted in applying the simplified hedge accounting approach only if the occurrence of forecaste…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:151da9d5b88542da2c7e6d697bade6f2f0f1fed5dbd4592d6fd29513cd9fd77d","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-139","para":"25-139","html":"
Concurrent with hedge inception, a private company that is not a financial institution as described in paragraph 942-320-50-1 shall document the following:
  1. a
    The hedging relationship in accordance with paragraph 815-20-25-3(b)(1)
  2. b
    The hedging instrument in accordance with paragraph 815-20-25-3(b)(2)(i)
  3. c
    The hedged item in accordance with paragraph 815-20-25-3(b)(2)(ii), including (if applicable) firm commitments or the analysis supporting a portfolio layer method designation in paragraph 815-20-25-3(c), or forecasted transactions in paragraph 815-20-25-3(d)
  4. d
    The nature of the risk being hedged in accordance with paragraph 815-20-25-3(b)(2)(iii).
","snippet":"Concurrent with hedge inception, a private company that is not a financial institution as described in paragraph 942-320-50-1 shall document the following:\n(a) The hedging relationship in accordance with paragraph 815-20…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:95663e67155b28e530ce4bc264b73177fb3c97ae764a2853e97549cf289789a0","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-140","para":"25-140","html":"
A private company that is not a financial institution is not required to perform or document the following items concurrent with hedge inception but rather is required to perform or document them within the time periods discussed in paragraph 815-20-25-142:
  1. a
    The method of assessing hedge effectiveness at inception and on an ongoing basis in accordance with paragraph 815-20-25-3(b)(2)(iv) and (vi)
  2. b
    Initial hedge effectiveness assessments in accordance with paragraph 815-20-25-3(b)(2)(iv)(01) through (04).
","snippet":"A private company that is not a financial institution is not required to perform or document the following items concurrent with hedge inception but rather is required to perform or document them within the time periods …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:54c3878a8a7a01580c274da9de93acac437621cc105a679bd1d572a817138b8a","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-141","para":"25-141","html":"
Example 1A beginning in paragraph 815-20-55-80A illustrates hedge documentation when the critical terms of the hedging instrument and hedged forecasted transaction match. Although that Example illustrates the documentation of the method of assessing hedge effectiveness, private companies that are not financial institutions may complete hedge documentation requirements in accordance with paragraphs
815-20-25-139 through 25-140
.
","snippet":"Example 1A beginning in paragraph 815-20-55-80A illustrates hedge documentation when the critical terms of the hedging instrument and hedged forecasted transaction match. Although that Example illustrates the documentati…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:85012d38a997e236bb628b342dc1981f55fed083b812022ffc4adbfefaaed2b1","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"citation":"815-20-25-142","para":"25-142","html":"
For a private company that is not a financial institution, the performance and documentation of the items listed in paragraph 815-20-25-140, as well as required subsequent quarterly hedge effectiveness assessments, may be completed before the date on which the next interim (if applicable) or annual financial statements are available to be issued. Even though the completion of the initial and ongoing assessments of effectiveness may be deferred to the date on which financial statements are available to be issued the assessments shall be completed using information applicable as of hedge inception and each subsequent quarterly assessment date when completing this documentation on a deferred basis. Therefore, the assessment should be performed to determine whether the hedge was highly effective at achieving offsetting changes in fair values or cash flows at inception and in each subsequent quarterly assessment period up to the reporting date.
","snippet":"For a private company that is not a financial institution, the performance and documentation of the items listed in paragraph 815-20-25-140, as well as required subsequent quarterly hedge effectiveness assessments, may b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ee304694ad4eb78fa0091b4657bdd2cf77720ddbbe08117983263987527a9aba","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b74efff95b5b798913013dc292320c0b125e1860789ac48395950b8d3ae49481","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"block":null,"heading":"Hedge Accounting Provisions Applicable to Certain Not-for-Profit Entities","paragraphs":[{"citation":"815-20-25-143","para":"25-143","html":"
Not-for-profit entities (except for not-for-profit entities that have issued, or are a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market) may apply the guidance on the timing of hedge documentation and hedge effectiveness assessments in paragraphs
815-20-25-139 through 25-142
. Specifically, those entities shall document the items listed in paragraph 815-20-25-139 concurrent with hedge inception, but they may perform and document the items listed in paragraph 815-20-25-140and perform the required subsequent quarterly hedge effectiveness assessments in accordance with paragraph 815-20-25-142within the time periods discussed in paragraph 815-20-25-142.
","snippet":"Not-for-profit entities (except for not-for-profit entities that have issued, or are a conduit bond obligor for, securities that are traded, listed, or quoted on an exchange or an over-the-counter market) may apply the g…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2eb1ae94ace243e00b1d9806734290788f3dedf393be1e83a815f1dd36754af5","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:597d99efdba43dd077cee24d1b15bb973513e9b19e43a2653715238297538725","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e3998752a0972a00f1062e9f18af09476ebdd1b6ee3f6fe69eb599119f1fcff5","downloaded_from":"2026-09-10T01:36:46.883Z","last_downloaded_at":"2026-09-10T01:36:46.883Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480682","source_sha256":"317ef4950230850595417825e4041f837a9668cff1a121198d4d34ffe32e20d2"}},{"number":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-20-35-1","para":"35-1","html":"
Paragraph 815-10-35-2 states that the accounting for subsequent changes in the fair value (that is, gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding it. Specifically, subsequent gains and losses on derivative instruments shall be accounted for as follows:
  1. a
    No hedging designation. Paragraph 815-10-35-2 requires that the gain or loss on a derivative instrument not designated as a hedging instrument be recognized currently in earnings.
  2. b
    Fair value hedge. The gain or loss on a derivative instrument designated and qualifying as a fair value hedging instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk shall be recognized currently in earnings in the same accounting period, as provided in paragraphs 
    815-25-35-1 through 35-6
    .     If an entity excludes a portion of the hedging instrument from the assessment of hedge effectiveness in accordance with paragraph 815-20-25-82, the initial value of the excluded component shall be recognized in earnings using a systematic and rational method over the life of the hedging instrument with any difference between the change in fair value of the excluded component and amounts recognized in earnings under that systematic and rational method recognized in other comprehensive income in accordance with paragraph 815-20-25-83A. An entity also may elect to recognize the excluded component of the gain or loss currently in earnings in accordance with paragraph 815-20-25-83B. The gain or loss on the hedging derivative or nonderivative instrument in a hedge of a foreign-currency-denominated firm commitment and the offsetting loss or gain on the hedged firm commitment shall be recognized currently in earnings in the same accounting period. The gain or loss on the hedging derivative instrument in a hedge of an available-for-sale debt security and the offsetting loss or gain on the hedged available-for-sale debt security shall be recognized currently in earnings in the same accounting period.
  3. c
    Cash flow hedge. The gain or loss on a derivative instrument designated and qualifying as a cash flow hedging instrument shall be reported as a component of other comprehensive income (outside earnings) and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings, as provided in paragraphs 815-30-35-3 and
    815-30-35-38 through 35-41
    .     If an entity excludes a portion of the hedging instrument from the assessment of hedge effectiveness in accordance with paragraph 815-20-25-82, the initial value of the excluded component shall be recognized in earnings using a systematic and rational method over the life of the hedging instrument with any difference between the change in fair value of the excluded component and amounts recognized in earnings under that systematic and rational method recognized in other comprehensive income in accordance with paragraph 815-20-25-83A. An entity also may elect to recognize the excluded component of the gain or loss currently in earnings in accordance with paragraph 815-20-25-83B. The gain or loss on the hedging derivative instrument in a hedge of a forecasted foreign-currency-denominated transaction shall be reported as a component of other comprehensive income (outside earnings) and reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings, as provided in paragraph 815-20-25-65.
  4. d
    Net investment hedge. The gain or loss on the hedging derivative or nonderivative hedging instrument in a hedge of a net investment in a foreign operation shall be reported in other comprehensive income (outside earnings) as part of the cumulative translation adjustment, as provided in paragraph 815-20-25-66. If an entity excludes a portion of the hedging instrument from the assessment of hedge effectiveness in accordance with paragraphs 815-35-35-5 through 35-5B, the initial value of the excluded component shall be recognized in earnings using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and the amounts recognized in earnings under that systematic and rational method shall be recognized in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment section of other comprehensive income) in accordance with paragraph 815-35-35-5A. An entity also may elect to recognize the excluded component of the gain or loss currently in earnings in accordance with paragraph 815-35-35-5B.
","snippet":"Paragraph 815-10-35-2 states that the accounting for subsequent changes in the fair value (that is, gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4d069d7f2fb93b72ff0e62a138f1eb0ce8bc70e1666db4de9433619b86e133cf","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d7b90af091a6f6f6ebf4d222fec6bd60d5c0168ce84374e01e006bdf20d01022","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"block":null,"heading":"Hedge Effectiveness—After Designation","paragraphs":[{"citation":"815-20-35-2","para":"35-2","html":"
If a fair value hedge or cash flow hedge initially qualifies for hedge accounting, the entity would continue to assess whether the hedge meets the effectiveness test on either a quantitative basis (using either a dollar-offset test or a statistical method such as regression analysis) or a qualitative basis. See paragraphs
815-20-35-2A through 35-2F
for additional guidance on qualitative assessments of effectiveness. If the hedge fails the effectiveness test at any time (that is, if the entity does not expect the hedge to be highly effective at achieving offsetting changes in fair values or cash flows), the hedge ceases to qualify for hedge accounting. At least quarterly, the hedging entity shall determine whether the hedging relationship has been highly effective in having achieved offsetting changes in fair value or cash flows through the date of the periodic assessment.
","snippet":"If a fair value hedge or cash flow hedge initially qualifies for hedge accounting, the entity would continue to assess whether the hedge meets the effectiveness test on either a quantitative basis (using either a dollar-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5d30d4ccc832da0e2b3fe8dbd44c47396af5529d8f39647678f6e2fb73797ff2","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-2A","para":"35-2A","html":"
An entity may qualitatively assess hedge effectiveness if both of the following criteria are met:
  1. a
    An entity performs an initial quantitative test of hedge effectiveness on a prospective basis (that is, it is not assuming that the hedging relationship is perfectly effective at hedge inception as described in paragraph 815-20-25-3(b)(2)(iv)(01)(A) through (H)), and the results of that quantitative test demonstrate highly effective offset.
  2. b
    At hedge inception, an entity can reasonably support an expectation of high effectiveness on a qualitative basis in subsequent periods.
See paragraphs
815-20-55-79G through 55-79N
for implementation guidance on factors to consider when determining whether qualitative assessments of effectiveness can be performed after hedge inception.
","snippet":"An entity may qualitatively assess hedge effectiveness if both of the following criteria are met:\n(a) An entity performs an initial quantitative test of hedge effectiveness on a prospective basis (that is, it is not assu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c692b50aaa13b7ddf86874764091d17c69100643617f3e49db82918b184d733b","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-2B","para":"35-2B","html":"
An entity may elect to qualitatively assess hedge effectiveness in accordance with paragraph 815-20-35-2A on a hedge-by-hedge basis. If an entity makes this qualitative assessment election, only the quantitative method specified in an entity's initial hedge documentation must comply with paragraph 815-20-25-81.
","snippet":"An entity may elect to qualitatively assess hedge effectiveness in accordance with paragraph 815-20-35-2A on a hedge-by-hedge basis. If an entity makes this qualitative assessment election, only the quantitative method s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9e398887c79c63f52f53cd7258a4833e8dd3e6ed240f482a38525b2f32cb6d05","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-2C","para":"35-2C","html":"
When an entity performs qualitative assessments of hedge effectiveness, it shall verify and document whenever financial statements or earnings are reported and at least every three months that the facts and circumstances related to the hedging relationship have not changed such that it can assert qualitatively that the hedging relationship was and continues to be highly effective. While not all-inclusive, the following is a list of indicators that may, individually or in the aggregate, allow an entity to continue to assert qualitatively that the hedging relationship is highly effective:
  1. a
    An assessment of the factors that enabled the entity to reasonably support an expectation of high effectiveness on a qualitative basis has not changed such that the entity can continue to assert qualitatively that the hedging relationship was and continues to be highly effective. This shall include an assessment of the guidance in paragraph 815-20-25-100 when applicable.
  2. b
    There have been no adverse developments regarding the risk of counterparty default.
","snippet":"When an entity performs qualitative assessments of hedge effectiveness, it shall verify and document whenever financial statements or earnings are reported and at least every three months that the facts and circumstances…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8314560355cc995eb5088daae91166ca2d2e985d02531f7a19314ac49ec040a1","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-2D","para":"35-2D","html":"
If an entity elects to assess hedge effectiveness on a qualitative basis and then facts and circumstances change such that the entity no longer can assert qualitatively that the hedging relationship was and continues to be highly effective in achieving offsetting changes in fair values or cash flows, the entity shall assess effectiveness of that hedging relationship on a quantitative basis in subsequent periods. In addition, an entity may perform a quantitative assessment of hedge effectiveness in any reporting period to validate whether qualitative assessments of hedge effectiveness remain appropriate. In both cases, the entity shall apply the quantitative method that it identified in its initial hedge documentation in accordance with paragraph 815-20-25-3(b)(2)(iv)(03).
","snippet":"If an entity elects to assess hedge effectiveness on a qualitative basis and then facts and circumstances change such that the entity no longer can assert qualitatively that the hedging relationship was and continues to …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5bbfc3cacb9d3975d2d4ae97f4a8887e1298046205d44d4a7e3aa8f5e762d6b","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-2E","para":"35-2E","html":"
When an entity determines that facts and circumstances have changed and it no longer can assert qualitatively that the hedging relationship was and continues to be highly effective, the entity shall begin performing subsequent quantitative assessments of hedge effectiveness as of the period that the facts and circumstances changed. If there is no identifiable event that led to the change in the facts and circumstances of the hedging relationship, the entity may begin performing quantitative assessments of effectiveness in the current period.
","snippet":"When an entity determines that facts and circumstances have changed and it no longer can assert qualitatively that the hedging relationship was and continues to be highly effective, the entity shall begin performing subs…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cbeb38432bb02cfbd0f166a6c49163bcb164770c439ce79ac3169949b8aaf5fe","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-2F","para":"35-2F","html":"
After performing a quantitative assessment of hedge effectiveness for one or more reporting periods as discussed in paragraphs
815-20-35-2D through 35-2E
, an entity may revert to qualitative assessments of hedge effectiveness if it can reasonably support an expectation of high effectiveness on a qualitative basis for subsequent periods. See paragraphs
815-20-55-79G through 55-79N
for implementation guidance on factors to consider when determining whether qualitative assessments of effectiveness can be performed after hedge inception.
","snippet":"After performing a quantitative assessment of hedge effectiveness for one or more reporting periods as discussed in paragraphs 815-20-35-2D through 35-2E, an entity may revert to qualitative assessments of hedge effectiv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d5bf6066042e58f83e90ed6837e18267733bbdf055764fa34f2c528aff09a5b9","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-2G","para":"35-2G","html":"
Quantitative assessments can be based on regression or other statistical analysis of past changes in fair values or cash flows as well as on other relevant information.
","snippet":"Quantitative assessments can be based on regression or other statistical analysis of past changes in fair values or cash flows as well as on other relevant information.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:59a75f194d6de97c6626e9a74ca4b8fd504c9b086c3d8bf8bb243878b2425764","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-3","para":"35-3","html":"
If an entity elects at the inception of a hedging relationship to use the same regression analysis approach for both prospective considerations and retrospective evaluations of assessing effectiveness, then during the term of that hedging relationship both of the following conditions shall be met:
  1. a
    Those regression analysis calculations shall generally incorporate the same number of data points.
  2. b
    That entity must periodically update its regression analysis (or other statistical analysis).
","snippet":"If an entity elects at the inception of a hedging relationship to use the same regression analysis approach for both prospective considerations and retrospective evaluations of assessing effectiveness, then during the te…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f4de0dc2c0243130d7f4187f18566c853c0a84183c8c129672cb275fe288877c","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-4","para":"35-4","html":"
Electing to use a regression or other statistical analysis approach instead of a dollar-offset approach to perform retrospective evaluations of assessing hedge effectiveness may affect whether an entity can apply hedge accounting for the current assessment period.
","snippet":"Electing to use a regression or other statistical analysis approach instead of a dollar-offset approach to perform retrospective evaluations of assessing hedge effectiveness may affect whether an entity can apply hedge a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:db1c2acbe3f9d066d5d704ea14a94f15c5437ba0d7985d2a1db89c297ef3ea5a","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-5","para":"35-5","html":"
In periodically (that is, at least quarterly) assessing retrospectively the effectiveness of a fair value hedge (or a cash flow hedge) in having achieved offsetting changes in fair values (or cash flows) under a dollar-offset approach, an entity shall use either a period-by-period approach or a cumulative approach on individual fair value hedges (or cash flow hedges):
  1. a
    Period-by-period approach. The period-by-period approach involves comparing the changes in the hedging instrument's fair values (or cash flows) that have occurred during the period being assessed to the changes in the hedged item's fair value (or hedged transaction's cash flows) attributable to the risk hedged that have occurred during the same period. If an entity elects to base its comparison of changes in fair value (or cash flows) on a period-by-period approach, the period cannot exceed three months. Fair value (or cash flow) patterns of the hedging instrument or the hedged item (or hedged transaction) in periods before the period being assessed are not relevant.
  2. b
    Cumulative approach. The cumulative approach involves comparing the cumulative changes (to date from inception of the hedge) in the hedging instrument's fair values (or cash flows) to the cumulative changes in the hedged item's fair value (or hedged transaction's cash flows) attributable to the risk hedged.
","snippet":"In periodically (that is, at least quarterly) assessing retrospectively the effectiveness of a fair value hedge (or a cash flow hedge) in having achieved offsetting changes in fair values (or cash flows) under a dollar-o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f97b920ed015761f330d45556b94a5c0578b6d305724cefd8d7413fa36446742","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-6","para":"35-6","html":"
If an entity elects at inception of a hedging relationship to base its comparison of changes in fair value (or cash flows) on a cumulative approach, then that entity must abide by the results of that methodology as long as that hedging relationship remains designated. Electing to utilize a period-by-period approach instead of a cumulative approach (or vice versa) to perform retrospective evaluations of assessing hedge effectiveness under the dollar-offset method may affect whether an entity can apply hedge accounting for the current assessment period.
","snippet":"If an entity elects at inception of a hedging relationship to base its comparison of changes in fair value (or cash flows) on a cumulative approach, then that entity must abide by the results of that methodology as long …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:248038f52d38b8cbff407235778f620d7b997fe54abeb02a3c4562f6ca010907","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-7","para":"35-7","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66d1e836d87069b638439600caf7ea8cf8e1cad1de7c2912dbdce7c98a3272b7","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-8","para":"35-8","html":"
The remainder of this guidance is organized as follows:
  1. a
    Assessing effectiveness based on whether the critical terms of the hedging instrument and hedged item match
  2. b
    Possibility of default by the counterparty to hedging derivative
  3. c
    Change in hedge effectiveness method when hedge effectiveness is assessed on a quantitative basis.
","snippet":"The remainder of this guidance is organized as follows:\n(a) Assessing effectiveness based on whether the critical terms of the hedging instrument and hedged item match\n(b) Possibility of default by the counterparty to he…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6c72957784647a903b7fbdd8cb9999d2d21be98f0d2204491d9fd52b9f88180","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-9","para":"35-9","html":"
If, at inception, the critical terms of the hedging instrument and the hedged forecasted transaction are the same (see paragraphs 815-20-25-84 through 25-84A), the entity can conclude that changes in cash flows attributable to the risk being hedged are expected to be completely offset by the hedging derivative. Therefore, subsequent assessments can be performed by verifying and documenting whether the critical terms of the hedging instrument and the forecasted transaction have changed during the period in review.
","snippet":"If, at inception, the critical terms of the hedging instrument and the hedged forecasted transaction are the same (see paragraphs 815-20-25-84 through 25-84A), the entity can conclude that changes in cash flows attributa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c7d77f3ad1000b85c2c00c15aa06d640b1896542bec8ee33ea533e6bb809caf","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-10","para":"35-10","html":"
Because the assessment of hedge effectiveness in a cash flow hedge involves assessing the likelihood of the counterparty's compliance with the contractual terms of the derivative instrument designated as the hedging instrument, the entity must also assess whether there have been adverse developments regarding the risk of counterparty default, particularly if the entity planned to obtain its cash flows by liquidating the derivative instrument at its fair value.
","snippet":"Because the assessment of hedge effectiveness in a cash flow hedge involves assessing the likelihood of the counterparty's compliance with the contractual terms of the derivative instrument designated as the hedging inst…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:781f524f15725158c4eb377ef894df1397f5b1f7b5260ab44fa685f092e39294","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-11","para":"35-11","html":"
If there are no such changes in the critical terms or adverse developments regarding counterparty default, the entity may conclude that the hedging relationship is perfectly effective. In that case, the change in fair value of the derivative instrument can be viewed as a proxy for the present value of the change in cash flows attributable to the risk being hedged.
","snippet":"If there are no such changes in the critical terms or adverse developments regarding counterparty default, the entity may conclude that the hedging relationship is perfectly effective. In that case, the change in fair va…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9fcb28d35efb9e4db70599f26c1b889e09168e0f628324174d65f5a77674faa1","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-12","para":"35-12","html":"
However, the entity must assess whether the hedging relationship is expected to continue to be highly effective using a quantitative assessment method (either a dollar-offset test or a statistical method such as regression analysis) if any of the following conditions exist:
  1. a
    The critical terms of the hedging instrument or the hedged forecasted transaction have changed.
  2. b
    There have been adverse developments regarding the risk of counterparty default.
","snippet":"However, the entity must assess whether the hedging relationship is expected to continue to be highly effective using a quantitative assessment method (either a dollar-offset test or a statistical method such as regressi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:12160e25518c2a348f415b234e800c7f056caf8ebf683e7512aa44322afd992e","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-13","para":"35-13","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a099fd0774cc99be053ff4a6f1e1749f06987ad741fa5dd314c0bc5f41642ccc","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-14","para":"35-14","html":"
For an entity to conclude on an ongoing basis that the hedging relationship is expected to be highly effective in achieving offsetting changes in cash flows, the entity shall not ignore whether it will collect the payments it would be owed under the contractual provisions of the derivative instrument. In complying with the requirements of paragraph 815-20-25-75(b), the entity shall assess the possibility of whether the counterparty to the derivative instrument will default by failing to make any contractually required payments to the entity as scheduled in the derivative instrument. In making that assessment, the entity shall also consider the effect of any related collateralization or financial guarantees. The entity shall be aware of the counterparty's creditworthiness (and changes therein) in determining the fair value of the derivative instrument. Although a change in the counterparty's creditworthiness would not necessarily indicate that the counterparty would default on its obligations, such a change shall warrant further evaluation.
","snippet":"For an entity to conclude on an ongoing basis that the hedging relationship is expected to be highly effective in achieving offsetting changes in cash flows, the entity shall not ignore whether it will collect the paymen…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ddf22f08a193b7553331568c1db5c2187f45b47e9d3a453fc9391801182a3912","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-15","para":"35-15","html":"
If the likelihood that the counterparty will not default ceases to be probable, an entity would be unable to conclude that the hedging relationship in a cash flow hedge is expected to be highly effective in achieving offsetting cash flows.
","snippet":"If the likelihood that the counterparty will not default ceases to be probable, an entity would be unable to conclude that the hedging relationship in a cash flow hedge is expected to be highly effective in achieving off…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f56687cadc556f797226d322a9d586310b7b33bf43c11078d66b0839bee1b91b","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-16","para":"35-16","html":"
In contrast, a change in the creditworthiness of the derivative instrument's counterparty in a fair value hedge would have an immediate effect because that change in creditworthiness would affect the change in the derivative instrument's fair value, which would immediately affect both of the following:
  1. a
    The assessment of whether the relationship qualifies for hedge accounting
  2. b
    The amount of mismatch between the change in the fair value of the hedging instrument and the hedged item attributable to the hedged risk recognized in earnings under fair value hedge accounting.
","snippet":"In contrast, a change in the creditworthiness of the derivative instrument's counterparty in a fair value hedge would have an immediate effect because that change in creditworthiness would affect the change in the deriva…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3b4837a9d22943c0b64f7d7a835489f7219b14656ba1ff9ab5e79488c58d1f9b","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-17","para":"35-17","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fae251c4b48f96f90a1fe45294fd06571466a1ad70ab1663543bb2303efa1494","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-18","para":"35-18","html":"
Paragraph 815-20-25-103 states that, in applying the shortcut method, an entity shall consider the likelihood of the counterparty's compliance with the contractual terms of the hedging derivative that require the counterparty to make payments to the entity. That paragraph explains that implicit in the criteria for the shortcut method is the requirement that a basis exist for concluding on an ongoing basis that the hedging relationship is expected to be highly effective in achieving offsetting changes in fair values or cash flows.
","snippet":"Paragraph 815-20-25-103 states that, in applying the shortcut method, an entity shall consider the likelihood of the counterparty's compliance with the contractual terms of the hedging derivative that require the counter…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8892e99befeef9cc5cb96b9f8c1961dc8357a2a9723b6bbe6b6f0249f4b99f86","downloaded_from":"2026-09-10T01:36:48.664Z","last_downloaded_at":"2026-09-10T01:36:48.664Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480651","source_sha256":"7240d85014d6731134dd1f8afa5d35adaa24184c2a47fc95347c2e9961c31a2d"}},{"citation":"815-20-35-19","para":"35-19","html":"
If the entity identifies an improved method of assessing hedge effectiveness in accordance with the guidance in paragraph 815-20-25-80 and wants to apply that method prospectively, it shall do both of the following:
  1. a
    Discontinue the existing hedging relationship
  2. b
    Designate the relationship anew using the improved method.
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The new method of assessing hedge effectiveness shall be applied prospectively and shall also be applied to similar hedges unless the use of a different method for similar hedges is justified. A change in the method of assessing hedge effectiveness by an entity shall not be considered a change in accounting principle as defined in Topic 250.
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Paragraph superseded by Accounting Standards Update No. 2017-12.
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For qualifying fair value and cash flow hedges, an entity shall present both of the following in earnings in the same income statement line item that is used to present the earnings effect of the hedged item:
  1. a
    The change in the fair value of the hedging instrument that is included in the assessment of hedge effectiveness
  2. b
    Amounts excluded from the assessment of hedge effectiveness in accordance with paragraphs
    815-20-25-83A through 25-83B
    .
See paragraphs 815-20-55-79W through 55-79AD for related implementation guidance.
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For cash flow hedges in which the hedged forecasted transaction is probable of not occurring in accordance with paragraph 815-30-40-5, this Subtopic provides no guidance on the required income statement classification of amounts reclassified from accumulated other comprehensive income to earnings.
","snippet":"For cash flow hedges in which the hedged forecasted transaction is probable of not occurring in accordance with paragraph 815-30-40-5, this Subtopic provides no guidance on the required income statement classification of…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b0bf7be58328e6d4126022a5bed6b308831c43683abde76e7b5f85a311d15c71","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}},{"citation":"815-20-45-1C","para":"45-1C","html":"
For qualifying net investment hedges, an entity shall present in the same income statement line item that is used to present the earnings effect of the hedged net investment those amounts reclassified from accumulated other comprehensive income to earnings. This Subtopic provides no guidance on the required income statement classification of amounts excluded from the assessment of effectiveness in net investment hedges.
","snippet":"For qualifying net investment hedges, an entity shall present in the same income statement line item that is used to present the earnings effect of the hedged net investment those amounts reclassified from accumulated ot…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5f4a06d2f4e48e14f2613a4480d74dd61b92af038a1ca510a3bd705572e713b8","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}},{"citation":"815-20-45-1CC","para":"45-1CC","html":"
If a breach of a portfolio layer method hedge has occurred in accordance with paragraph 815-25-40-8(b), an entity shall present in interest income the basis adjustment associated with the hedged layer (or portion thereof) that is no longer outstanding.
","snippet":"If a breach of a portfolio layer method hedge has occurred in accordance with paragraph 815-25-40-8(b), an entity shall present in interest income the basis adjustment associated with the hedged layer (or portion thereof…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8142f215847eed234d1277e1557fe2b25109b877a7b8e272b93d1312d89b724b","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}},{"citation":"815-20-45-1D","para":"45-1D","html":"
While the Derivatives and Hedging Topic does not specify whether certain income statement line items are either permitted or appropriate, the other hedging-related Subtopics in this Topic do contain specific disclosure requirements for those items. See Section 815-10-50 and Subtopics 815-25, 815-30, and 815-35.
","snippet":"While the Derivatives and Hedging Topic does not specify whether certain income statement line items are either permitted or appropriate, the other hedging-related Subtopics in this Topic do contain specific disclosure r…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:55f1a9f439177aaaf4e0e088a5cd36d4bfd320791628bfd64df07113520d1e13","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e790aa28f62e416ccaf43d9ac7fa0ecee86023ba58e6a9434b5dbf87de3ae712","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}},{"block":null,"heading":"Statement of Cash Flows","paragraphs":[{"citation":"815-20-45-2","para":"45-2","html":"
For guidance on the classification of cash receipts and payments related to hedging activities, see paragraph 230-10-45-27.
","snippet":"For guidance on the classification of cash receipts and payments related to hedging activities, see paragraph 230-10-45-27.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e79f85bf00b28fd1aa99259dfbc072420880022399cb42c1daa5d597b99ae26d","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0bc159d0dd21170dee2f60667e929066d808e3b0761b61431d88665a0c409a11","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}},{"block":null,"heading":"Other Comprehensive Income","paragraphs":[{"citation":"815-20-45-3","para":"45-3","html":"
An entity shall display as a separate classification within other comprehensive income the net gain or loss on derivative instruments designated and qualifying as fair value or cash flow hedging instruments that are reported in comprehensive income pursuant to paragraphs 815-20-25-65, 815-20-25-83A, and 815-30-35-3.
","snippet":"An entity shall display as a separate classification within other comprehensive income the net gain or loss on derivative instruments designated and qualifying as fair value or cash flow hedging instruments that are repo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0318d826e22808735f791af256a7d552baf0f62ea213871b0838728d06ce1f06","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:de99b6a58f2df104b1d32aa39ebc1d7c442b526c771b4d11a27ca54df13cf7c4","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}},{"block":null,"heading":"Balance Sheet Classification","paragraphs":[{"citation":"815-20-45-4","para":"45-4","html":"
For an existing portfolio layer method hedge, if the assets included in the same closed portfolio are presented in different line items in the statement of financial position, an entity shall allocate the portfolio layer method basis adjustment to the assets’ associated line items in the statement of financial position using a systematic and rational method.
","snippet":"For an existing portfolio layer method hedge, if the assets included in the same closed portfolio are presented in different line items in the statement of financial position, an entity shall allocate the portfolio layer…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:76f0bdca49758327aabb6164f012653eec74be993e7f0ab0071d755b40e5ce70","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66890680806410723d063b22fcc830e12c649848c73a31e3ed9e07d8a2b8374e","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2c3f8568c0aa758f4018492367fd567d7af3145cb763477b5f2451b45efa42e6","downloaded_from":"2026-09-10T01:36:51.363Z","last_downloaded_at":"2026-09-10T01:36:51.363Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480627","source_sha256":"b52cd113e0903b8675372a729614a3a34c9347cd4a291279cbe71b43cbb38955"}},{"number":"50","label":"50 Disclosure","anchor":"50-disclosure","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-20-50-1","para":"50-1","html":"
See Section 815-10-50 for overall guidance on disclosures about derivative instruments used in hedging activities. For guidance on disclosures about instruments used to mitigate the income statement effect of changes in fair value of servicing assets and servicing liabilities, see paragraph 860-50-50-2(b). For guidance on encouraged disclosure of quantitative information about instruments used to manage the risks inherent in servicing assets and servicing liabilities, see paragraph 860-50-50-2.
","snippet":"See Section 815-10-50 for overall guidance on disclosures about derivative instruments used in hedging activities. For guidance on disclosures about instruments used to mitigate the income statement effect of changes in …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba727ec8610c61e4fccc43751c4d4fee029ac41c71c671d2fd0d1188ea0625cf","downloaded_from":"2026-09-10T01:36:53.139Z","last_downloaded_at":"2026-09-10T01:36:53.139Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480591","source_sha256":"3b28322feb2314a59a160b52b1e13c2cc64956c83b3cac3f345e65187445c1d4"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3562bead83060c1ef343f152657c21e22e6e9e0eb608f6b4ff3a62c8a8f8ff2d","downloaded_from":"2026-09-10T01:36:53.139Z","last_downloaded_at":"2026-09-10T01:36:53.139Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480591","source_sha256":"3b28322feb2314a59a160b52b1e13c2cc64956c83b3cac3f345e65187445c1d4"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3c76b746bf7af1916e1032223fa4424f1690b901f0fbf010dd33a3023ca8015f","downloaded_from":"2026-09-10T01:36:53.139Z","last_downloaded_at":"2026-09-10T01:36:53.139Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480591","source_sha256":"3b28322feb2314a59a160b52b1e13c2cc64956c83b3cac3f345e65187445c1d4"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Implementation Guidance","paragraphs":[{"citation":"815-20-55-1","para":"55-1","html":"
This implementation guidance is organized as follows:
  1. a
    Eligibility of hedged items
  2. b
    Eligibility of hedging instruments
  3. c
    Hedge effectiveness.
","snippet":"This implementation guidance is organized as follows:\n(a) Eligibility of hedged items\n(b) Eligibility of hedging instruments\n(c) Hedge effectiveness.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:52564efde477a9f1dc75d096333b0538ecffd4f888a43f8ed6645e5bb601737d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-2","para":"55-2","html":"
This implementation guidance on eligibility criteria for hedged items is organized as follows:
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  2. b
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  3. c
    Hedged items in fair value hedges only
  4. d
    Hedged items in cash flow hedges only
  5. e
    Hedged items involving foreign exchange risk
  6. f
    Strategic risk ineligible as hedged risk.
","snippet":"This implementation guidance on eligibility criteria for hedged items is organized as follows:\n(a) Subparagraph superseded by Accounting Standards Update No. 2017-12.\n(b) Subparagraph superseded by Accounting Standards U…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:004b43817fe5512c16f2b6a5393a243c8669b616d4575e49b4c1464eec9b1a4c","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-3","para":"55-3","html":"
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This implementation guidance on hedged items in fair value hedges only is organized as follows:
  1. a
    Subaragraph superseded by Accounting Standards Update No. 2017-12.
  2. b
    Application of the definition of firm commitment
  3. c
    Determining whether risk exposure is shared within a portfolio
  4. d
    Servicing rights as a hedged item.
  5. e
    Hedged layer in a portfolio layer method hedge.
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This implementation guidance discusses whether certain items meet the definition of a firm commitment for purposes of paragraph 815-20-25-12.
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A firm commitment that represents an asset or liability that a specific accounting standard prohibits recognizing (such as a lessor's noncancellable operating lease or an unrecognized mortgage servicing right) may nevertheless be designated as the hedged item in a fair value hedge.
","snippet":"A firm commitment that represents an asset or liability that a specific accounting standard prohibits recognizing (such as a lessor's noncancellable operating lease or an unrecognized mortgage servicing right) may nevert…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3309ce126e80baffd730bf230f5f667ef3205c26fb10a2f4262b27e07d5198ed","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-12","para":"55-12","html":"
A mortgage banker's unrecognized interest rate lock commitment does not qualify as a firm commitment (because as an option it does not obligate both parties) and thus is not eligible for fair value hedge accounting as the hedged item. (However, a mortgage banker's forward sale commitments, which are derivative instruments that lock in the prices at which the mortgage loans will be sold to investors, may qualify as hedging instruments in cash flow hedges of the forecasted sales of mortgage loans.)
","snippet":"A mortgage banker's unrecognized interest rate lock commitment does not qualify as a firm commitment (because as an option it does not obligate both parties) and thus is not eligible for fair value hedge accounting as th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0db9d3843b048435be283937c36485de94b39c86e285c067aa3f5b11bb954c28","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-13","para":"55-13","html":"
A supply contract for which the contract price is fixed only in certain circumstances (such as if the selling price is above an embedded price cap or below an embedded price floor) meets the definition of a firm commitment for purposes of designating the hedged item in a fair value hedge. Provided the embedded price cap or floor is considered clearly and closely related to the host contract and therefore is not accounted for separately under paragraph 815-15-25-1, either party to the supply contract can hedge the fair value exposure arising from the cap or floor.
","snippet":"A supply contract for which the contract price is fixed only in certain circumstances (such as if the selling price is above an embedded price cap or below an embedded price floor) meets the definition of a firm commitme…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2878b27ad8030d2fb5dca4e452eb980d855ca4b2dc6a8fce7f1f2b80e469df1c","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-14","para":"55-14","html":"
This implementation guidance discusses the application of the guidance in paragraph 815-20-25-12(b)(1) that the individual assets or individual liabilities within a portfolio hedged in a fair value hedge shall share the risk exposure for which they are designated as being hedged. If the change in fair value of a hedged portfolio attributable to the hedged risk was 10 percent during a reporting period, the change in the fair values attributable to the hedged risk for each item constituting the portfolio should be expected to be within a fairly narrow range, such as 9 percent to 11 percent. In contrast, an expectation that the change in fair value attributable to the hedged risk for individual items in the portfolio would range from 7 percent to 13 percent would be inconsistent with the requirement in that paragraph.
","snippet":"This implementation guidance discusses the application of the guidance in paragraph 815-20-25-12(b)(1) that the individual assets or individual liabilities within a portfolio hedged in a fair value hedge shall share the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dfa7788955f581d98cf7bf2c7a8fd6c655e619d64e2292621e7c281d325c97b3","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-14A","para":"55-14A","html":"
If both of the following conditions exist, the quantitative test described in paragraph 815-20-55-14 may be performed qualitatively on a hedge-by-hedge basis and only at hedge inception:
  1. a
    The hedged item is a hedged layer in a portfolio layer hedge designated in accordance with paragraph 815-20-25-12A.
  2. b
    An entity measures the change in fair value of the hedged item based on the benchmark rate component of the contractual coupon cash flows in accordance with paragraph 815-25-35-13.
Using the benchmark rate component of the contractual coupon cash flows when all assets have the same assumed maturity date and prepayment risk (if applicable) does not affect the measurement of the hedged item results in all hedged items having the same benchmark rate component coupon cash flows.
","snippet":"If both of the following conditions exist, the quantitative test described in paragraph 815-20-55-14 may be performed qualitatively on a hedge-by-hedge basis and only at hedge inception:\n(a) The hedged item is a hedged l…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:20cf8147ac2d783da476eb44fb60ba7eead431273b0e6b67c6b72cb2566d2de3","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-14B","para":"55-14B","html":"
If the hedging instrument is a derivative with a notional amount that changes over time (for example, an amortizing-notional interest rate swap), the condition in paragraph 815-20-55-14A(b) can be satisfied because the swap has a contractual fixed rate and, thus, the hedged item can be measured on the basis of a single benchmark component of the contractual coupon cash flows in accordance with paragraph 815-25-35-13. An entity that designates a derivative with a notional amount that changes over time as a hedging instrument is designating a single hedging relationship with a single benchmark rate component of the contractual coupon cash flows.
","snippet":"If the hedging instrument is a derivative with a notional amount that changes over time (for example, an amortizing-notional interest rate swap), the condition in paragraph 815-20-55-14A(b) can be satisfied because the s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e3ff02cb0c53bda7115a6363dd2d5b3ae3a53e0436eb1b6708934b3f2e5ca41a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-15","para":"55-15","html":"
In aggregating loans in a portfolio to be hedged, an entity may choose to consider some of the following characteristics, as appropriate:
  1. a
    Loan type
  2. b
    Loan size
  3. c
    Nature and location of collateral
  4. d
    Interest rate type (fixed or variable)
  5. e
    Coupon interest rate or the benchmark rate component of the contractual coupon cash flows (if fixed)
  6. f
    Scheduled maturity or the assumed maturity if the hedged item is measured in accordance with paragraph 815-25-35-13B
  7. g
    Prepayment history of the loans (if seasoned)
  8. h
    Expected prepayment performance in varying interest rate scenarios.
","snippet":"In aggregating loans in a portfolio to be hedged, an entity may choose to consider some of the following characteristics, as appropriate:\n(a) Loan type\n(b) Loan size\n(c) Nature and location of collateral\n(d) Interest rat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:206dd341e7e34657f6136dc2c0d9a9245cc450baf83fba2bf93277346ce00226","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-15A","para":"55-15A","html":"
This implementation guidance describes the hedged item in a portfolio layer method hedge in several scenarios.
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For a closed portfolio of financial assets of $100 million, Entity A designates a single hedged item of $10 million of the assets that is expected to be outstanding for the hedge period of Years 1–5. Entity A designates as the hedging instrument a spot-starting constant-notional pay-fixed, receive-variable interest rate swap with a notional amount of $10 million and a term of 5 years. In this single-layer hedge, the hedged layer represents $10 million of assets in the closed portfolio that is not expected to be affected by prepayments, defaults, or other factors affecting the timing or amount of cash flows for the hedge period of Years 1–5.
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For a closed portfolio of financial assets of $100 million, Entity A designates a hedged item of $20 million of assets that is expected to be outstanding for the hedge period of Years 1–3. It also designates a hedged item of $10 million of the assets in the closed portfolio that is expected to be outstanding for the hedge period of Years 1–5. For the $20 million hedged item, Entity A designates as the hedging instrument a spot-starting constant-notional pay-fixed, receive-variable interest rate swap with a notional amount of $20 million and a term of 3 years. For the $10 million hedged item, Entity A designates as the hedging instrument a spot-starting constant-notional pay-fixed, receive-variable interest rate swap with a notional amount of $10 million and a term of 5 years. In this scenario, there are two hedged layers:
  1. a
    A hedged layer representing $20 million of assets in the closed portfolio that is not expected to be affected by prepayments, defaults, or other factors affecting the timing or amount of cash flows for the hedge period of Years 1–3
  2. b
    A hedged layer representing $10 million of assets in the closed portfolio that is not expected to be affected by prepayments, defaults, or other factors affecting the timing or amount of cash flows for the hedge period of Years 1–5.
Although the $10 million and $20 million hedged layers are separately designated, Entity A should consider the aggregate hedged amount of $30 million in Years 1–3 when assessing whether the hedged layers are anticipated to be outstanding in accordance with paragraphs 815-20-25-12A(a) and 815-25-35-7A.
","snippet":"For a closed portfolio of financial assets of $100 million, Entity A designates a hedged item of $20 million of assets that is expected to be outstanding for the hedge period of Years 1–3. It also designates a hedged ite…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:76b14b4a0ab0928924ebd40c2dde18016548ba1981c42e5fef388e12e8b61515","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-15D","para":"55-15D","html":"
For a closed portfolio of financial assets of $100 million, Entity A designates a single hedged item of $30 million for Year 1 that decreases to an amount of $20 million for Year 2 and $10 million for Year 3. Entity A designates a single amortizing-notional swap as the hedging instrument. In this single-layer hedge, the hedged layer represents a $30 million stated amount for Year 1, a $20 million stated amount for Year 2, and a $10 million stated amount for Year 3, which reflects the amortizing-notional swap’s features.
","snippet":"For a closed portfolio of financial assets of $100 million, Entity A designates a single hedged item of $30 million for Year 1 that decreases to an amount of $20 million for Year 2 and $10 million for Year 3. Entity A de…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8c403766363d8d4e777df41491c0a819bb756432e9a214a25e740e61284774b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-16","para":"55-16","html":"
Paragraph 815-20-25-12(b)(1) provides criteria under which similar assets or similar liabilities may be aggregated and hedged as a portfolio under a fair value hedge, requiring, in part, that the individual assets or individual liabilities share the risk exposure for which they are designated as being hedged. Servicers of financial assets that designate a hedged portfolio by aggregating servicing rights within one or more risk strata used under paragraph 860-50-35-9 would not necessarily comply with the requirement in paragraph 815-20-25-12(b)(1) for portfolios of similar assets because the risk strata under paragraph 860-50-35-9 can be based on any predominant risk characteristic, including date of origination or geographic location.
","snippet":"Paragraph 815-20-25-12(b)(1) provides criteria under which similar assets or similar liabilities may be aggregated and hedged as a portfolio under a fair value hedge, requiring, in part, that the individual assets or ind…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bf2d12cbe937507764260c057e4d7217641adf3534b28c309d8f0cc2c46b4527","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-17","para":"55-17","html":"
This guidance on hedged items in cash flow hedges only is organized as follows:
  1. a
    Exposure to variability in cash flows
  2. b
    Variable price component of a purchase contract as hedged item
  3. c
    Grouping individual transactions
  4. d
    Probability of a forecasted transaction
  5. e
    Specificity of timing of a forecasted transaction
  6. ee
    Determining if a contractually specified component exists
  7. eee
    Contractually specified component in a not-yet-existing contract
  8. f
    Forecasted acquisition of a marketable debt security
  9. g
    Stock-appreciation-right obligation as a hedged item
  10. h
    First-payments-received technique in hedging variable nonbenchmark interest payments on a group of loans.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7This guidance on hedged items in cash flow hedges only is organized as follows:
  1. a
    Exposure to variability in cash flows
  2. b
    Variable price component (or subcomponent) of a forecasted transaction to purchase or sell a nonfinancial asset as hedged risk
  3. c
    Grouping individual transactions
  4. d
    Probability of a forecasted transaction
  5. e
    Specificity of timing of a forecasted transaction
  6. ee
  7. eee
  8. f
    Forecasted acquisition of a marketable debt security
  9. g
    Stock-appreciation-right obligation as a hedged item
  10. h
    First-payments-received technique in hedging variable interest payments on a group of loans.
","snippet":"This guidance on hedged items in cash flow hedges only is organized as follows:\n(a) Exposure to variability in cash flows\n(b) Variable price component of a purchase contract as hedged item\n(c) Grouping individual transac…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:77701afe0ff2c75841142558c946a65b33a2c8f3ed0279a7519463c66a6dcad9","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-18","para":"55-18","html":"
The future sale of an asset or settlement of a liability that exposes an entity (consistent with the criterion in paragraph 815-20-25-15(c)(2)) to the risk of a change in fair value may result in recognizing a gain or loss in earnings when the sale or settlement occurs. Changes in market price could change the amount for which the asset or liability could be sold or settled and, consequently, change the amount of gain or loss recognized. Forecasted transactions that expose an entity to cash flow risk have the potential to affect reported earnings because the amount of related revenue or expense may differ depending on the price eventually paid or received. Thus, an entity could designate the forecasted sale of a product at the market price at the date of sale as a hedged transaction because revenue will be recorded at that future sales price.
","snippet":"The future sale of an asset or settlement of a liability that exposes an entity (consistent with the criterion in paragraph 815-20-25-15(c)(2)) to the risk of a change in fair value may result in recognizing a gain or lo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bbd867e80b0d10f8e48e96c297c0a9e6ff17fc6cb612d397c568921e8bc085f3","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-18A","para":"55-18A","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7
Editor's Note: Paragraph 815-20-55-18A will be added upon transition, and the preceding heading will be amended as shown below.
• • • > Variable Price Component (or Subcomponent) of a Forecasted Transaction to Purchase or Sell a Nonfinancial Asset as Hedged Risk
This guidance discusses the implementation of paragraphs 815-20-25-15(i)(3) and 815-20-25-22C.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7\nEditor's Note: Paragraph 815-20-55-18A will be added upon transition, and the preceding heading will be amended as shown below. …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2dd169221527f81529475575094b8dd01de298437c0a63978b428d06c9eef7a7","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-18B","para":"55-18B","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7An entity may designate the variability in cash flows attributable to changes in a component (or subcomponent) of the forecasted purchase price or sales price of a nonfinancial asset as the hedged risk in a cash flow hedge if the conditions in paragraph 815-20-25-22C are satisfied. The scope of that paragraph includes forecasted transactions to purchase or sell nonfinancial assets consummated in spot markets and in accordance with arrangements to purchase or sell nonfinancial assets in the future.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7An entity may designate the variability in cash flows attributable to changes in a component (or subcomponent) of the forecasted …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9abc25f8408a0e86dafdf6f8ef7b727a6de19a4d93484277a06ad9eb8fbec2b1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-18C","para":"55-18C","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7To be eligible to designate a hedge of a variable component of a forecasted purchase price or sales price of a nonfinancial asset in the spot market, paragraph 815-20-25-22C(a) requires that the component being designated as the hedged risk be clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to the nonfinancial asset being purchased or sold. If an entity wants to designate a hedge of a variable component of a forecasted purchase or sales price of a nonfinancial asset to be consummated in accordance with a variable price contract, paragraph 815-20-25-22C(b)(1) requires that the component being hedged be both clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to the nonfinancial asset being purchased or sold and explicitly referenced in the agreement’s pricing formula used to determine that purchase or sales price. Alternatively, if an entity wants to hedge a subcomponent of an explicitly referenced component in an agreement’s pricing formula, paragraph 815-20-25-22C(b)(2) requires that the subcomponent be clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to that explicitly referenced component and that the explicitly referenced component is clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to the nonfinancial asset being purchased or sold.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7To be eligible to designate a hedge of a variable component of a forecasted purchase price or sales price of a nonfinancial asset…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5593464daedfee40242c109b343eedae8f818041fc651750ac10e41fc2e1462","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-18D","para":"55-18D","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If an entity enters into an agreement to purchase or sell a nonfinancial asset that meets the definition of a derivative and the entity applies the normal purchases and normal sales scope exception in Subtopic 815-10, the condition in paragraph 815-20-25-22C(b)(1) is met for the variable pricing component that is explicitly referenced in the agreement. Entities that do not apply the normal purchases and normal sales scope exception in Subtopic 815-10 and account for an agreement to purchase or sell a nonfinancial asset as a derivative may, as permitted by paragraph 815-20-25-15(e), designate a variable component (or subcomponent) of the forecasted purchase price or sales price as the hedged risk as discussed in paragraph 815-20-55-18C if the conditions in paragraph 815-20-25-22C are met.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7If an entity enters into an agreement to purchase or sell a nonfinancial asset that meets the definition of a derivative and the …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:01634fada1085eafd438432a7f9cad2d1d6a2daa1f53ad60deebd973af57a4f4","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-19","para":"55-19","html":"
This guidance discusses the implementation of paragraph 815-20-25-15(i). An entity enters into a contract that requires it to pay a total contract price based on the VWX sugar index on the date of purchase plus a variable basis differential related to transportation costs. The entity may use a derivative instrument whose underlying is the price of sugar or any other underlying for which the derivative would be highly effective in achieving offsetting cash flows in a cash flow hedge of its forecasted purchases under the contract. In accordance with paragraph 815-20-25-15(i), the entity may designate as the risk being hedged the risk of changes in the cash flows relating to all changes in the purchase price of the items being acquired under the contract. The entity also may designate the variability in cash flows attributable to changes in the contractually specified component (VWX sugar index) as the hedged risk. In that case, the entity not only must consider whether the VWX sugar index is explicitly referenced in the purchase agreement but also must ensure that the requirements in paragraph 815-20-25-22A are met. In both scenarios, the entity must determine that all the criteria for cash flow hedges are satisfied, including that the hedging relationship is highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the hedge.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7This guidance discusses several hedge designation methods that an entity may use when hedging the purchase of a nonfinancial asset. An entity enters into a contract that requires it to pay a total contract price based on the VWX sugar index on the date of purchase plus a variable basis differential related to transportation costs. The entity may use a derivative instrument whose underlying is the price of sugar or any other underlying for which the derivative would be highly effective in achieving offsetting cash flows attributable to the hedged risk in a cash flow hedge of its forecasted purchases under the contract. In accordance with paragraph 815-20-25-15(i)(2), the entity may designate as the risk being hedged the risk of changes in the cash flows relating to all changes in the purchase price of the items being acquired under the contract. In accordance with paragraph 815-20-25-15(i)(3), the entity also may designate the variability in cash flows attributable to changes in a component (or subcomponent) of the purchase price of the nonfinancial asset as the hedged risk. In this Example, the entity could designate as the hedged risk the VWX sugar index or the variable basis differential related to transportation costs, both of which are variable components explicitly referenced in the purchase agreement if the conditions in paragraph 815-20-25-22C(b)(1) are met. The entity also could designate a subcomponent of either the VWX sugar index or transportation costs as the hedged risk. If designating a subcomponent, the entity must ensure that the conditions in paragraph 815-20-25-22C(b)(2)are met. In all scenarios, the entity must determine that all the criteria for cash flow hedges are satisfied, including that the hedging relationship is highly effective in achieving offsetting cash flows attributable to the hedged risk during the term of the hedge.
","snippet":"This guidance discusses the implementation of paragraph 815-20-25-15(i). An entity enters into a contract that requires it to pay a total contract price based on the VWX sugar index on the date of purchase plus a variabl…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:56e36adc00d2ad464947ecdcacdf7cd9f5231004ef3b81914cc4066ddd3e202a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-20","para":"55-20","html":"
It sometimes will be impractical (perhaps impossible) and not cost-effective for an entity to identify each individual transaction that is being hedged. An example is a group of sales or purchases over a period of time to or from one or more parties. This Subtopic permits an entity to aggregate individual forecasted transactions for hedging purposes in some circumstances. As it does for a hedge of a single forecasted transaction, paragraph 815-20-25-3(d)(1)(vi) requires that an entity identify the hedged transactions with sufficient specificity that it is possible to determine which transactions are hedged transactions when they occur.
","snippet":"It sometimes will be impractical (perhaps impossible) and not cost-effective for an entity to identify each individual transaction that is being hedged. An example is a group of sales or purchases over a period of time t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f5cef2273ae70ace62b7f7513c56a4e0ca778e542e53480c15d5ce079d22aa55","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-21","para":"55-21","html":"
For example, an entity that expects to sell at least 300,000 units of a particular product in its next fiscal quarter might designate the sales of the first 300,000 units as the hedged transactions. Alternatively, it might designate the first 100,000 sales in each month as the hedged transactions. It could not, however, simply designate any sales of 300,000 units during the quarter as the hedged transaction because it then would be impossible to determine whether the first sales transaction of the quarter was a hedged transaction. Similarly, an entity could not designate the last 300,000 sales of the quarter as the hedged transaction because it would not be possible to determine whether sales early in the quarter were hedged or not.
","snippet":"For example, an entity that expects to sell at least 300,000 units of a particular product in its next fiscal quarter might designate the sales of the first 300,000 units as the hedged transactions. Alternatively, it mig…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:95a4ab3caa739b1a33d4a1bb2bc13e405d3393febf0c01f26a2215eb9f244021","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-22","para":"55-22","html":"
Under the guidance in this Subtopic, a single derivative instrument of appropriate size could be designated as hedging a given amount of aggregated forecasted transactions, such as any of the following:
  1. a
    Forecasted sales of a particular product to numerous customers within a specified time period, such as a month, a quarter, or a year
  2. b
    Forecasted purchases of a particular product from the same or different vendors at different dates within a specified time period
  3. c
    Forecasted interest payments on several variable-rate debt instruments within a specified time period.
","snippet":"Under the guidance in this Subtopic, a single derivative instrument of appropriate size could be designated as hedging a given amount of aggregated forecasted transactions, such as any of the following:\n(a) Forecasted sa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:777fe4a581184fb6464a79b7b0869ac97f89ed4651c54ec5b796f1883e3d0c1a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-23","para":"55-23","html":"
At the time of hedge designation only, the transactions in each group must share the risk exposure for which they are being hedged. For example, the interest payments in the group in (c) in the preceding paragraph shall vary with the same index to qualify for hedging with a single derivative instrument.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7The transactions in each group must have a similar risk exposure for which they are being hedged. To satisfy that requirement, an entity should determine whether the forecasted transactions are expected to have a similar risk exposure prospectively at hedge inception and on an ongoing basis. In addition, an entity should determine whether the forecasted transactions had a similar risk exposure retrospectively on an ongoing basis during the hedge period. An entity should assess similarity each time it assesses hedge effectiveness for a group (for timing of hedge effectiveness assessments, see paragraphs
815-20-25-79 through 25-79A
, and for certain private companies and certain not-for-profit entities, see paragraphs
815-20-25-139 through 25-143
).
","snippet":"At the time of hedge designation only, the transactions in each group must share the risk exposure for which they are being hedged. For example, the interest payments in the group in (c) in the preceding paragraph shall …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:33485d12c98d81034c955773256fa99ff58e5f20a99d04b2504776515f69b9ea","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-23A","para":"55-23A","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7An entity should determine that the risk exposures being hedged in a group of forecasted transactions are similar by applying either of the following methods:
  1. a
    The entity determines whether the designated hedging instrument is highly effective in achieving offsetting changes in cash flows attributable to each hedged risk in the group, assessed on an individual basis, by applying the guidance in paragraph 815-20-25-79 and paragraphs
    815-30-35-10 through 35-32
    for assessing hedge effectiveness.
  2. b
    The entity determines whether each hedged risk related to a forecasted transaction hedged in a group is similar to each other hedged risk in the group. In that assessment, an entity should use the same threshold applied to determine whether a relationship is highly effective. When assessing whether hedged risks in a group of forecasted transactions are similar, an entity should consider the guidance in paragraph 815-20-25-79 as well as the guidance in paragraphs
    815-30-35-10 through 35-32
    for hedges of interest rate risk.
Ordinarily, an entity should apply the selected method consistently to similar hedges. Use of different methods for similar hedges should be justified.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7An entity should determine that the risk exposures being hedged in a group of forecasted transactions are similar by applying eit…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ced42a6a825777cef755d514cc493197f85a3ca1cbb32ab616471a6ec00996bb","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-23B","para":"55-23B","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If an entity applies one of the qualitative methods in paragraph 815-20-25-3(b)(2)(iv)(01) for purposes of assessing hedge effectiveness and it applies the similar risk assessment method described in paragraph 815-20-55-23A(a), it also may assume that the hedged risks related to a group of forecasted transactions are similar because the hedging instrument is considered highly effective qualitatively against each hedged risk in the group.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7If an entity applies one of the qualitative methods in paragraph 815-20-25-3(b)(2)(iv)(01) for purposes of assessing hedge effect…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c6a536bc3d77643ad352169bda713dc24fd5ffd9247bfc5149bcc42bef2cb4f1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-23C","para":"55-23C","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7After performing an initial quantitative assessment at hedge inception (if required), an entity may elect on a hedge-by-hedge basis to qualitatively assess whether a group of individual forecasted transactions have a similar risk exposure in subsequent periods, if the entity can reasonably support an expectation of similar risk on a qualitative basis, in a manner similar to the guidance in paragraphs
815-20-35-2A through 35-2F
. The qualitative assessment used to reasonably support an expectation of high effectiveness also may be used to support an expectation of similar risk exposure if an entity applies the similar risk assessment method described in paragraph 815-20-55-23A(a).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7After performing an initial quantitative assessment at hedge inception (if required), an entity may elect on a hedge-by-hedge bas…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cfb7ed41f0b9bda705ae7db846e391fdc5942cf3896bb922ee417127e0d33628","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-23D","para":"55-23D","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If an entity determines as part of its ongoing similar risk assessment that one or more hedged risks related to the group of individual forecasted transactions are no longer similar, it should dedesignate the hedging relationship as of the last date when all hedged risks in the group were assessed to have similar risk exposure, unless the entity can determine the specific date that all hedged risks in the group were no longer similar. Amounts previously recognized in accumulated other comprehensive income should remain until the forecasted transactions affect earnings or become probable of not occurring in accordance with paragraphs
815-30-40-4 through 40-6
.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7If an entity determines as part of its ongoing similar risk assessment that one or more hedged risks related to the group of indi…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e1d9bee6268e0a708d3f5df5a99800678b32d7bf0de0f469679fa10dc36840d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-24","para":"55-24","html":"
An assessment of the likelihood that a forecasted transaction will take place (see paragraph 815-20-25-15(b)) should not be based solely on management's intent because intent is not verifiable. The transaction's probability should be supported by observable facts and the attendant circumstances. Consideration should be given to the following circumstances in assessing the likelihood that a transaction will occur.
  1. a
    The frequency of similar past transactions
  2. b
    The financial and operational ability of the entity to carry out the transaction
  3. c
    Substantial commitments of resources to a particular activity (for example, a manufacturing facility that can be used in the short run only to process a particular type of commodity)
  4. d
    The extent of loss or disruption of operations that could result if the transaction does not occur
  5. e
    The likelihood that transactions with substantially different characteristics might be used to achieve the same business purpose (for example, an entity that intends to raise cash may have several ways of doing so, ranging from a short-term bank loan to a common stock offering).
","snippet":"An assessment of the likelihood that a forecasted transaction will take place (see paragraph 815-20-25-15(b)) should not be based solely on management's intent because intent is not verifiable. The transaction's probabil…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:80c61ad1de3591dadf0096c030301815842cd9eb011b050edbc2055f04981b75","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-25","para":"55-25","html":"
Both the length of time until a forecasted transaction is projected to occur and the quantity of the forecasted transaction are considerations in determining probability. Other factors being equal, the more distant a forecasted transaction is or the greater the physical quantity or future value of a forecasted transaction, the less likely it is that the transaction would be considered probable and the stronger the evidence that would be required to support an assertion that it is probable.
","snippet":"Both the length of time until a forecasted transaction is projected to occur and the quantity of the forecasted transaction are considerations in determining probability. Other factors being equal, the more distant a for…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cecb0ae4e2698cab8d33601377044885e7dd8f664556e84e42c6b53a315e5047","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-26","para":"55-26","html":"
Paragraph 815-20-25-3(d)(1)(vi) requires an entity to identify the hedged forecasted transaction with sufficient specificity to make it clear whether a particular transaction is a hedged transaction when it occurs. Paragraph 815-20-25-3(d)(1)(i) requires that an entity document the date on or period within which the forecasted transaction is expected to occur. An entity should not be able to choose when to reclassify into earnings a gain or loss on a hedging instrument in accumulated other comprehensive income after the gain or loss has occurred by asserting that the instrument hedges a transaction that has or has not yet occurred. However, this Subtopic does not require that an entity be able to specify at the time of entering into a hedge the date on which the hedged forecasted transaction will occur.
","snippet":"Paragraph 815-20-25-3(d)(1)(vi) requires an entity to identify the hedged forecasted transaction with sufficient specificity to make it clear whether a particular transaction is a hedged transaction when it occurs. Parag…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:19e7756b23c9a3f8f135b5f1bc5f8f6bcf2932b5342a133a9122fa0b71bed532","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-26A","para":"55-26A","html":"
The definition of a contractually specified component is considered to be met if the component is explicitly referenced in agreements that support the price at which a nonfinancial asset will be purchased or sold. For example, an entity intends to purchase a commodity in the commodity's spot market. If as part of the governing agreements of the transaction or commodities exchange it is noted that prices are based on a pre-defined formula that includes a specific index and a basis, those agreements may be utilized to identify a contractually specified component. After an entity determines that a contractually specified component exists, it must assess whether the variability in cash flows attributable to changes in the contractually specified component may be designated as the hedged risk in accordance with paragraphs
815-20-25-22A through 25-22B
.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7
Editor's Note: Paragraph 815-20-55-26A will be superseded upon transition, together with the heading shown below.
• • • > Determining Whether a Contractually Specified Component Exists
Paragraph superseded by Accounting Standards Update No. 2025-09.
","snippet":"The definition of a contractually specified component is considered to be met if the component is explicitly referenced in agreements that support the price at which a nonfinancial asset will be purchased or sold. For ex…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50fca77fa6d2e621c8ee1a0c74413e3261eacedd8bc0531e4bfe8885fac24e32","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-26B","para":"55-26B","html":"
This guidance discusses the implementation of paragraphs 815-20-25-22B and 815-30-35-37A. Entity A's objective is to hedge the variability in cash flows attributable to changes in a contractually specified component in forecasted purchases of a specified quantity of soybeans on various dates during June 20X1. Entity A has executed contracts to purchase soybeans only through the end of March 20X1. Entity A's contracts to purchase soybeans typically are based on the ABC soybean index price plus a variable basis differential representing transportation costs. Entity A expects that the forecasted purchases during June 20X1 will be based on the ABC soybean index price plus a variable basis differential.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7
Editor's Note: Paragraph 815-20-55-26B will be superseded upon transition, together with the heading shown below.
• • • > Contractually Specified Component in a Not-Yet-Existing Contract
Paragraph superseded by Accounting Standards Update No. 2025-09.
","snippet":"This guidance discusses the implementation of paragraphs 815-20-25-22B and 815-30-35-37A. Entity A's objective is to hedge the variability in cash flows attributable to changes in a contractually specified component in f…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e18be3bae48ed6ad897006e245e311cfef0e2fd01886aea77aa19dcd6b66c901","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-26C","para":"55-26C","html":"
On January 1, 20X1, Entity A enters into a forward contract indexed to the ABC soybean index that matures on June 30, 20X1. The forward contract is designated as a hedging instrument in a cash flow hedge in which the hedged item is documented as the forecasted purchases of a specified quantity of soybeans during June 20X1. As of the date of hedge designation, Entity A expects the contractually specified component that will be in the contract once it is executed to be the ABC soybean index. Therefore, in accordance with paragraph 815-20-25-3(d)(1), Entity A documents as the hedged risk the variability in cash flows attributable to changes in the contractually specified ABC soybean index in the not-yet-existing contract. On January 1, 20X1, Entity A determines that all requirements for cash flow hedge accounting are met and that the requirements of paragraph 815-20-25-22A will be met in the contract once executed in accordance with paragraph 815-20-25-22B. Entity A also will assess whether the criteria in 815-20-25-22A are met when the contract is executed.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Paragraph superseded by Accounting Standards Update No. 2025-09.
","snippet":"On January 1, 20X1, Entity A enters into a forward contract indexed to the ABC soybean index that matures on June 30, 20X1. The forward contract is designated as a hedging instrument in a cash flow hedge in which the hed…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6fd737e756426d499b93eb355dbbdf4eee6188c593cdc16e5c84448e749220bb","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-26D","para":"55-26D","html":"
As part of its normal process of assessing whether it remains probable that the hedged forecasted transactions will occur, on March 31, 20X1, Entity A determines that the forecasted purchases of soybeans in June 20X1 will occur but that the price of the soybeans to be purchased will be based on the XYZ soybean index rather than the ABC soybean index. As of March 31, 20X1, Entity A begins assessing the hedge effectiveness of the hedging relationship on the basis of the changes in cash flows associated with the forecasted purchases of soybeans attributable to variability in the XYZ soybean index. Because the hedged forecasted transactions (that is, purchases of soybeans) are still probable of occurring, Entity A may continue to apply hedge accounting if the hedging instrument (indexed to the ABC soybean index) is highly effective at achieving offsetting cash flows attributable to the revised contractually specified component (the XYZ soybean index). On April 30, 20X1, Entity A enters into a contract to purchase soybeans throughout June 20X1 based on the XYZ soybean index price plus a variable basis differential representing transportation costs.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Paragraph superseded by Accounting Standards Update No. 2025-09.
","snippet":"As part of its normal process of assessing whether it remains probable that the hedged forecasted transactions will occur, on March 31, 20X1, Entity A determines that the forecasted purchases of soybeans in June 20X1 wil…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:255c0f6da9ebc956b72d5b22b436e1df8c3a9d12dda70905451eca1f51a2c0ce","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-26E","para":"55-26E","html":"
If the hedging instrument is not highly effective at achieving offsetting cash flows attributable to the revised contractually specified component, the hedging relationship must be discontinued. As long as the hedged forecasted transactions (that is, the forecasted purchases of the specified quantity of soybeans) are still probable of occurring, Entity A would reclassify amounts from accumulated other comprehensive income to earnings when the hedged forecasted transaction affects earnings in accordance with paragraphs
815-30-35-38 through 35-41
. The reclassified amounts should be presented in the same income statement line item as the earnings effect of the hedged item. Immediate reclassification of amounts from accumulated other comprehensive income to earnings would be required only if it becomes probable that the hedged forecasted transaction (that is, the purchases of the specified quantity of soybeans in June 20X1) will not occur. As discussed in paragraph 815-30-40-5, a pattern of determining that hedged forecasted transactions are probable of not occurring would call into question both an entity's ability to accurately predict forecasted transactions and the propriety of applying cash flow hedge accounting in the future for similar forecasted transactions.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Paragraph superseded by Accounting Standards Update No. 2025-09.
","snippet":"If the hedging instrument is not highly effective at achieving offsetting cash flows attributable to the revised contractually specified component, the hedging relationship must be discontinued. As long as the hedged for…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8c0eb5b66c5e8325c6d725d6fcd2d5172207317f47ba6d5b648b51be2644f653","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-27","para":"55-27","html":"
This discussion provides additional information on the forecasted acquisition of a marketable debt security as a hedged item (see paragraph 815-20-25-16[b]).
","snippet":"This discussion provides additional information on the forecasted acquisition of a marketable debt security as a hedged item (see paragraph 815-20-25-16[b]).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:41d4c401dbd23fa05d11609300e7148b3c9eb882fe9da746015f986fbe7dd545","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-28","para":"55-28","html":"
An entity seeking to reduce the variability of the price at which it will acquire a marketable debt security in the future might use a forward contract to fix the price today.
","snippet":"An entity seeking to reduce the variability of the price at which it will acquire a marketable debt security in the future might use a forward contract to fix the price today.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9fce3e97dee7f3758faa4de2395765c86e528e8d38b66987df19a218c9148d3a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-29","para":"55-29","html":"
With a forward contract, the typical settlement is the delivery of the marketable debt security at a later date at the pre-fixed price.
","snippet":"With a forward contract, the typical settlement is the delivery of the marketable debt security at a later date at the pre-fixed price.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:46c3122c01d11ea527aaaa78d6a4e39fbaa87770e261591ac0ae2f1cab60fbeb","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-30","para":"55-30","html":"
With a purchased option, the typical settlement might be the delivery of the marketable debt security at the ceiling price, or the holder may allow the purchased option to expire unexercised.
","snippet":"With a purchased option, the typical settlement might be the delivery of the marketable debt security at the ceiling price, or the holder may allow the purchased option to expire unexercised.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:55e3e81023abdbe0a740579dd7543d983ce7072dbbd5a8701e884701509c2356","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-31","para":"55-31","html":"
Therefore, to qualify for cash flow hedge accounting in this circumstance, the entity shall be able to establish that it is probable that it will acquire the marketable debt security by any of the following means:
  1. a
    Exercising the option designated as the hedging instrument if it is in the money
  2. b
    Purchasing the security in the marketplace at its prevailing market price if the option is out of the money.
","snippet":"Therefore, to qualify for cash flow hedge accounting in this circumstance, the entity shall be able to establish that it is probable that it will acquire the marketable debt security by any of the following means:\n(a) Ex…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:880fa1b9d89e74001bf111af57fdbdf9acc49bd4d668c0ab127ab5b680d4f408","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-32","para":"55-32","html":"
If the entity expects to acquire the marketable debt security only by exercising the option and only if the option were in the money, a cash flow hedging relationship typically would not be designated because acquisition of the security is contingent and thus would not be considered probable.
","snippet":"If the entity expects to acquire the marketable debt security only by exercising the option and only if the option were in the money, a cash flow hedging relationship typically would not be designated because acquisition…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:029fdeb095366f40385c1ef3aeeb35f22216d170080b785eb5ee8cf1e87a7a61","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-33","para":"55-33","html":"
This guidance addresses the application of the criteria in Section 815-20-25 to an unrecognized, nonvested stock appreciation right as a hedged item. An unrecognized, nonvested stock appreciation right relates to the portion of the stock appreciation right liability that has not yet been accrued. It does not refer to future fair value changes in the recognized liability for the vested portion of the stock appreciation right. To the extent that vesting of stock appreciation rights is probable, a purchased call option indexed to an entity's own stock that is recorded as an asset and accounted for as a derivative instrument may be designated as the hedging instrument in a hedge of cash flow variability of expected future obligations associated with unrecognized, nonvested stock appreciation rights if the option is classified as an asset in the entity's financial statements and the option is a derivative instrument subject to Subtopic 815-10. Presumably, if using this strategy, hedge effectiveness typically would be assessed based on changes in the entire value of the purchased call option, rather than just the intrinsic value of the option because the fair value of the unrecognized, nonvested stock appreciation rights likewise consists of a time value portion and an intrinsic value portion. Because an unrecognized, nonvested stock appreciation right results in exposure to cash flow variability of expected future obligations that affects reported earnings, it is eligible to be designated as being hedged. A stock appreciation right that is recognized as a liability may not be designated as being hedged in a cash flow hedge because the hedged cash flow variability in a recognized stock appreciation right relates to a liability that is remeasured with changes in fair value reported currently in earnings. The hedge of exposure to cash flow variability in an unrecognized, nonvested stock appreciation right could be expected to be highly effective. The entity's stock price is the underlying for both the unrecognized, nonvested stock appreciation right and the option on the entity's own stock. Changes in fair value of the purchased call option on the entity's own stock would be recorded in other comprehensive income consistent with paragraph 815-30-35-3. As required by paragraphs
815-30-35-38 through 35-41
, the amount in other comprehensive income would be reclassified into earnings concurrent with the recognition in earnings of compensation cost on the stock appreciation right that relates to those fair value changes that occurred during the hedge period over the requisite service period.
","snippet":"This guidance addresses the application of the criteria in Section 815-20-25 to an unrecognized, nonvested stock appreciation right as a hedged item. An unrecognized, nonvested stock appreciation right relates to the por…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d49b62aa7af9898950c14d3ce231e6bb4abe11540494ff810a5000ce9ee4eb6d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-33A","para":"55-33A","html":"
A first-payments-received technique for identifying the hedged forecasted transactions (that is, the hedged interest payments) may be used in a cash flow hedge of interest rate risk associated with interest payments for a rolling portfolio of prepayable interest-bearing loans (or other interest-bearing financial assets), provided all other conditions for a cash flow hedge have been met. Such a technique involves identifying the hedged forecasted transactions in a cash flow hedge as the first interest payments based on the contractually specified interest rate received by an entity during each recurring period of a specified length and beginning date for the period covered by the hedging instrument. Example 4, Case A (see paragraphs
815-20-55-91 through 55-96
) illustrates this technique.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7A first-payments-received technique for identifying the hedged forecasted transactions (that is, the hedged interest payments) may be used in a cash flow hedge of interest rate risk associated with interest payments for a rolling portfolio of prepayable interest-bearing loans (or other interest-bearing financial assets) if all other conditions for a cash flow hedge have been met. Such a technique involves identifying the hedged forecasted transactions in a cash flow hedge as the first interest payments based on the contractually specified interest rate received by an entity during each recurring period of a specified length and beginning date for the period covered by the hedging instrument. Example 4, Case A (see paragraphs
815-20-55-91 through 55-96A
)illustrates this technique.
","snippet":"A first-payments-received technique for identifying the hedged forecasted transactions (that is, the hedged interest payments) may be used in a cash flow hedge of interest rate risk associated with interest payments for …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d99de84abe7abb2b46692438d7a265fa0440a9e1acd2aa665abbc366aa1d7d95","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-33B","para":"55-33B","html":"
Similarly, a comparable first-payments-made technique may be used to identify the hedged forecasted transactions in a cash flow hedge of the contractually specified rate-based interest payments for a group of the reporting entity's financial liabilities, provided all other conditions for a cash flow hedge have been met.
","snippet":"Similarly, a comparable first-payments-made technique may be used to identify the hedged forecasted transactions in a cash flow hedge of the contractually specified rate-based interest payments for a group of the reporti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:571ad20cb33ac6fad16fc86a807805af945a06e7c522a878233472917f5909e9","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-33C","para":"55-33C","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bf44c35b892561d850aa90a58d8947916acc1b107e2791a851621d9504194a78","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-33D","para":"55-33D","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f10d334eb22d69affbdf9647302303e939f4f6fd3f8e96d8e566a694ac4d35b5","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-33E","para":"55-33E","html":"
This implementation guidance regarding use of a first-cash-flows technique also may be applied to a cash flow hedging relationship in which the hedging instrument is a basis swap as discussed beginning in paragraph 815-20-25-50. However, use of that technique for those basis-swap hedging relationships may not be common because that paragraph limits designating a basis swap as the hedging instrument to cash flow hedges of the contractually specified interest payments of only recognized financial assets and liabilities existing at the inception of the hedge, whereas the first-cash-flows technique is typically applied to the contractually specified interest payments for rolling portfolios whose composition of financial assets changes over the period of the hedge.
","snippet":"This implementation guidance regarding use of a first-cash-flows technique also may be applied to a cash flow hedging relationship in which the hedging instrument is a basis swap as discussed beginning in paragraph 815-2…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:70f35461a8c1a77b2af444108a775302b3c65cccfa32444df7421b1d25c1ca43","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-33F","para":"55-33F","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3f20ff88be585fbc00f6edaa17eba83633f69c8a1b871dd8bbe5dfe6f3e7e741","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-33G","para":"55-33G","html":"
Under the first-payments-received technique, an entity also may designate the risk of overall changes in the hedged cash flows, which includes the risk of decreases in cash flows attributable to credit default. The use of the first-payments-received technique in those circumstances is permitted by this Subtopic as an exception even though that technique excludes the variable interest payments that are contractually due but not paid by the debtor from being hedged transactions, thereby excluding some of the risk of decreases in interest payment inflows attributable to credit default. This implementation guidance on applying the first-payments-received technique to overall changes in cash flows for interest-bearing financial assets should not be applied by analogy to other circumstances.
","snippet":"Under the first-payments-received technique, an entity also may designate the risk of overall changes in the hedged cash flows, which includes the risk of decreases in cash flows attributable to credit default. The use o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4dd9f425dcc623cc9a5016e4b7cd2ae25e07daccb293c867cf7d9daba463ce68","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-34","para":"55-34","html":"
This implementation guidance on hedged items involving foreign exchange risk is organized as follows:
  1. a
    Foreign-currency-denominated interest payments
  2. b
    Foreign-currency-denominated debt instrument as both hedging instrument and hedged item.
","snippet":"This implementation guidance on hedged items involving foreign exchange risk is organized as follows:\n(a) Foreign-currency-denominated interest payments\n(b) Foreign-currency-denominated debt instrument as both hedging in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d1a1c031fb8206892fc725fdace84bde97f79d6f1471cfde61ac14fd4f254ecc","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-35","para":"55-35","html":"
An entity may not treat foreign-currency-denominated fixed-rate interest coupon payments arising from an issuance of foreign-currency-denominated fixed-rate debt as an unrecognized firm commitment that may be designated as a hedged item in a foreign currency fair value hedge. (See paragraph 815-20-25-23.) The foreign-currency exposure of the future interest payments would not meet this Subtopic's definition of an unrecognized firm commitment because the obligation is recognized on the balance sheet—that is, the carrying amount of the foreign-currency-denominated fixed-rate debt incorporates the entity's obligation to make those future interest payments as well as the repayment of principal. However, those fixed-rate interest payments could be designated as the hedged transaction in a cash flow hedge.
","snippet":"An entity may not treat foreign-currency-denominated fixed-rate interest coupon payments arising from an issuance of foreign-currency-denominated fixed-rate debt as an unrecognized firm commitment that may be designated …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9278afd13c7ab6a7d390cfc3aed78d87e57985b6751e1b13f7be1a68e837b7ac","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-36","para":"55-36","html":"
Those fixed-rate interest payments might arise as follows. An entity whose functional currency is the U.S. dollar issues fixed-rate debt denominated in a foreign currency. The debt has a fixed interest coupon that is payable semiannually in that foreign currency. The entity wishes to lock in, in U.S. dollar functional currency terms, the future interest expense that will result from the debt and enters into a derivative instrument to hedge the foreign currency risk of the fixed foreign-currency-denominated interest coupon payments. For example, the entity may enter into a foreign currency swap to receive an amount of the foreign currency required to satisfy the interest coupon obligation in exchange for U.S. dollars at each coupon date, or, alternatively, it may enter into a strip of foreign currency forward contracts that provide for receipt of an amount of foreign currency required to satisfy the interest coupon obligation in exchange for the payment of U.S. dollars at each coupon date.
","snippet":"Those fixed-rate interest payments might arise as follows. An entity whose functional currency is the U.S. dollar issues fixed-rate debt denominated in a foreign currency. The debt has a fixed interest coupon that is pay…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6cdf29bb7293a275781017c1ef695d9afcf59c372a3e8541f1646e2e6e2648b6","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-37","para":"55-37","html":"
This guidance also applies to dual-currency bonds that provide for repayment of principal in the functional currency and periodic fixed-rate interest payments denominated in a foreign currency. Subtopic 830-20 applies to dual-currency bonds and requires the present value of the interest payments denominated in a foreign currency to be remeasured and the transaction gain or loss recognized in earnings. Thus, those fixed-rate interest payments on a dual-currency bond could be designated as the hedged transaction in a cash flow hedge of foreign exchange risk.
","snippet":"This guidance also applies to dual-currency bonds that provide for repayment of principal in the functional currency and periodic fixed-rate interest payments denominated in a foreign currency. Subtopic 830-20 applies to…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d03962f045dc4e8db31c32289250224ee1f6a2111a7d4fd6fc528bffa171fc5b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-38","para":"55-38","html":"
A foreign-currency-denominated debt instrument that is designated as the hedging instrument in a net investment hedge may also be designated as the hedged item in a fair value hedge of interest rate risk. The two hedging relationships address separate risk types that are permitted to be hedged individually under this Subtopic. Example 10 (see paragraph 815-20-55-127) illustrates this circumstance.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7A foreign-currency-denominated debt instrument that is designated as the hedging instrument in a net investment hedge may also be designated as the hedged item in a fair value hedge of interest rate risk. The two hedging relationships address separate risk types that are permitted to be hedged individually under this Subtopic. When a foreign-currency-denominated debt instrument is designated as both a hedging instrument and a hedged item, an entity should exclude from the assessment of effectiveness in the net investment hedging relationship the fair value hedge basis adjustment resulting from designating the foreign-currency-denominated debt instrument in the fair value hedge. In those situations, an entity should recognize gains and losses from the remeasurement of the foreign-currency-denominated debt instrument’s fair value basis adjustment at the spot exchange rate currently in earnings in accordance with Subtopic 830-20. If the fair value hedge of the foreign-currency-denominated debt instrument is subsequently discontinued in accordance with the guidance in Section 815-25-40, an entity should consider the foreign-currency-denominated debt instrument’s fair value hedge basis adjustment when prospectively assessing the effectiveness of the net investment hedge after the date of discontinuing the fair value hedge. Excluding the fair value hedge basis adjustment from the assessment of effectiveness in the designated net investment hedging relationship should not be applied by analogy to other circumstances. Example 10 (see paragraph 815-20-55-127) illustrates the circumstances in which a foreign-currency-denominated debt instrument that is designated as the hedging instrument in a net investment hedge also is designated as the hedged item in a fair value hedge of interest rate risk.
","snippet":"A foreign-currency-denominated debt instrument that is designated as the hedging instrument in a net investment hedge may also be designated as the hedged item in a fair value hedge of interest rate risk. The two hedging…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4e7a7e86d25349f6babb02251decb00addc2894ceb8b26aa70d112ee0e7f07ce","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-39","para":"55-39","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9b6b123693aa9daefdbcab9d16818d4cbc038a352fff9be5341c33298d13aeed","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-40","para":"55-40","html":"
The offset criterion in paragraph 815-20-25-75 precludes hedge accounting for certain risk management techniques, such as hedges of strategic risk. For example, a U.S. manufacturer, with no export business, that designates a forward contract to buy U.S. dollars (USD) for Japanese yen (JPY) as a hedge of its USD sales would fail the requirement that the cash flows of the derivative instrument are expected to be highly effective in achieving offsetting cash flows on the hedged transaction. A weakened JPY might allow a competitor to sell goods imported from Japan more cheaply, undercutting the domestic manufacturer's prices and reducing its sales volume and revenues. However, it would be difficult for the U.S. manufacturer to expect a high degree of offset between a decline in U.S. sales revenue due to increased competition and cash inflows on a foreign currency derivative instrument. Any relationship between the exposure and the hedging derivative typically would be quite indirect, would depend on price elasticities, and would be only one of many factors influencing future results. In addition, the risk that a desired or expected number of transactions will not occur, that is, the potential absence of a transaction, is not a hedgeable risk for accounting purposes.
","snippet":"The offset criterion in paragraph 815-20-25-75 precludes hedge accounting for certain risk management techniques, such as hedges of strategic risk. For example, a U.S. manufacturer, with no export business, that designat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bd9c74ad0af0f96c1d2ed7ba1df24e01154c3ddb50646631cd31639e4948ef9c","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-41","para":"55-41","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
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Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f79e8d5252fb995d610f5eb86e6b556ffb80f1ddee43c8e0c1f051bdec4843a3","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-43","para":"55-43","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86000f35dfcdb3e14ea18fea20ba05ea968165e8d92038b82b755e0f029ab547","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6048d9880b6f9861f0d9e9d2b121ce39393698fbff29887cec8ae8b179115a99","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"block":null,"heading":"Eligibility of Hedging Instruments","paragraphs":[{"citation":"815-20-55-44","para":"55-44","html":"
This implementation guidance on eligibility of hedging instruments is organized as follows:
  1. a
    Contingent designation of a hedging instrument
  2. b
    No hedge accounting for covered call strategies
  3. c
    Mixed-attribute derivative commodity contracts as cash flow hedging instruments
  4. d
    Subparagraph superseded by Accounting Standards Update No. 2016-19.
  5. e
    Synthetic foreign currency borrowing ineligible as a hedging instrument.
","snippet":"This implementation guidance on eligibility of hedging instruments is organized as follows:\n(a) Contingent designation of a hedging instrument\n(b) No hedge accounting for covered call strategies\n(c) Mixed-attribute deriv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a09a1dd6635361fe2bd1dacfdaba5813496e2735d084faaed9804216d3102f10","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-44A","para":"55-44A","html":"
A contract that meets the definition of a derivative instrument after acquisition by an entity may be designated as a hedging instrument.
","snippet":"A contract that meets the definition of a derivative instrument after acquisition by an entity may be designated as a hedging instrument.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a4dd8354d39d3ce929d201656dead0c4f046bab5362b490ef4b554a8e928c13","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-44B","para":"55-44B","html":"
During the period in which the contract does not meet the definition of a derivative instrument, that contract cannot be designated as the hedging instrument in any hedging relationship. (However, the contract could potentially be the hedged item in a fair value hedge or its cash flows could potentially be the hedged transactions in a cash flow hedge.)
","snippet":"During the period in which the contract does not meet the definition of a derivative instrument, that contract cannot be designated as the hedging instrument in any hedging relationship. (However, the contract could pote…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f5e8a078c31b2930961f92dff92ec8da1664e3af0e40e58cdfd74f88df945ef7","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-44C","para":"55-44C","html":"
The contingent designation of a hedging relationship in which the hedging instrument is not currently a derivative instrument but may become one cannot justify the application of hedge accounting to fair value changes occurring before inception of the hedge; the inception of that hedging relationship would be the date on which the contract meets the definition of a derivative instrument. If an entity had anticipated that a contract that was not a derivative instrument at inception might later meet the definition of a derivative instrument and has made a contingent designation of an all-in-one hedging relationship to be effective upon the date that the contract meets the definition of a derivative instrument, only the changes in the fair value of the new derivative instrument occurring after the date the contract became a derivative instrument would be recognized in other comprehensive income.
","snippet":"The contingent designation of a hedging relationship in which the hedging instrument is not currently a derivative instrument but may become one cannot justify the application of hedge accounting to fair value changes oc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b8a26a4feb048eb777b86dc81e34d6ac491e21e5bed792245c71fc8675296d63","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-45","para":"55-45","html":"
This Subtopic does not permit hedge accounting for covered call strategies (strategies in which an entity writes an option on an asset that it owns) unless that asset is a call option that is embedded in another instrument. In a covered call strategy, any loss on the written option will be covered by the gain on the owned asset. A covered call strategy will not qualify for hedge accounting because the risk profile of the combined position is asymmetrical (the exposure to losses is greater than the potential for gains). In contrast, the risk profile of the asset alone is symmetrical or better (the potential for gains is at least as great as the exposure to losses). The symmetry requirement for hedges with written options precludes a written option that is used to sell a portion of the gain potential on an asset or liability from being eligible for hedge accounting.
","snippet":"This Subtopic does not permit hedge accounting for covered call strategies (strategies in which an entity writes an option on an asset that it owns) unless that asset is a call option that is embedded in another instrume…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9657f1170f9ad67bd0098251b7d0afcf06abe7aade4da5c3cfbdbbf29c375b13","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-46","para":"55-46","html":"
Commodity contracts commonly have features of both fixed-price contracts and variable-price contracts, such as an agreement to purchase a commodity in the future at the prevailing market index price at that future date plus or minus a fixed basis differential set at the inception of the contract. Assume an example mixed-attribute contract has the characteristics of notional amount, underlying, and no initial net investment and the commodity to be delivered is readily convertible to cash pursuant to the guidance beginning in paragraph 815-10-15-119.
","snippet":"Commodity contracts commonly have features of both fixed-price contracts and variable-price contracts, such as an agreement to purchase a commodity in the future at the prevailing market index price at that future date p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ceb52a81c8125af24805e1d6ad0a4336bedb5dc9bdeaf71602ddb901eb55dc32","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-47","para":"55-47","html":"
Because that mixed-attribute contract is a derivative instrument and has an underlying related solely to changes in the basis differential, that contract (as a derivative instrument) would generally not be sufficiently effective if designated as the sole hedging instrument in a cash flow hedge of the anticipated purchase or sale of the commodity—a forecasted transaction whose variability in cash flows is based on changes in both the basis differential and the base commodity price. Because its underlying relates solely to changes in the basis differential, the mixed-attribute contract would essentially be hedging only a portion of the variability in cash flows. The entity is not permitted to designate a cash flow hedging relationship as hedging only the change in cash flows attributable to changes in the basis differential. For an entity to be able to conclude that such a hedging relationship is expected to be highly effective in achieving offsetting cash flows, the entity would need to consider the likelihood of changes in the base commodity price as remote or insignificant to the variability in hedged cash flows (for the total purchase or sales price). However, the mixed-attribute contract may be combined with another derivative instrument whose underlying is the base commodity price, with the combination of those derivative instruments designated as the hedging instrument in a cash flow hedge of the overall variability of cash flows for the anticipated purchase or sale of the commodity. Such a combination would address the risk of changes in both the basis differential and the base commodity price.
","snippet":"Because that mixed-attribute contract is a derivative instrument and has an underlying related solely to changes in the basis differential, that contract (as a derivative instrument) would generally not be sufficiently e…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3aa0f2396b226bf1a1ec5425bdf8372e316a648dc6349927816f5b6b9488b2bf","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-48","para":"55-48","html":"
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A debt instrument denominated in the investor's functional currency and a cross-currency interest rate swap cannot be accounted for as synthetically created foreign-currency-denominated debt to be designated as a hedge of the entity's net investment in a foreign operation.
","snippet":"A debt instrument denominated in the investor's functional currency and a cross-currency interest rate swap cannot be accounted for as synthetically created foreign-currency-denominated debt to be designated as a hedge o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:60923d4dbc262ce70bcb26fc1f2f9b7760ad19f407668a9911f4ea27bf61c3f9","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-50","para":"55-50","html":"
For example, a parent entity that has the U.S. dollar (USD) as its functional and reporting currency has a net investment in a Japanese yen- (JPY-) functional-currency subsidiary. The parent borrows in euros (EUR) on a fixed-rate basis and simultaneously enters into a receive-EUR, pay-Japanese yen currency swap (for all interest and principal payments) to synthetically convert the borrowing into a yen-denominated borrowing. The parent entity cannot designate the EUR-denominated borrowing and the currency swap in combination as a hedging instrument for its net investment in the JPY-functional-currency subsidiary.
","snippet":"For example, a parent entity that has the U.S. dollar (USD) as its functional and reporting currency has a net investment in a Japanese yen- (JPY-) functional-currency subsidiary. The parent borrows in euros (EUR) on a f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dca8dc52233d471923a53b5ebf37637da1aa624b489a265a612abed20a59489e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-51","para":"55-51","html":"
An approach that would involve measuring a derivative instrument and a cash instrument as a single unit at the current spot rate (which is used in the translation of the hedged net investment) violates the requirements of Subtopic 830-20 for translation of foreign-currency-denominated borrowings at the spot rate relevant to the currency of the borrowing. It also violates the requirements of Subtopic 815-10 for measurement of all derivative instruments at fair value. Accordingly, combining the EUR-denominated borrowing and the currency swap for designation as a single hedging instrument—a JPY-denominated borrowing—in a net investment hedge is not permitted.
","snippet":"An approach that would involve measuring a derivative instrument and a cash instrument as a single unit at the current spot rate (which is used in the translation of the hedged net investment) violates the requirements o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:20c1d3270b6b2e40e51bd3f247e94e5a153d3fffde0c5af7ad9f9a917b17f93e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-52","para":"55-52","html":"
In contrast, an entity could designate a foreign currency derivative instrument and a foreign-currency-denominated cash instrument individually as hedging different portions of its net investment in a foreign operation provided the derivative instrument and the cash instrument each individually qualified as a hedging instrument.
","snippet":"In contrast, an entity could designate a foreign currency derivative instrument and a foreign-currency-denominated cash instrument individually as hedging different portions of its net investment in a foreign operation p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:499d5ab08f25c12a1e0b0c475c37b285a312ce5416b9cb77264c0e6710a24586","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-53","para":"55-53","html":"
For example, a JPY-USD forward contract and a JPY-denominated cash instrument could each be designated as the hedging instrument in a hedge of different portions of the net investment in a JPY-functional-currency subsidiary (that is, two separate hedging relationships would be designated).
","snippet":"For example, a JPY-USD forward contract and a JPY-denominated cash instrument could each be designated as the hedging instrument in a hedge of different portions of the net investment in a JPY-functional-currency subsidi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d941fe25a0f591757655858e451cea7871d59fa457d2661793b1bb3050f84c75","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:04dcf198c73497b8dbfd9b3a67f9c1a429520dd80f67543edd5435912d406d6f","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"block":null,"heading":"Hedge Effectiveness","paragraphs":[{"citation":"815-20-55-54","para":"55-54","html":"
This implementation guidance on hedge effectiveness is organized as follows:
  1. a
    Changes in quantitative assessment methods
  2. b
    Components of option time value
  3. c
    Effect of interest rate indexes
  4. d
    Prohibition of preset hedge coverage ratios
  5. e
    Methodologies to assess effectiveness of fair value and cash flow hedges
  6. f
    Applicability of the shortcut method
  7. g
    Application of the prepayable criterion under the shortcut method
  8. h
    Determining whether a mirror-image call provision exists in application of the shortcut method
  9. i
    Simplified hedge accounting approach.
  10. j
    Timing of initial quantitative prospective effectiveness assessment
  11. k
    Eligibility of hedging relationships for subsequent qualitative effectiveness assessments
  12. l
    Change in facts and circumstances in qualitative effectiveness assessments
  13. m
    Income statement presentation of hedging instruments.
","snippet":"This implementation guidance on hedge effectiveness is organized as follows:\n(a) Changes in quantitative assessment methods\n(b) Components of option time value\n(c) Effect of interest rate indexes\n(d) Prohibition of prese…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c3ddeb8ed68cedd302737671d64654ee02c91566492f40a89c37ccad6574d602","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-55","para":"55-55","html":"
If an entity elects to or is required to assess hedge effectiveness on a quantitative basis after the initial quantitative assessment of hedge effectiveness, examples of changes in the types of methods an entity may use in assessing hedge effectiveness (see paragraph 815-20-35-20) could include the following:
  1. a
    A change from the dollar-offset method to the use of regression analysis or vice versa
  2. b
    A change between any one of the three methods discussed beginning in paragraph 815-30-35-10 (for example, a change from the change in variable cash flows method to either the hypothetical derivative method or the change in fair value method)
  3. c
    A change from excluding certain components of a derivative instrument gain or loss to including such components or vice versa (for example, a change from assessing effectiveness based on changes in intrinsic value to the entire change in an option's fair value)
  4. d
    A change from assessing hedge effectiveness on a period-by-period basis to a cumulative basis or vice versa.
","snippet":"If an entity elects to or is required to assess hedge effectiveness on a quantitative basis after the initial quantitative assessment of hedge effectiveness, examples of changes in the types of methods an entity may use …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f9056e0ef6f9b3d5e10d23cd560600f3f5f82144df99cf18a67ec8d2aba93e29","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-56","para":"55-56","html":"
This Subtopic permits a hedging relationship to be dedesignated (that is, discontinued) at any time. (See paragraphs 815-25-40-1(c) and 815-30-40-1(c).) If an entity wishes to change any of the critical terms of the hedging relationship (including the method designated for use in assessing hedge effectiveness), as documented at inception, the mechanism provided in this Subtopic to accomplish that change is the dedesignation of the original hedging relationship and the designation of a new hedging relationship that incorporates the desired changes. However, as discussed in paragraph 815-30-35-37A, a change to the hedged risk in a cash flow hedge of a forecasted transaction does not result in an automatic dedesignation of the hedging relationship if the hedging instrument continues to be highly effective at achieving offsetting cash flows associated with the hedged item attributable to the revised hedged risk. The dedesignation of an original hedging relationship and the designation of a new hedging relationship represents the application of this Subtopic and is not a change in accounting principle under Topic 250, even though the new hedging relationship may differ from the original hedging relationship only with respect to the method designated for use in assessing the hedge effectiveness of that hedging relationship. Although paragraph 815-20-35-19 refers to discontinuing an existing hedging relationship and then designating and documenting a new hedging relationship using an improved method for assessing effectiveness, that reference was not meant to imply that the perceived improved method had to be justified as a preferable method of applying an accounting principle under Topic 250.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7This Subtopic permits a hedging relationship to be dedesignated (that is, discontinued) at any time. (See paragraphs 815-25-40-1(c) and 815-30-40-1(c).) If an entity wishes to change any of the critical terms of the hedging relationship (including the method designated for use in assessing hedge effectiveness or the method of assessing similar risk exposure), as documented at inception, the mechanism provided in this Subtopic to accomplish that change is the dedesignation of the original hedging relationship and the designation of a new hedging relationship that incorporates the desired changes. However, as discussed in paragraphs
815-30-35-37B through 35-37M
, for a cash flow hedge of forecasted interest payments on choose-your-rate debt (and related replacement debt), a change in the contractually specified interest rate (and associated change in the number and timing of forecasted interest payments within the hedged period, if any) does not result in an automatic dedesignation of the hedging relationship if the conditions in those paragraphs are met. The dedesignation of an original hedging relationship and the designation of a new hedging relationship represent the application of this Subtopic and is not a change in accounting principle under Topic 250, even though the new hedging relationship may differ from the original hedging relationship only with respect to the method designated for use in assessing the similar risk exposure or hedge effectiveness of that hedging relationship. Although paragraph 815-20-35-19 refers to discontinuing an existing hedging relationship and then designating and documenting a new hedging relationship using an improved method for assessing effectiveness, that reference was not meant to imply that the perceived improved method had to be justified as a preferable method of applying an accounting principle under Topic 250.
","snippet":"This Subtopic permits a hedging relationship to be dedesignated (that is, discontinued) at any time. (See paragraphs 815-25-40-1(c) and 815-30-40-1(c).) If an entity wishes to change any of the critical terms of the hedg…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2f4c358be717b4dd0ea14941af17b15fba16b05a7be23ac04c0e32feb61461ca","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-56A","para":"55-56A","html":"
For the purposes of applying the guidance in paragraph 815-20-55-56, 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 change in a critical term of the hedging relationship.
","snippet":"For the purposes of applying the guidance in paragraph 815-20-55-56, a change in the counterparty to a derivative instrument that has been designated as the hedging instrument in an existing hedging relationship would no…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0e32cd06401fce1e6a183cd25fd26423825c6908c4990c6e711c6925633a7bda","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-57","para":"55-57","html":"
This guidance discusses implementation of paragraph 815-20-25-82.
","snippet":"This guidance discusses implementation of paragraph 815-20-25-82.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a684452ebca3126955b6bad00383b77bd755a26a7ebbf23b51a0f2ef996f27e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-58","para":"55-58","html":"
Some entities may wish to assess hedge effectiveness based on the change in an option's value excluding a certain aspect of the change in the option's time value. For example, some entities may wish to exclude the change in time value attributable to the passage of time (theta) from the assessment of hedge effectiveness, while assessing hedge effectiveness based on the remaining components of changes in an option's value. As an illustration, if out-of-the-money options are designated as hedging instruments, changes in value of the option are primarily driven by the change, if any, in the value of the underlying (delta). If the price of the underlying asset changes, in effective hedging strategies involving out-of-the-money options, the hedge gain or loss due to delta would offset the change in value of the hedged item; however, if the price of the underlying does not change, there is no change in fair value attributable to changes in delta. In that case, the only change in the option's value is attributable to the passage of time (theta), or to changes in other market variables such as volatilities or interest rates. Accordingly, for those hedging relationships to qualify for hedge accounting, an entity may need to exclude the change in value attributable to theta from the assessment of hedge effectiveness.
","snippet":"Some entities may wish to assess hedge effectiveness based on the change in an option's value excluding a certain aspect of the change in the option's time value. For example, some entities may wish to exclude the change…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:42e8c75c75ab0c72fc4111a6eea22744a9854c0d484ad3bfb70c056141a53d8d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-59","para":"55-59","html":"
Other entities may wish to exclude changes in time value attributable to certain market variables—volatility (vega) or interest rates (rho)—from the assessment of hedge effectiveness. An entity may wish to exclude changes in time value attributable to volatility (vega) from the assessment of hedge effectiveness because the fair value measurement of the hedged item does not incorporate a measure of implied volatility.
","snippet":"Other entities may wish to exclude changes in time value attributable to certain market variables—volatility (vega) or interest rates (rho)—from the assessment of hedge effectiveness. An entity may wish to exclude change…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6d906a6c5197ecf24ddba110190086c60895665976d66a7a467fdbb73ec8e84e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-60","para":"55-60","html":"
Similarly, an entity may seek to exclude changes in time value attributable to interest rates (rho) from the assessment of hedge effectiveness. For example, in a foreign currency hedge involving a country in which interest rates are volatile, a substantial portion of the change in value of the option may be attributable to fluctuations in those interest rates, while the fair value of the hedged item is not affected correspondingly. Accordingly, for these hedging relationships to qualify for hedge accounting, an entity may need to exclude the change in value attributable to the relevant market variable from the assessment of hedge effectiveness.
","snippet":"Similarly, an entity may seek to exclude changes in time value attributable to interest rates (rho) from the assessment of hedge effectiveness. For example, in a foreign currency hedge involving a country in which intere…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4ee6222d5e9c630fef6a88ae72c3d0c11c63cca157024ad10f68cd77e56f5271","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-61","para":"55-61","html":"
In summary, the exclusion of a certain aspect of the change in an option's time value from the assessment of hedge effectiveness is driven by the fact that, in certain circumstances, the measurement of changes in fair value of the hedged item or changes in the cash flows of the hedged transaction does not depend on or incorporate that aspect. Option valuation models are capable of isolating the various aspects of changes in an option's time value.
","snippet":"In summary, the exclusion of a certain aspect of the change in an option's time value from the assessment of hedge effectiveness is driven by the fact that, in certain circumstances, the measurement of changes in fair va…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:567c1a421cae53f394867bd8c7aead55fc33952ac64847d36be247a767538601","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-62","para":"55-62","html":"
The effectiveness of a cash flow hedge of the variability in interest payments of a variable-rate financial asset or liability, either existing or forecasted, is affected by the contractually specified interest rate on which the variability is based and the extent to which the hedging instrument provides offset. If the cash flows on the hedging instrument and the contractually specified interest rate of the hedged cash flows of the existing financial asset or liability or the contractually specified interest rate of the variable-rate financial asset or liability that is forecasted to be acquired or issued are based on different indexes, the basis difference between those indexes would affect the assessment of hedge effectiveness.
","snippet":"The effectiveness of a cash flow hedge of the variability in interest payments of a variable-rate financial asset or liability, either existing or forecasted, is affected by the contractually specified interest rate on w…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:511fc8877e03b0a854c44b85d316b83ac3631daf8009508fc0a806f758be47d3","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-62A","para":"55-62A","html":"
An entity may designate as the hedged risk only the change in cash flows of the contractually specified interest rate, not an implied rate embedded in the interest rate. For example, if an entity issues variable-rate debt based on its own prime rate, it cannot designate the change in cash flows of the Fed Funds Target rate or the Wall Street Journal prime rate as the hedged risk.
","snippet":"An entity may designate as the hedged risk only the change in cash flows of the contractually specified interest rate, not an implied rate embedded in the interest rate. For example, if an entity issues variable-rate deb…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:803be7b0ea519e7c4450b124dff40f0345832b7e49088962802c7cf314d36216","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-63","para":"55-63","html":"
Subtopic 860-50 requires that if an entity subsequently measures servicing assets and servicing liabilities using the amortization method, any impairment of servicing assets, which is the amount by which the carrying amount of the servicing assets for an individual stratum exceeds their fair value, be recognized in current earnings. However, an increase in the fair value above the carrying amount of servicing assets for an individual stratum may not be recognized in current earnings.
","snippet":"Subtopic 860-50 requires that if an entity subsequently measures servicing assets and servicing liabilities using the amortization method, any impairment of servicing assets, which is the amount by which the carrying amo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5cb7f84dc6c67738eb92757116af5d19a48b8274dff07377728d61b0e9eef9f9","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-64","para":"55-64","html":"
Entities that service certain types of financial assets may wish to designate as the hedged item in a fair value hedge a prespecified percentage of the total change in fair value of those servicing rights (attributable to the hedged risk) that varies based on changes in a specified independent variable. Because the prespecified percentage for each specified independent variable can be presented in a rectangular array, that method of determining the hedged item retroactively based on the actual independent variable is sometimes referred to as the matrix method. Under that approach, at the end of the hedge assessment period, the entity would determine the hedged item and assess hedge effectiveness by determining retrospectively which hedge coverage ratio would be applied to the servicing right asset to identify the hedged item for that period. That approach is in contrast to designating the hedged item at the inception of the hedge by specifying a single percentage of that recognized servicing right asset as the hedged item.
","snippet":"Entities that service certain types of financial assets may wish to designate as the hedged item in a fair value hedge a prespecified percentage of the total change in fair value of those servicing rights (attributable t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:edd97df3f72f32eb11282d1090f62cb7b66988387db2c11820a9a595c5580da2","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-65","para":"55-65","html":"
In a fair value hedge of a portion of a recognized servicing right asset subsequently measured using the amortization method and its related impairment analysis, an entity may not designate the hedged item at the inception of the hedge by initially specifying a series of possible percentages of the servicing right asset (that is, preset hedge coverage ratios) and then determining at the end of the assessment period what specific percentage of the servicing right asset is the actual hedged item for that period based on the change in a specified independent variable during that period. Such a matrix method would not be a valid application of the provisions of this Subtopic.
","snippet":"In a fair value hedge of a portion of a recognized servicing right asset subsequently measured using the amortization method and its related impairment analysis, an entity may not designate the hedged item at the incepti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eaa75b3d80cd7db9e59d2381c7a6cc8aee220f810e323aba012f914cd427eff1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-66","para":"55-66","html":"
Paragraph 815-20-25-12(b)(2)(i) precludes an entity from expressing the hedged item as multiple percentages of a recognized asset or liability and then retroactively determining the hedged item based on an independent matrix of those multiple percentages and the actual scenario that occurred during the period for which hedge effectiveness is being assessed.
","snippet":"Paragraph 815-20-25-12(b)(2)(i) precludes an entity from expressing the hedged item as multiple percentages of a recognized asset or liability and then retroactively determining the hedged item based on an independent ma…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1e059c40c27c3dee9329642504c44364f5dbec037de6bd9cbad60433ca53cf6a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-67","para":"55-67","html":"
There is a limited exception under paragraph 815-20-25-10 in which a collar that is comprised of one purchased option and one written option that have different notional amounts is designated as the hedging instrument, and the hedged item is specified as two different proportions of the same asset based on the upper and lower rate or price range of the asset referenced in those two options.
","snippet":"There is a limited exception under paragraph 815-20-25-10 in which a collar that is comprised of one purchased option and one written option that have different notional amounts is designated as the hedging instrument, a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:afefd692e695051708028a0062532c47d5d31e53231ff49bdfc19fbac20dbdde","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-68","para":"55-68","html":"
As discussed in paragraph 815-20-25-80, if an entity assesses hedge effectiveness on a quantitative basis and elects at the inception of a hedging relationship to utilize a regression analysis approach for prospective considerations of assessing effectiveness and the dollar-offset method to perform retrospective evaluations of assessing effectiveness, then that entity must abide by the results of that methodology as long as that hedging relationship remains designated. Thus, in its retrospective evaluation, an entity might conclude that, under a dollar-offset approach, a designated hedging relationship does not qualify for hedge accounting for the period just ended, but that the hedging relationship may continue because, under a regression analysis approach, there is an expectation that the relationship will be highly effective in achieving offsetting changes in fair value or cash flows in future periods. In its retrospective evaluation, if that entity concludes that, under a dollar-offset approach, the hedging relationship has not been highly effective in having achieved offsetting changes in fair value or cash flows, hedge accounting may not be applied in the current period. Whenever a hedging relationship fails to qualify for hedge accounting in a certain assessment period, the overall change in fair value of the derivative instrument for that current period is recognized in earnings (not reported in other comprehensive income for a cash flow hedge) and the change in fair value of the hedged item would not be recognized in earnings for that period (for a fair value hedge).
","snippet":"As discussed in paragraph 815-20-25-80, if an entity assesses hedge effectiveness on a quantitative basis and elects at the inception of a hedging relationship to utilize a regression analysis approach for prospective co…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51b2a99fdd9fbaaed997c4f34c9ceb69c784e47f71efab220ec32e8b5eba9212","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-69","para":"55-69","html":"
As discussed in paragraph 815-20-35-3(b), if an entity assesses hedge effectiveness on a quantitative basis and elects at the inception of a hedging relationship to utilize a regression analysis (or other statistical analysis) approach for either prospective considerations or retrospective evaluations of assessing effectiveness, then that entity shall periodically update its regression analysis (or other statistical analysis). As long as an entity reruns its regression analysis and determines that the hedging relationship is still expected to be highly effective, then it can continue to apply hedge accounting without interruption.
","snippet":"As discussed in paragraph 815-20-35-3(b), if an entity assesses hedge effectiveness on a quantitative basis and elects at the inception of a hedging relationship to utilize a regression analysis (or other statistical ana…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:20c7528894a20a8a78b2dbbcdc8bdbb990e15dcf78644698ce5b15c1475af93f","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-70","para":"55-70","html":"
The application of a regression or other statistical analysis approach to assessing effectiveness is complex. Those methodologies require appropriate interpretation and understanding of the statistical inferences.
","snippet":"The application of a regression or other statistical analysis approach to assessing effectiveness is complex. Those methodologies require appropriate interpretation and understanding of the statistical inferences.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a88091bc0fc19900ac20c7ac08268212156ad2af6a66571d558013cc661d2f08","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-71","para":"55-71","html":"
Given the conditions in paragraph 815-20-25-104, the shortcut method cannot be applied, for example, to any of the following hedging relationships:
  1. a
    Those hedging interest rate risk that involve hedging instruments other than interest rate swaps.
  2. b
    For fair value hedges, those that involve hedged risks other than the risk of changes in fair value attributable to changes in the designated benchmark interest rate.
  3. bb
    For cash flow hedges, those that involve hedging relationships in which the contractually specified interest rate of a recognized interest-bearing asset or liability does not match the interest rate index of the variable leg of the interest rate swap.
  4. c
    Those that do not involve a recognized interest-bearing asset or liability.
","snippet":"Given the conditions in paragraph 815-20-25-104, the shortcut method cannot be applied, for example, to any of the following hedging relationships:\n(a) Those hedging interest rate risk that involve hedging instruments ot…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6922293b27b90b0b44589041e2f816a46ffb775bd3a8c5191f05e807dbc37cec","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-72","para":"55-72","html":"
Based on (c) in the preceding paragraph, the shortcut method cannot be applied in a cash flow hedge of a forecasted transaction, even if an entity determines that all critical terms of the hedging instrument and the hedged forecasted transaction are matched.
","snippet":"Based on (c) in the preceding paragraph, the shortcut method cannot be applied in a cash flow hedge of a forecasted transaction, even if an entity determines that all critical terms of the hedging instrument and the hedg…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3bbb4295672ede546300e66da59abded17ab69a7269741c84b1eb1e05264c01f","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-73","para":"55-73","html":"
Paragraph superseded by Accounting Standards Update No. 2016-02
","snippet":"Paragraph superseded by Accounting Standards Update No. 2016-02","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8dfa42fd57fe15cee73a6f95240442ba6f473c8c88f5dc4c3b8e67c8f7c0852f","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-74","para":"55-74","html":"
This implementation guidance discusses the application of the prepayable criterion in paragraph 815-20-25-104(e) and related guidance beginning in paragraph 815-20-25-112.
","snippet":"This implementation guidance discusses the application of the prepayable criterion in paragraph 815-20-25-104(e) and related guidance beginning in paragraph 815-20-25-112.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:db9ba05ab880ed4658a785645f44c0a926d6ce161613abed1d994a247bd00386","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-75","para":"55-75","html":"
A debt instrument may contain various terms and provisions that permit either the debtor or the creditor to cause prepayment of the debt (that is, cause the payment of principal before the scheduled payment dates), including the terms in the following illustrative instruments:
  1. a
    Illustrative debt instrument 1. Some fixed-rate debt instruments include a typical call option that permits the debt instrument to be called for prepayment by the debtor at a fixed amount, for example, at par or at a specified premium over par. In some instruments, the prepayment amount varies based on when the call option is exercised. Fixed-rate debt instruments that provide the borrower with the option to prepay at a fixed amount are considered prepayable under paragraph 815-20-25-104(e), because those contracts permit settlement at an amount that is potentially below the contract's fair value (absent the effect of the call provision) as of the date of settlement. Such clauses can be exercised based on an economic advantage related to changes in the designated benchmark interest rate.
  2. b
    Illustrative debt instrument 2. Some debt instruments include contingent acceleration clauses that permit the lender to accelerate the maturity of an outstanding note only if a specified event related to the debtor's credit deterioration or other change in the debtor's credit risk occurs (for example, the debtor's failure to make timely payment, thus making it delinquent; its failure to meet specific covenant ratios; its disposition of specific significant assets, such as a factory; a declaration of cross-default; or a restructuring by the debtor). A common example is a clause in a mortgage note secured by certain property that permits the lender to accelerate the maturity of the note if the borrower sells the property. Debt instruments that include contingent acceleration clauses that permit the lender to accelerate the maturity of an outstanding note only upon the occurrence of a specified event related to the debtor's credit deterioration or other changes in the debtor's credit risk are not considered prepayable under paragraph 815-20-25-104(e).
  3. c
    Illustrative debt instrument 3. Some fixed-rate debt instruments include a call option that permits the debtor to repurchase the debt instrument from the creditor at an amount equal to its then fair value. Fixed-rate debt instruments that provide the debtor with the option to repurchase from the creditor the debt at an amount equal to the then fair value of the contract are not considered prepayable under paragraph 815-20-25-104(e), because that right would have a fair value of zero at all times. Such clauses, which provide the debtor with the discretionary opportunity to settle its obligation before maturity, are not exercised based on an economic advantage related to changes in the designated benchmark interest rate because the repurchases are done at fair value.
  4. d
    Illustrative debt instrument 4. Some fixed-rate debt instruments, typically issued in private markets, include a make-whole provision. A make-whole provision differs from a typical call option, which enables the issuer to benefit by prepaying the debt if market interest rates decline. In a declining interest rate market, the settlement amount of a typical call option is less than what the fair value of the debt would have been absent the call option. In contrast, a make-whole provision involves settlement at a variable amount typically determined by discounting the debt's remaining contractual cash flows at a specified small spread over the current Treasury rate. That calculation results in a settlement amount significantly above the debt's current fair value based on the issuer's current spread over the current Treasury rate. The make-whole provision contains a premium settlement amount to penalize the debtor for prepaying the debt and to compensate the investor (that is, to approximately make the investor whole) for its being forced to recognize a taxable gain on the settlement of the debt investment. In some debt instruments, the prepayment option under a make-whole provision will not be exercisable during an initial lock-out period. (For example, Private Entity A borrows from Insurance Entity B under a 10-year loan with fixed periodic coupon payments. The spread over the Treasury rate for Entity A at issuance of the debt is 275 basis points. The loan agreement contains a make-whole provision that if Entity A prepays the debt, it will pay Insurance Entity B an amount equal to all the future contractual cash flows discounted at the current Treasury rate plus 50 basis points.) Fixed-rate debt instruments that include a make-whole provision (as previously described) are not considered prepayable under paragraph 815-20-25-104(e), because it involves settlement of the entire contract by the debtor before its stated maturity at an amount greater than (rather than an amount less than) the then fair value of the contract.
  5. e
    Illustrative debt instrument 5. Some variable-rate debt instruments include a call option that permits the debtor to repurchase the debt instrument from the creditor at each interest reset date at an amount equal to par. Although illustrative debt instrument 5, a variable-rate debt instrument, does have a fair value exposure between the date of a change in the contractually specified interest rate and the reset date, a swap would not be an appropriate hedging instrument to hedge that fair value exposure. Thus, a fair value hedge of illustrative debt instrument 5 could not qualify for the shortcut method discussed in paragraph 815-20-25-102, which requires the hedging instrument to be an interest rate swap. In cash flow hedges, if the reset provisions always result in the instrument's par amount being equal to its fair value at a reset date, then an option for the debtor to prepay the variable-rate debt instrument at par at that reset date would not be considered prepayable under paragraph 815-20-25-104(e). However, if the reset provisions can result in the instrument's par amount not being equal to its fair value at those reset dates, then an option for the debtor to prepay the variable-rate debt instrument at par at a reset date would be considered prepayable under that paragraph. (Because the reset provisions typically do not adjust the variable interest rate for changes in credit sector spreads and changes in the debtor's creditworthiness, the variable-rate debt instrument's par amount could seldom be expected to be equal to its fair value at each reset date.) Furthermore, to qualify for cash flow hedge accounting, the hedging relationship must meet the applicable conditions in this Subtopic and the entity designating the hedge (that is, the debtor or creditor) must conclude it is probable that future interest payments will be made during the term of the interest rate swap. If the creditor's counterparty (that is, the debtor) on a recognized variable-rate asset related to the hedged forecasted interest payments can cause that asset to be prepaid, then that creditor would likely be unable to conclude that all the forecasted interest payments on its recognized interest-bearing asset are probable and, thus, the cash flow hedging relationship would not qualify for the shortcut method. (Even though the creditor believes it could immediately obtain a replacement variable-rate asset if prepayment occurs and thus could conclude that the forecasted variable interest inflows are probable, the only hedged forecasted interest inflows that are eligible for application of the shortcut method are those related to a recognized interest-bearing asset at the inception of the hedge.) However, paragraph 815-20-25-104(e) indicates that its criterion that prohibits a prepayment option in the interest-bearing asset or liability does not apply to a hedging relationship if the hedging interest rate swap contains an embedded mirror-image option. In that latter case, if both the prepayment option and the mirror-image option in the swap were exercised, there would be no future hedged interest cash flows related to the recognized interest-bearing asset or liability and no future cash flows under the swap and, thus, the existence of the prepayment option would not preclude the use of the shortcut method.
  6. f
    Illustrative debt instrument 6. Some fixed-rate debt instruments include both a call option as described in illustrative debt instrument 1 and a contingent acceleration clause as described in illustrative debt instrument 2. The same conclusions reached relative to illustrative debt instrument 1 also apply to illustrative debt instrument 6.
  7. g
    Illustrative debt instrument 7. Some debt instruments contain an investor protection clause (which is standard in substantially all debt issued in Europe) that provides that, in the event of a change in tax law that would subject the investor to additional incremental taxation by tax jurisdictions other than those entitled to tax the investor at the time of debt issuance, the coupon interest rate of the debt increases so that the investor's yield, net of the incremental taxation effect, is equal to the investor's yield before the tax law change. The debt issuance also contains an issuer protection clause (which is standard in substantially all debt issued in Europe) that provides that, in the event of a tax law change that triggers an increase in the coupon interest rate, the issuer has the right to call the debt obligation at par. There would be no market for the debt were it not for the prepayment and interest rate adjustment clauses that protect the issuer and investors. Illustrative debt instrument 7 is not considered prepayable under paragraph 815-20-25-104(e) because it meets the exclusion criteria under paragraph 815-20-25-113(c).
","snippet":"A debt instrument may contain various terms and provisions that permit either the debtor or the creditor to cause prepayment of the debt (that is, cause the payment of principal before the scheduled payment dates), inclu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e753b20302c94804fa3d24f109245bf571885ae0a51ffa739ee5aa124f337a6","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-76","para":"55-76","html":"
An entity is not precluded from applying the shortcut method to a fair value hedging relationship of interest rate risk involving illustrative debt instruments 1 and 6 that are prepayable due to an embedded purchased call option if the hedging interest rate swap contains an embedded mirror-image written call option.
","snippet":"An entity is not precluded from applying the shortcut method to a fair value hedging relationship of interest rate risk involving illustrative debt instruments 1 and 6 that are prepayable due to an embedded purchased cal…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4b9728a247ce75f2ad99279034a68fc5b92ccba8e97fd2446485f8d3e19b697c","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-77","para":"55-77","html":"
In addition, an entity is not precluded from applying the shortcut method to a fair value hedging relationship of interest rate risk involving illustrative debt instruments 2, 3, 4, and 7 that are not considered prepayable if the hedging interest rate swap does not contain an embedded purchased or written call option related to changes in the designated benchmark interest rate.
","snippet":"In addition, an entity is not precluded from applying the shortcut method to a fair value hedging relationship of interest rate risk involving illustrative debt instruments 2, 3, 4, and 7 that are not considered prepayab…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:49b2af21b2441cc28de1881b57f56feaf3afb169746c3c185c078dd6d8f98917","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-78","para":"55-78","html":"
However, an entity would likely be precluded from applying the shortcut method to a cash flow hedging relationship of interest rate risk involving illustrative debt instrument 5 because the entity would likely be unable to conclude that all the forecasted interest payments on the recognized interest-bearing asset or liability are probable.
","snippet":"However, an entity would likely be precluded from applying the shortcut method to a cash flow hedging relationship of interest rate risk involving illustrative debt instrument 5 because the entity would likely be unable …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9be2cc8ee5fd906021c698caeb9d1f33c9a1d0f541d2b7d940d5f243fd744c53","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79","para":"55-79","html":"
This implementation guidance addresses the application of paragraph 815-20-25-104(e). It is common to quote the call prices (strike prices) on debt as a percentage of par value. In contrast, the strike prices of options embedded in interest rate swaps are generally quoted as a rate or current yield (the current fixed-rate coupon on a noncallable-nonputtable swap having zero fair value at inception). One means of determining whether these strike prices are the same would be to:
  1. a
    Impute the yield to maturity at a price equal to the call price for a noncallable-nonputtable debt instrument that is otherwise identical to the hedged debt instrument
  2. b
    Compare that yield to the call or put yield embedded in the swap.
","snippet":"This implementation guidance addresses the application of paragraph 815-20-25-104(e). It is common to quote the call prices (strike prices) on debt as a percentage of par value. In contrast, the strike prices of options …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ecdfae2e21f947827ac1441c88f56108f947ae83d8be066e1b232ed20630c7cb","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79A","para":"55-79A","html":"
In complying with the condition in paragraph 815-20-25-137(b), comparable does not necessarily mean equal. For example, if the swap's variable rate is the London Interbank Offered Rate (LIBOR) and the borrowing's variable rate is LIBOR plus 2 percent, a 10 percent cap on the swap would be comparable to a 12 percent cap on the borrowing.
","snippet":"In complying with the condition in paragraph 815-20-25-137(b), comparable does not necessarily mean equal. For example, if the swap's variable rate is the London Interbank Offered Rate (LIBOR) and the borrowing's variabl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7cdb19f5ee63ac535d38043b997a78bab15e0f5614df8fbe0e873eed1cb934ce","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79B","para":"55-79B","html":"
For a forward-starting swap, only the effective term of the receive-variable, pay-fixed interest rate swap (that is, from its effective date through its expiration date) shall be considered in complying with the condition in paragraph 815-20-25-137(f). The period from the swap's inception to the date the swap is effective shall not be considered in complying with the condition in paragraph 815-20-25-137(f) because the effective date of a forward-starting swap occurs after the swap's inception. For example, a forward-starting receive-variable, pay-fixed, interest rate swap with a five-year effective term and an effective date commencing one year after the swap's inception would meet the condition in paragraph 815-20-25-137(f) if designated as a hedge of a five-year, variable-rate borrowing forecasted to be entered into one year after the swap's inception.
","snippet":"For a forward-starting swap, only the effective term of the receive-variable, pay-fixed interest rate swap (that is, from its effective date through its expiration date) shall be considered in complying with the conditio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:773d8f0e670bec3cc36e89d3a04c5af96e2084081244ab84755c7ab040937e1a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79C","para":"55-79C","html":"
The following scenarios illustrate the application of paragraph 815-20-25-3(b)(2)(iv)(02). Entity A documents all hedges in accordance with paragraph 815-20-25-3, including designating the hedging instrument, hedged item, and method of assessing hedge effectiveness. It performs subsequent prospective and retrospective hedge effectiveness assessments every three months on the last day of the quarter in accordance with paragraph 815-20-25-79(a) through (b). In the following scenarios, assume that the next quarterly effectiveness assessment date is March 31, 20X1. Entity A also does not dedesignate the hedging relationships in the following scenarios.
","snippet":"The following scenarios illustrate the application of paragraph 815-20-25-3(b)(2)(iv)(02). Entity A documents all hedges in accordance with paragraph 815-20-25-3, including designating the hedging instrument, hedged item…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b3ed809ad02e0c18fee8080a35c5b9b7a3243566243c6bfba99e0f04920c6e41","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79D","para":"55-79D","html":"
Entity A enters into a cash flow hedging relationship on January 15, 20X1, in which the hedged item is a forecasted transaction expected to occur in one year. Because the hedged item and hedging instrument do not expire, are not sold, or do not terminate before the quarterly effectiveness testing date, Entity A may perform the initial prospective quantitative effectiveness assessment at any time after hedge designation but no later than March 31, 20X1.
","snippet":"Entity A enters into a cash flow hedging relationship on January 15, 20X1, in which the hedged item is a forecasted transaction expected to occur in one year. Because the hedged item and hedging instrument do not expire,…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ea22d5e02a8f67a8283be2cbc08d31725abb0716ef238c238441cce0f1d45891","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79E","para":"55-79E","html":"
Entity A enters into a cash flow hedging relationship on March 28, 20X1, in which the hedged item is a forecasted transaction expected to occur in one year. Entity A must perform the initial prospective quantitative effectiveness assessment no later than March 31, 20X1.
","snippet":"Entity A enters into a cash flow hedging relationship on March 28, 20X1, in which the hedged item is a forecasted transaction expected to occur in one year. Entity A must perform the initial prospective quantitative effe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:619010afeae7b7742fdbb2ad76255a1db6f0e570a247474962b4df9c32e38070","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79F","para":"55-79F","html":"
On January 15, 20X1, Entity A enters into a cash flow hedging relationship in which the hedged forecasted purchase of a nonfinancial asset is expected to occur in two months. The purchase occurs as forecasted on March 15, 20X1. Entity A must complete the initial prospective effectiveness assessment at any time after hedge designation but no later than March 15, 20X1, when the forecasted purchase occurs.
","snippet":"On January 15, 20X1, Entity A enters into a cash flow hedging relationship in which the hedged forecasted purchase of a nonfinancial asset is expected to occur in two months. The purchase occurs as forecasted on March 15…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:588d28c257554b74d70128773a4fead17aca4ae82865d796aa8f6f1362ac0393","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79G","para":"55-79G","html":"
An entity should use judgment in determining whether it can reasonably support performing assessments of effectiveness after hedge inception on a qualitative basis. That judgment should include careful consideration of the following factors:
  1. a
    Results of the quantitative assessment of effectiveness performed for the hedging relationship.
  2. b
    Alignment of the critical terms of the hedging relationship. If one or more of the critical terms of the hedging instrument and the hedged item are not aligned, an entity should consider whether changes in market conditions may cause the changes in fair values or cash flows of the hedging instrument and hedged item or hedged forecasted transaction attributable to the hedged risk to diverge as a result of those differences in terms.
    1. 1
      In cases in which the underlyings of the hedged item and hedging instrument are different, an entity should consider the extent and consistency of the correlation exhibited between the changes in the underlyings of the hedged item and hedging instrument.
      1. i
        This may inform the entity about whether expected changes in market conditions could cause the changes in fair values or cash flows of the hedging instrument and the hedged item or hedged forecasted transaction attributable to the hedged risk to diverge. Particularly in the context of reverting to qualitative assessments of hedge effectiveness after being required to perform a quantitative assessment (as discussed in paragraph 815-20-35-2D), this may inform an entity about whether there is a reasonable expectation that the hedging relationship is expected to remain stable or whether that divergence is expected to continue or recur in the future.
      2. ii
        A specific event or circumstance may cause a temporary disruption to the market that results in an entity concluding that the facts and circumstances of the hedging relationship have changed such that it no longer can assert qualitatively that the hedging relationship was and continues to be highly effective. In those instances, if the results of the quantitative assessment of effectiveness do not significantly diverge from the results of the initial assessment of effectiveness, that market disruption should not prevent the entity from returning to qualitative testing in subsequent periods. If the results of the quantitative assessment of effectiveness do significantly diverge from the results of the initial assessment of effectiveness, the entity should continually monitor whether the temporary market disruption has been resolved when determining whether to return to qualitative testing in subsequent periods.
","snippet":"An entity should use judgment in determining whether it can reasonably support performing assessments of effectiveness after hedge inception on a qualitative basis. That judgment should include careful consideration of t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:402fb54d5c67adc2eedc7241c3197f47a514ea5ace036d8edcdd262430c707c6","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79H","para":"55-79H","html":"
In the following scenarios, assume that the entity is required to perform a quantitative assessment of effectiveness at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(01). For each scenario, a discussion of whether the entity could reasonably support performing qualitative assessments of effectiveness is included in paragraphs
815-20-55-79L through 55-79N
.
","snippet":"In the following scenarios, assume that the entity is required to perform a quantitative assessment of effectiveness at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(01). For each scenario, a discuss…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3dd2c351e4dbaa11e91b3217123ad32136337452441bc9b71ab5663955dd207b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79I","para":"55-79I","html":"
The following factors are present in the hedging relationship:
  1. a
    The results of the initial or most recent quantitative assessment of effectiveness performed indicate that the hedging relationship is close to achieving perfect offset.
  2. b
    All critical terms of the hedging relationship match except for the underlyings of the hedged item and hedging instrument.
    1. 1
      The changes in the underlyings of the hedged item and hedging instrument have been consistently highly correlated such that expected changes in market conditions are not anticipated to prevent the hedging relationship from achieving highly effective offset.
","snippet":"The following factors are present in the hedging relationship:\n(a) The results of the initial or most recent quantitative assessment of effectiveness performed indicate that the hedging relationship is close to achieving…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b44271b3c26ee6f85366c3e9b5361ea81ba9a269ed075db9eb89c08319f49754","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79J","para":"55-79J","html":"
The following factors are present in the hedging relationship:
  1. a
    The results of the initial or most recent quantitative assessment of effectiveness performed indicate that the hedging relationship is close to failing the effectiveness test.
  2. b
    All critical terms of the hedging relationship match except for the underlyings of the hedged item and the hedging instrument.
    1. 1
      The changes in the underlyings of the hedged item and the hedging instrument have not been consistently highly correlated such that expected changes in market conditions could prevent the hedging relationship from achieving highly effective offset.
","snippet":"The following factors are present in the hedging relationship:\n(a) The results of the initial or most recent quantitative assessment of effectiveness performed indicate that the hedging relationship is close to failing t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:579e1f305b21bb3131a1cb4f4385792b5139ab91c5b751a9901605b9a87db501","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79K","para":"55-79K","html":"
The following factors are present in the hedging relationship:
  1. a
    The results of the initial or most recent quantitative assessment of effectiveness performed indicate that the hedging relationship is neither close to achieving perfect offset nor close to failing the effectiveness test.
  2. b
    All critical terms of the hedging relationship match except for the underlyings of the hedged item and the hedging instrument.
    1. 1
      The changes in the underlyings of the hedged item and the hedging instrument have not been consistently highly correlated such that expected changes in market conditions could prevent the hedging relationship from achieving highly effective offset.
","snippet":"The following factors are present in the hedging relationship:\n(a) The results of the initial or most recent quantitative assessment of effectiveness performed indicate that the hedging relationship is neither close to a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9b239e3540e0be4a8efbe40a7fc0b2d99a06395da8ba1f0cc8e3d0d78ecb2eec","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79L","para":"55-79L","html":"
In Scenario A, the entity could reasonably support performing qualitative assessments of effectiveness. The quantitative assessment of effectiveness was close to achieving perfect offset and past observations of changes in the underlyings of the hedged item and hedging instrument (that is, the only critical term that did not match) consistently exhibited high correlation. This indicates that the results of subsequent assessments of effectiveness may not significantly differ from those observed from the assessment of effectiveness performed at hedge inception.
","snippet":"In Scenario A, the entity could reasonably support performing qualitative assessments of effectiveness. The quantitative assessment of effectiveness was close to achieving perfect offset and past observations of changes …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6fb0a35bc83921730d46075e4193fabb489fe3a91ba0e0316c75b95ab804b1f","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79M","para":"55-79M","html":"
In Scenario B, the entity could not reasonably support performing qualitative assessments of effectiveness. The lack of consistent high correlation exhibited between the changes in the underlyings of the hedged item and the hedging instrument could prevent the entity from concluding that the results of subsequent assessments of effectiveness will be similar to the results observed from the initial assessment of effectiveness. Had the changes in underlyings of the hedged item and the hedging instrument been consistently highly correlated, the entity may conclude that it is still unable to reasonably support performing subsequent assessments of effectiveness on a qualitative basis. Because the hedging relationship is close to failing its quantitative assessment, minimal changes in the relationship between the hedged item and hedging instrument could result in the hedging relationship not being highly effective.
","snippet":"In Scenario B, the entity could not reasonably support performing qualitative assessments of effectiveness. The lack of consistent high correlation exhibited between the changes in the underlyings of the hedged item and …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6fa3c3d3e0ccfc831cda35013285c40422998f1cc83134a9275cd95c3990049a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79N","para":"55-79N","html":"
In Scenario C, the entity could not reasonably support performing qualitative assessments of effectiveness. Although this hedging relationship is not close to failing the quantitative assessment of effectiveness as in Scenario B, the lack of consistent high correlation exhibited between the changes in the underlyings of the hedged item and the hedging instrument prevent the entity from concluding that the results of subsequent assessments of effectiveness will be similar to the results observed from the initial or most recent quantitative assessment of effectiveness. Had the changes in value of the underlyings of the hedged item and the hedging instrument consistently been highly correlated, the entity may conclude that it could reasonably support performing subsequent assessments of effectiveness on a qualitative basis.
","snippet":"In Scenario C, the entity could not reasonably support performing qualitative assessments of effectiveness. Although this hedging relationship is not close to failing the quantitative assessment of effectiveness as in Sc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4ae08c2246c2252cc977f7ca081ff2189574f298bf1bd41316d14789c8d1d53e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79O","para":"55-79O","html":"
The following scenarios illustrate the application of paragraphs
815-20-35-2A through 35-2F
.
","snippet":"The following scenarios illustrate the application of paragraphs 815-20-35-2A through 35-2F.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2e863b28ce1b7d04110e43a893a42519b3087bb650de020ff7a519d24ebc0877","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79P","para":"55-79P","html":"
Entity B expects to purchase 10,000 metric tons of cottonseed meal throughout April 20X3 based on the spot price of the cottonseed meal index on the respective date of each purchase. Entity B wants to hedge the variability in cash flows attributable to changes in the cottonseed meal index on the price that it will pay for the cottonseed meal. It enters into a forward contract on August 24, 20X1, with a notional of 10,000 metric tons, a maturity of April 1, 20X3, and an underlying of the soybean meal index because no market exists for derivatives indexed to the cottonseed meal index. Concurrent with the execution of the forward, Entity B designates the forward as the hedging instrument in a hedging relationship in which the hedged item is documented as the forecasted purchases of the first 10,000 metric tons of cottonseed meal expected to be purchased during April 20X3 and the hedged risk is documented as the variability in cash flows attributable to changes in the contractually specified cottonseed meal index in the not-yet-existing contract. On August 24, 20X1, Entity B determines that all requirements for cash flow hedge accounting are met and that the requirements of paragraph 815-20-25-22A will be met in the contract once executed in accordance with paragraph 815-20-25-22B. Entity B also will assess whether the criteria in 815-20-25-22A are met in the contract when it is executed.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity B expects to purchase 10,000 metric tons of cottonseed meal throughout April 20X3 based on the spot price of the cottonseed meal index on the respective date of each purchase. Entity B wants to hedge the variability in cash flows attributable to changes in the cottonseed meal index on the price that it will pay for the cottonseed meal. It enters into a forward contract on August 24, 20X1, with a notional of 10,000 metric tons, a maturity of April 1, 20X3, and an underlying of the soybean meal index because no market exists for derivatives indexed to the cottonseed meal index. Concurrent with the execution of the forward, Entity B designates the forward as the hedging instrument in a hedging relationship in which the hedged item is documented as the forecasted purchases of the first 10,000 metric tons of cottonseed meal expected to be purchased during April 20X3 and the hedged risk is documented as the variability in cash flows attributable to changes in the cottonseed meal index. On August 24, 20X1, Entity B determines that all requirements for cash flow hedge accounting are met, including the relevant conditions in paragraph 815-20-25-22C on designating the variability in cash flows attributable to changes in a component of the forecasted purchase price of a nonfinancial asset as the hedged risk.
","snippet":"Entity B expects to purchase 10,000 metric tons of cottonseed meal throughout April 20X3 based on the spot price of the cottonseed meal index on the respective date of each purchase. Entity B wants to hedge the variabili…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fba0d9fec252ef187124a2034a9e30769d2b02aa9954fc43411a0e80ac16fb21","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79Q","para":"55-79Q","html":"
Because the hedged risk and forward contract are based on different indexes, the hedging relationship does not qualify for one of the exemptions in paragraph 815-20-25-3(b)(2)(iv)(01). Entity B performs an initial quantitative hedge effectiveness assessment and determines that the hedging instrument is highly effective at achieving offsetting cash flows associated with the hedged item attributable to the hedged risk. In Entity B's hedge documentation, it elects to perform subsequent assessments of hedge effectiveness on a qualitative basis. It makes this election based on the following factors:
  1. a
    The results of the quantitative effectiveness assessment performed at hedge inception indicate that the hedging relationship is close to achieving perfect offset.
  2. b
    Changes in the value of the cottonseed meal index have been consistently highly correlated with changes in value of the soybean meal index such that expected changes in market conditions are not anticipated to prevent the hedging relationship from achieving highly effective offset.
  3. c
    Although the underlyings of the hedging instrument and hedged item do not match, the notional amount of the derivative and the expected quantity to be purchased do match. Based on the quantitative effectiveness assessment, Entity B also determined that the difference in timing between the maturity date of the derivative and the dates on which the group of forecasted purchases is expected to occur is insignificant.
","snippet":"Because the hedged risk and forward contract are based on different indexes, the hedging relationship does not qualify for one of the exemptions in paragraph 815-20-25-3(b)(2)(iv)(01). Entity B performs an initial quanti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3bfc04ba2267ace5f845b1f705e1f21b84ec4df984b9e3693ffd555369aa2b3b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79R","para":"55-79R","html":"
During the fourth quarter of 20X1, a storm damages the soybean harvest, which leads to a shortage in soybean meal supply and a sharp increase in the price of soybean meal based on the soybean meal index. The cottonseed meal index has not experienced a similar increase because cotton harvests were unaffected by the storm that damaged the soybean harvest. Because the increase in the soybean meal index is not reflected in the cottonseed meal index, Entity B concludes that a change in facts and circumstance has occurred that prevents a qualitative assertion in subsequent periods that the hedging relationship continues to be highly effective at achieving offsetting cash flows. Thus, on the next subsequent effectiveness assessment date (December 31, 20X1), the company begins performing quantitative assessments of hedge effectiveness based on the method used to perform the initial prospective assessment of effectiveness. In the effectiveness assessment performed on December 31, 20X1, Entity B determines that the hedging relationship remains highly effective but that it is not close to achieving perfect offset.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7During the fourth quarter of 20X1, a storm damages the soybean harvest, which leads to a shortage in soybean meal supply and a sharp increase in the price of soybean meal based on the soybean meal index. The cottonseed meal index has not experienced a similar increase because cotton harvests were unaffected by the storm that damaged the soybean harvest. Because the increase in the soybean meal index is not reflected in the cottonseed meal index, Entity B concludes that a change in facts and circumstances has occurred that prevents a qualitative assertion in subsequent periods that the hedging relationship continues to be highly effective at achieving offsetting cash flows. Thus, on the next subsequent effectiveness assessment date (December 31, 20X1), the company begins performing quantitative assessments of hedge effectiveness based on the method used to perform the initial prospective assessment of effectiveness. In the effectiveness assessment performed on December 31, 20X1, Entity B determines that the hedging relationship remains highly effective but that it is not close to achieving perfect offset.
","snippet":"During the fourth quarter of 20X1, a storm damages the soybean harvest, which leads to a shortage in soybean meal supply and a sharp increase in the price of soybean meal based on the soybean meal index. The cottonseed m…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1e2d0fa8951dfd30c0b1082d426a32510a93d4a987425af7b3f3f05f7637411a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79S","para":"55-79S","html":"
Entity B returns to assessing effectiveness qualitatively as of June 30, 20X2, because the evaluation of the following criteria leads to the conclusion that high effectiveness can be asserted prospectively on a qualitative basis:
  1. a
    Entity B determines that the event that caused the soybean meal index and cottonseed meal index to experience a lack of correlation was temporary, that it was an isolated weather event, and the effect of the weather event has passed.
  2. b
    The changes in value of the soybean meal index and cottonseed meal index reverted to levels of correlation that were consistent with those before the storm.
  3. c
    The results of the June 30, 20X2 quantitative assessment of effectiveness are in line with the results of the quantitative assessment of effectiveness performed at hedge inception.
  4. d
    No further disruptions in supply are expected.
","snippet":"Entity B returns to assessing effectiveness qualitatively as of June 30, 20X2, because the evaluation of the following criteria leads to the conclusion that high effectiveness can be asserted prospectively on a qualitati…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a901a79cd0310d27aa245d3e9c01aa6fa3ae55e17276aff2aecadfa12fdfe4a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79T","para":"55-79T","html":"
On August 17, 20X1, Entity C issues at par a $100 million 5-year fixed-rate noncallable debt instrument with an annual 8 percent interest coupon. On that date, Entity C enters into a 5-year interest rate swap with Financial Institution D and designates it as the hedging instrument in a fair value hedge of the LIBOR interest rate risk of the $100 million liability. Under the terms of the interest rate swap, Entity C will receive fixed interest at 6 percent and pay variable interest at LIBOR based on a notional amount of $100 million. The variable leg of the interest rate swap resets at the end of each quarter for the interest payment that is due at the end of the following quarter.
","snippet":"On August 17, 20X1, Entity C issues at par a $100 million 5-year fixed-rate noncallable debt instrument with an annual 8 percent interest coupon. On that date, Entity C enters into a 5-year interest rate swap with Financ…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8badc85871ec6e2c67738d07a423006d777f3eda3e46f2e0b18690bea5a44417","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79U","para":"55-79U","html":"
Entity C performs the initial quantitative and first subsequent hedge effectiveness assessments on September 30 (the entity's first quarterly testing date after hedge inception) and determines that the hedging relationship is highly effective at achieving offsetting changes in fair value attributable to interest rate risk. Entity C also elects at hedge inception to subsequently assess hedge effectiveness on a qualitative basis and documents how it would carry out that qualitative assessment. In its quarterly effectiveness assessment on December 31, the entity asserts that facts and circumstances related to the hedging relationship have not changed and the hedging relationship was and continues to be highly effective.
","snippet":"Entity C performs the initial quantitative and first subsequent hedge effectiveness assessments on September 30 (the entity's first quarterly testing date after hedge inception) and determines that the hedging relationsh…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a2939becaa107a01d7043f93abcbca7eb770cb268701b534fad327b13240e786","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79V","para":"55-79V","html":"
However, in the first quarter of 20X2, Financial Institution D's risk of default significantly increases, which affects the valuation of the interest rate swap with Entity C. Entity C notes that it no longer can qualitatively assert that the hedging relationship was and continues to be highly effective at achieving offsetting changes in fair value attributable to changes in benchmark interest rates. Thus, on the next subsequent effectiveness assessment date (March 31, 20X2), Entity C begins performing quantitative assessments of effectiveness using the method documented at hedge inception. In subsequent periods, Entity C does not return to qualitative effectiveness assessments because it cannot reasonably support an expectation of high effectiveness on a qualitative basis for the following reasons:
  1. a
    The significant risk of default of Financial Institution D has not reversed and is not expected to be temporary.
  2. b
    The results of quantitative effectiveness tests performed indicate that the hedging relationship is close to no longer being highly effective.
","snippet":"However, in the first quarter of 20X2, Financial Institution D's risk of default significantly increases, which affects the valuation of the interest rate swap with Entity C. Entity C notes that it no longer can qualitat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0dc3d29df3cdab54cb96777d411acb83b6cbc629ff6a8c781bc2fc660ee0dccf","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79W","para":"55-79W","html":"
Paragraph 815-20-45-1A requires an entity to present the change in the fair value of the hedging instrument included in the assessment of hedge effectiveness and the amount excluded from the assessment of hedge effectiveness in the same income statement line item that is used to present the earnings effect of the hedged item. The following scenarios include implementation guidance on the meaning of the phrase the same income statement line item that is used to present the earnings effect of the hedged item.
","snippet":"Paragraph 815-20-45-1A requires an entity to present the change in the fair value of the hedging instrument included in the assessment of hedge effectiveness and the amount excluded from the assessment of hedge effective…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86d3268024f26e3fa609b3e2e13b22a85cf5a66f5276bcebe4bf40d730e57001","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79X","para":"55-79X","html":"
Entity A designates a fair value hedge of interest rate risk in which the hedged item is a portfolio of fixed-rate loans. The derivative designated as the hedging instrument is a receive-floating-rate, pay-fixed-rate interest rate swap. In this scenario, Entity A's objective is to convert the interest cash flows on the portfolio of fixed-rate loans to floating-rate.
","snippet":"Entity A designates a fair value hedge of interest rate risk in which the hedged item is a portfolio of fixed-rate loans. The derivative designated as the hedging instrument is a receive-floating-rate, pay-fixed-rate int…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bf950b2ff665575c9fa5cc99bd5ed55a9fc6316935438ad7aca277f91f27157b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79Y","para":"55-79Y","html":"
The interest rate swap is a highly effective hedge of the interest rate risk of the portfolio of fixed-rate loans. Therefore, the change in the fair value of the interest rate swap should be presented in the same income statement line item used to present the earnings effect of the hedged item. Before applying hedge accounting, the earnings effect of the hedged item (that is, the interest accruals) is presented in an interest income line item. Therefore, Entity A should present all changes in the fair value of the hedging instrument (that is, the interest accruals and all other changes in fair value) in the same interest income line item in the income statement.
","snippet":"The interest rate swap is a highly effective hedge of the interest rate risk of the portfolio of fixed-rate loans. Therefore, the change in the fair value of the interest rate swap should be presented in the same income …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eff78f01a636e219b3a68866e523ad6a2ca681ed2f4daec8731f5e84eb02ee0a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79Z","para":"55-79Z","html":"
Entity B designates a fair value hedge of foreign exchange risk in which the hedged item is an issued variable-rate debt instrument denominated in a currency other than Entity B's functional currency. The derivative designated as the hedging instrument is a receive-floating-rate (in foreign currency), pay-floating-rate (in functional currency) cross-currency swap that requires an initial and final exchange of notional amounts. In this scenario, Entity B's objective is to convert the cash flows of the debt instrument (both interest cash flows and the principal cash flow) from a foreign currency to Entity B's functional currency.
","snippet":"Entity B designates a fair value hedge of foreign exchange risk in which the hedged item is an issued variable-rate debt instrument denominated in a currency other than Entity B's functional currency. The derivative desi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c8ba10166c6be28c5970cd657138569c66430df8f322407d144bd2abf204397c","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79AA","para":"55-79AA","html":"
The currency swap is a highly effective hedge of the currency risk of both the interest cash flows and the principal cash flows of the debt instrument. Therefore, the change in fair value of the currency swap should be presented in the same income statement line item(s) used to present the earnings effects of the hedged item. Before applying hedge accounting, Entity B presents the earnings effect associated with the hedged item in two income statement line items. That is, interest accruals are presented in an interest expense line item, and the spot remeasurement of the foreign-currency-denominated debt under Topic 830 on foreign currency matters is presented in a foreign currency transaction gain or loss line item. Therefore, in this scenario, because the hedging instrument is highly effective at offsetting changes in fair values associated with the hedged item that are reported in more than one income statement line item, the effects of the hedging instrument also should be presented in those corresponding income statement line items. Entity B should present all changes in the fair value of the hedging instrument (that is, the interest accruals and all other changes in fair value) in the same interest expense line item that is used to present the earnings effect of the hedged item before applying hedge accounting, except for the change in the fair value of the hedging instrument that the entity determines should be presented in the same foreign currency transaction gain or loss line item used to present the spot remeasurement of the hedged item before applying hedge accounting.
","snippet":"The currency swap is a highly effective hedge of the currency risk of both the interest cash flows and the principal cash flows of the debt instrument. Therefore, the change in fair value of the currency swap should be p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ead2ee7314c507a2f093b7414697522ae45d0c89f4180ce7841d1a183193e211","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79AB","para":"55-79AB","html":"
Entity C designates a fair value hedge of interest rate risk and foreign currency risk in which the hedged item is a foreign-currency-denominated fixed-rate available-for-sale debt security. The derivative designated as the hedging instrument is a pay-fixed-rate (in foreign currency), receive-floating-rate (in functional currency) cross-currency interest rate swap. In this scenario, Entity C's objective is to convert the interest cash flows of the fixed-rate security to floating-rate and also to convert the cash flows of the security (both interest cash flows and the principal cash flow) from a foreign currency to Entity C's functional currency.
","snippet":"Entity C designates a fair value hedge of interest rate risk and foreign currency risk in which the hedged item is a foreign-currency-denominated fixed-rate available-for-sale debt security. The derivative designated as …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e68263fc1a3ea832e89ec03e4b6139e1fd3377ba48279cc3930c08436509a860","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79AC","para":"55-79AC","html":"
The cross-currency interest rate swap is a highly effective hedge of both the interest rate risk and foreign currency risk of the available-for-sale debt security. Therefore, the change in fair value of the cross-currency interest rate swap should be presented in the same income statement line item or items used to present the earnings effect of the hedged item. Before applying hedge accounting, Entity C recognizes the earnings effect of the hedged item (that is, interest accruals on the available-for-sale debt security) in an interest income line item in the income statement and recognizes all other changes in fair value in other comprehensive income in accordance with paragraph 320-10-35-1(b). Entity C should present changes in fair value of the hedging instrument (that is, the interest accruals and all other changes in fair value) in the same income statement line item used to present the earnings effect of the hedged item. However, if Entity C's policy is to present the effect of foreign exchange rate changes on the fair value of the security that are recognized in earnings after applying hedge accounting in accordance with paragraph 815-25-35-6 in a different income statement line item (consistent with its presentation policies when reflecting other foreign exchange rate changes), then the related changes in fair value of the hedging instrument also should be presented in that income statement line item.
","snippet":"The cross-currency interest rate swap is a highly effective hedge of both the interest rate risk and foreign currency risk of the available-for-sale debt security. Therefore, the change in fair value of the cross-currenc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4d2d6667990713f386c41d469e75e89de93cfc8f82f57b27dae3eb06e803d046","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-79AD","para":"55-79AD","html":"
This scenario illustrates that a single hedging instrument (a cross-currency interest rate swap) may be highly effective at offsetting changes in fair values or cash flows associated with the hedged item in which the earnings effect of the hedged item is presented in more than one income statement line item. If a hedging instrument is highly effective at offsetting changes in fair values or cash flows of the hedged item and the earnings effect of the hedged item is presented in more than one income statement line item, then the earnings effects of the hedging instrument also should be presented in those corresponding income statement line item(s).
","snippet":"This scenario illustrates that a single hedging instrument (a cross-currency interest rate swap) may be highly effective at offsetting changes in fair values or cash flows associated with the hedged item in which the ear…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b963a7fc76ade3a98e174fa7a5706c1be8c174a358ca6d742ca1f274f2e67cae","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7ba10b3ed001a212157e7b9c958baf41afd8ecfb7a32ab5096fd6ce2b44c4b70","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"815-20-55-80","para":"55-80","html":"
This Example illustrates the requirement in paragraph 815-20-25-3(d)(1) for specific identification of the hedged transaction. Entity A determines with a high degree of probability that it will issue $5,000,000 of fixed-rate bonds with a 5-year maturity sometime during the next 6 months, but it cannot predict exactly when the debt issuance will occur. That situation might occur, for example, if the funds from the debt issuance are needed to finance a major project to which Entity A is already committed but the precise timing of which has not yet been determined. To qualify for cash flow hedge accounting, Entity A might identify the hedged forecasted transaction as, for example, the first issuance of five-year, fixed-rate bonds that occurs during the next six months.
","snippet":"This Example illustrates the requirement in paragraph 815-20-25-3(d)(1) for specific identification of the hedged transaction. Entity A determines with a high degree of probability that it will issue $5,000,000 of fixed-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5deca5e5b4ad1252539dbb32adbc3cc2d70f173ea201d3bd3a4dd48b8d11972e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-80A","para":"55-80A","html":"
This Example illustrates the documentation requirements in paragraph 815-20-25-3 when the critical terms of the hedging instrument and hedged forecasted transaction match in accordance with paragraphs
815-20-25-84 through 25-85
. On January 1, 20X1, Entity A, a U.S. dollar (USD) functional currency entity, executes a forward contract to hedge a portion of its exposure to Canadian Dollar- (CAD-) denominated forecasted sales expected to occur in December 20X1. Entity A determines that all the critical terms of the hedging instrument and hedged forecasted transaction match. It documents the hedging relationship concurrently with the execution of the forward contract in accordance with paragraph 815-20-25-3 as follows:
  1. a
    Risk management objective: To hedge against movements in the USD/CAD exchange rate that will affect the USD value of future CAD sales.
  2. b
    Hedged forecasted transaction: The first CAD 500,000 sales in December 20X1.
  3. c
    Hedging instrument: Foreign exchange forward contract to sell CAD 500,000 and receive USD 400,000 on December 31, 20X1. The fair value of the forward contract at hedge inception is zero.
  4. d
    Method of assessing hedge effectiveness: Entity A will assess the effectiveness on a qualitative basis at hedge inception. The critical terms of the hedging instrument and hedged forecasted transaction can be considered to match because the notional amounts and underlyings of the hedging instrument and hedged forecasted transaction are the same and the forecasted sales are expected to occur in the same fiscal month as the maturity date of the hedging instrument. Therefore, the hedge is expected to be perfectly effective. Subsequent assessments of effectiveness will be performed by verifying and documenting whether the critical terms of the hedging instrument and hedged forecasted transaction have changed during the period in review and whether it remains probable that the counterparty to the hedged item and hedged forecasted transactions will not default. If there are no such changes in critical terms or counterparty credit risk, Entity A will continue to conclude that the hedging relationship is perfectly effective.
","snippet":"This Example illustrates the documentation requirements in paragraph 815-20-25-3 when the critical terms of the hedging instrument and hedged forecasted transaction match in accordance with paragraphs 815-20-25-84 throug…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:36ae51c64c878d35b0762bd56abedec0adca07a3fdec5cbc5eb5c831b6525693","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-81","para":"55-81","html":"
This Example illustrates the application of paragraph 815-20-25-12.
","snippet":"This Example illustrates the application of paragraph 815-20-25-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c3dc7ba3b44a6c254f43134c38d25527d718901012297338ee76b286b98a655","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-82","para":"55-82","html":"
An entity that issues $100 million of fixed-rate debt may wish to hedge 50 percent of its fair value exposure to interest rate risk, as permitted by paragraph 815-20-25-12(b)(2). To accomplish that, the entity could enter into an interest rate swap with a notional amount of $50 million. The paragraph 815-20-25-104(a) criterion is satisfied because the entity has designated as a fair value hedge 50 percent of the contractual principal amount as the hedged item and has entered into an interest rate swap with a notional amount that matches the hedged principal amount.
","snippet":"An entity that issues $100 million of fixed-rate debt may wish to hedge 50 percent of its fair value exposure to interest rate risk, as permitted by paragraph 815-20-25-12(b)(2). To accomplish that, the entity could ente…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:defde486caab692bc9da2b7f6320899949d6f9a1f09519a72b19a25cb1dd5773","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-83","para":"55-83","html":"
If $100 million of fixed-rate debt were issued in increments of $1,000 individual bonds, the entity could aggregate 50,000 of those individual bonds as a portfolio to equal the notional amount of the swap, as permitted by paragraph 815-20-25-12(b)(1) (for the purposes of this Example, it is assumed that the hedge satisfies the portfolio requirements of that paragraph).
","snippet":"If $100 million of fixed-rate debt were issued in increments of $1,000 individual bonds, the entity could aggregate 50,000 of those individual bonds as a portfolio to equal the notional amount of the swap, as permitted b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d5478bdfd7a4b4785da94d16e93cef815ea7ffc64811efffa7afd9666b01843c","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-84","para":"55-84","html":"
This Example illustrates the application of paragraph 815-20-25-12 and the definition of firm commitment in relation to long-term supply contracts with embedded price caps or floors.
","snippet":"This Example illustrates the application of paragraph 815-20-25-12 and the definition of firm commitment in relation to long-term supply contracts with embedded price caps or floors.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5bd89fde55ceed27d967c0c6abf878dd91db1f901c40c7528b3619e092151fff","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-85","para":"55-85","html":"
Entity A enters into a long-term supply contract with a customer to sell a specified amount of a certain material. The selling price is the current monthly average list price for the quantity delivered each month but not to exceed $15 per pound. The current list price at the contract signing date is $12 per pound. The contract can be settled only by physical delivery. The contract also includes a penalty provision that is sufficiently large to make performance probable. The customer is not required to make an up-front cash payment for the written option (that is, the price cap) in the supply contract. Consequently, the supply contract is neither a recognized asset nor a recognized liability at inception.
","snippet":"Entity A enters into a long-term supply contract with a customer to sell a specified amount of a certain material. The selling price is the current monthly average list price for the quantity delivered each month but not…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a684dbbc5fdfb98f131b7a4258f248a4de6e3eb4caa49aa95420e8509f4579b6","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-86","para":"55-86","html":"
The supply contract in its entirety does not meet the definition of a derivative instrument due to the absence of a net settlement characteristic—that is, the contract does not permit or require net settlement (see guidance beginning in paragraph 815-10-15-100), there is no market mechanism (see guidance beginning in paragraph 815-10-15-110), and it does not require delivery of an asset that is readily convertible to cash (see guidance beginning in paragraph 815-10-15-119). Pursuant to the guidance in paragraph 815-15-25-19, the embedded cap on the selling price is an option that does not warrant separate accounting under Subtopic 815-15 because it is clearly and closely related to the host supply contract. In addition, because the supply contract is not remeasured with changes in fair value reported currently in earnings, it meets the criteria in paragraph 815-20-25-43(c)(3) to qualify as a hedged item in a fair value hedge.
","snippet":"The supply contract in its entirety does not meet the definition of a derivative instrument due to the absence of a net settlement characteristic—that is, the contract does not permit or require net settlement (see guida…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d5b18039741d6f89b4bd8e74097b804f44f98cc54677680db58089a0a2771586","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-87","para":"55-87","html":"
Entity A wishes to enter into a transaction to hedge the risk of changes in the fair value of the embedded written price cap in the supply contract. Accordingly, it purchases a cash-settled call option with a strike price of $15 per pound and a notional amount equal to the quantity specified in the supply contract. In accordance with the guidance in paragraph 815-20-25-12, a supply contract for which the contract price is fixed only under certain circumstances (such as when market prices are above an embedded price cap) meets the definition of a firm commitment for purposes of designating the hedged item in a fair value hedge. Therefore, if the selling price in a supply contract is subject to a cap, a floor, or both, either party to the contract is eligible to apply fair value hedge accounting in a hedging relationship to hedge the fair value exposure of the cap or floor. For the range of monthly average list prices above $15 per pound, the contract has a fixed $15 per pound price. Thus, Entity A may designate the written cap embedded in the supply contract as the hedged item in a fair value hedging relationship provided the other criteria for a fair value hedge are met. The embedded written cap in this Example is a specific portion of the contract that is subject to the risk of changes in fair value due to changes in the list price of the underlying materials. Because it is not accounted for separately from the supply contract, the embedded written cap may be designated as the hedged item in a fair value hedge. Paragraph 815-20-25-12 allows a nonbifurcated call option that is embedded in a supply contract to be the hedged item in a fair value hedge regardless of whether that supply contract is a recognized asset or liability or an unrecognized firm commitment.
","snippet":"Entity A wishes to enter into a transaction to hedge the risk of changes in the fair value of the embedded written price cap in the supply contract. Accordingly, it purchases a cash-settled call option with a strike pric…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:34ac1a5fb5f22424ff7e9134fce08c89121c81bbe1ff965ed3ba3996cae039cb","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-88","para":"55-88","html":"
The following Cases illustrate the implications of two different approaches to designation of variable interest payments on a group of variable-rate, interest-bearing loans:
  1. a
    Designation based on first payments received (Case A)
  2. b
    Designation based on a specific group of individual loans (Case B).
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7The following Cases illustrate the implications of different approaches to designation of variable interest payments on a group of variable-rate, interest-bearing loans:
  1. a
    Designation based on a single interest rate index under the first-payments-received technique (Case A)
  2. b
    Designation based on a specific group of individual loans (Case B)
  3. c
    Designation based on multiple interest rate indexes under the first-payments-received technique (Case C).
","snippet":"The following Cases illustrate the implications of two different approaches to designation of variable interest payments on a group of variable-rate, interest-bearing loans:\n(a) Designation based on first payments receiv…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f7769c863fdbdde2348ff98c8b78adb0b2619495e636ab1a0cdc3d7929029e91","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-89","para":"55-89","html":"
For Cases A and B, assume Entity A and Entity B both make to their respective customers London Interbank Offered Rate- (LIBOR-) indexed variable-rate loans for which interest payments are due at the end of each calendar quarter, and the LIBOR-based interest rate resets at the end of each quarter for the interest payment that is due at the end of the following quarter. Both entities determine that they will each always have at least $100 million of those LIBOR-indexed variable-rate loans outstanding throughout the next 3 years, even though the composition of those loans will likely change to some degree due to prepayments, loan sales, and potential defaults.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7For Cases A, B, and C, assume that Entities A, B, and C each make to their respective customers Secured Overnight Financing Rate (SOFR-) indexed variable-rate loans for which monthly interest payments are based on 30-Day Average SOFR (in arrears) (that is, daily compounded average of SOFR during the past 30 days). Entity C also originates SOFR-indexed variable-rate loans for which interest payments are based on both 1-Month Term SOFR (that is, 1-month forward-looking SOFR) and 30-Day Average Effective Federal Funds Rate (in arrears) (that is, daily compounded average Effective Federal Funds Rate during the past 30 days). All loans made by Entities A, B, and C have interest rate floors that range from 0 percent to 0.5 percent and reset and payment dates that occur over the course of a month.
","snippet":"For Cases A and B, assume Entity A and Entity B both make to their respective customers London Interbank Offered Rate- (LIBOR-) indexed variable-rate loans for which interest payments are due at the end of each calendar …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:828a2ebbbabdda3b59e8c20aed8614e528a8a2590a028c61c5a66f9cf302fe3a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-89A","para":"55-89A","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Both Entities A and B determine that they will each always have at least $100 million of 30-Day Average SOFR-indexed (in arrears) variable-rate loans outstanding throughout the next 3 years, even though the composition of those loans will likely change to some degree due to prepayments, loan sales, and potential defaults. Entity C determines that it will always have at least $100 million of variable-rate loans outstanding indexed to any combination of 30-Day Average SOFR (in arrears), 1-Month Term SOFR, and 30-Day Average Effective Federal Funds Rate (in arrears) throughout the next 3 years.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Both Entities A and B determine that they will each always have at least $100 million of 30-Day Average SOFR-indexed (in arrears)…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7e66bc560019d7c598b59749184161aa21e191b6d39b2b8bbbecb05578140b07","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-89B","para":"55-89B","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entities A, B, and C each execute a 3-year, receive-fixed, pay-variable (30-Day Average SOFR [in arrears]) interest rate swap with a $100 million notional amount that settles at the end of each calendar month. Each interest rate swap does not include a floor and has a fair value of $0 at inception.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entities A, B, and C each execute a 3-year, receive-fixed, pay-variable (30-Day Average SOFR [in arrears]) interest rate swap wit…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a5b4b51951820171aceaf5cab55bdfcb89e0bda8ad7fe6129443f0d4c9e16b7","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-90","para":"55-90","html":"
This Example does not address cash flow hedging relationships in which the hedged risk is the risk of overall changes in the hedged cash flows related to an asset or liability, as discussed in paragraph 815-20-25-15(j)(1).
","snippet":"This Example does not address cash flow hedging relationships in which the hedged risk is the risk of overall changes in the hedged cash flows related to an asset or liability, as discussed in paragraph 815-20-25-15(j)(1…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d15b19a302b82d3a338fa9b08a80171796c9ccf9adb4c2a9e09e2750eeb33d18","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-91","para":"55-91","html":"
In this Case, Entity A wishes to hedge its interest rate exposure to changes in the quarterly interest receipts on $100 million principal of those LIBOR-indexed variable-rate loans by entering into a 3-year interest rate swap that provides for quarterly net settlements based on Entity A receiving a fixed interest rate on a $100 million notional amount and paying a variable LIBOR-based rate on a $100 million notional amount.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7
Editor's Note: Paragraph 815-20-55-91 will be amended upon transition, together with its heading:
• • > Case A: Designation Based on a Single Interest Rate Index under the First-Payments-Received Technique
In this Case, Entity A designates the 30-Day Average SOFR (in arrears) interest rate swap (described in paragraph 815-20-55-89B) as hedging the cash flow variability attributable to changes in the first interest payments received during each month for the next 3 years on $100 million principal of 30-Day Average SOFR-indexed (in arrears) variable-rate loans.
","snippet":"In this Case, Entity A wishes to hedge its interest rate exposure to changes in the quarterly interest receipts on $100 million principal of those LIBOR-indexed variable-rate loans by entering into a 3-year interest rate…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47a1737dc29c44f680fecd9af612ea9c073ebc06f199df8f8fd2cdf02317853e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-92","para":"55-92","html":"
In a cash flow hedge of interest rate risk, Entity A may identify the hedged forecasted transactions as the first LIBOR-based interest payments received by Entity A during each 4-week period that begins 1 week before each quarterly due date for the next 3 years that, in the aggregate for each quarter, are payments on $100 million principal of its then existing LIBOR-indexed variable-rate loans. The LIBOR-based interest payments received by Entity A after it has received payments on $100 million aggregate principal would be unhedged interest payments for that quarter.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Any 30-Day Average SOFR-indexed (in arrears) interest payments received by Entity A after it has received payments on $100 million aggregate principal would be unhedged interest payments for that period.
","snippet":"In a cash flow hedge of interest rate risk, Entity A may identify the hedged forecasted transactions as the first LIBOR-based interest payments received by Entity A during each 4-week period that begins 1 week before eac…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50c91fc365339a60c4808a179d5a321b6d513aa4beed2c3dbe8e96f64820850f","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-93","para":"55-93","html":"
The hedged forecasted transactions for Entity A in this Case are described with sufficient specificity so that when a transaction occurs, it is clear whether that transaction is or is not the hedged transaction.
","snippet":"The hedged forecasted transactions for Entity A in this Case are described with sufficient specificity so that when a transaction occurs, it is clear whether that transaction is or is not the hedged transaction.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3b6c5968fec700be5b5c4a5ec7b6d8f6a1a9f1525202cdcacee41a91eff80834","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-94","para":"55-94","html":"
Because Entity A has designated the hedging relationship as hedging the risk of changes attributable to changes in the LIBOR interest rate in Entity A's first LIBOR-based interest payments received, any prepayment, sale, or credit difficulties related to an individual LIBOR-indexed variable-rate loan would not affect the designated hedging relationship.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Because Entity A has designated the hedging relationship as hedging the risk of changes in the 30-Day Average SOFR (in arrears) interest rate in Entity A's first 30-Day Average SOFR (in arrears) interest payments received, any prepayment, sale, or credit difficulties related to an individual 30-Day Average SOFR-indexed (in arrears) variable-rate loan would not necessarily affect the designated hedging relationship.
","snippet":"Because Entity A has designated the hedging relationship as hedging the risk of changes attributable to changes in the LIBOR interest rate in Entity A's first LIBOR-based interest payments received, any prepayment, sale,…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d7cc86b1d233dce61341a6bcf9f9e19c6871f85f7600aeb2f0a80b1a3239a013","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-95","para":"55-95","html":"
Provided Entity A determines it is probable that it will continue to receive interest payments on at least $100 million principal of its then existing LIBOR-indexed variable-rate loans, Entity A can conclude that the hedged forecasted transactions in the documented cash flow hedging relationships are probable of occurring.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Provided Entity A determines it is probable that it will continue to receive interest payments on at least $100 million principal of its then existing 30-Day Average SOFR-indexed (in arrears) variable-rate loans, Entity A can conclude that the hedged forecasted transactions in the documented cash flow hedging relationships are probable of occurring.
","snippet":"Provided Entity A determines it is probable that it will continue to receive interest payments on at least $100 million principal of its then existing LIBOR-indexed variable-rate loans, Entity A can conclude that the hed…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e4a569fa33cb7c8ab84f35c7152c0b78e085df6365a58a0a388e8dde9e6dfb4","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-96","para":"55-96","html":"
An entity may not assume perfect effectiveness in such a hedging relationship as described in paragraph 815-20-25-102 because the hedging relationship does not involve hedging the interest payments related to the same recognized interest-bearing loan throughout the life of the hedging relationship. Consequently, at a minimum, Entity A must consider the timing of the hedged cash flows vis-à-vis the swap's cash flows when assessing effectiveness.
","snippet":"An entity may not assume perfect effectiveness in such a hedging relationship as described in paragraph 815-20-25-102 because the hedging relationship does not involve hedging the interest payments related to the same re…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:555b82ed543d7c9476713f7f5b889f48820cf7b2b48749021c848d530818cc82","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-96A","para":"55-96A","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity A elects to assess similar risk exposure for the group of forecasted transactions by determining that the designated hedging instrument is highly effective against each hedged risk in the group in accordance with the method outlined in paragraph 815-20-55-23A(a) and determines that the similar risk exposure requirement is met. Entity A also utilizes that same assessment to satisfy the initial prospective effectiveness assessment. In performing that assessment, Entity A considers the differences between the individual forecasted transactions in the group and the contractual terms of the hedging instrument. Those differences include, for example, payment dates, reset dates, and interest rate floors.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity A elects to assess similar risk exposure for the group of forecasted transactions by determining that the designated hedgi…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a7e58490c92d863b91dffe65cfdd3ad6faa1e77ec27d904f9c6617568c6fdb55","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-97","para":"55-97","html":"
In this Case, Entity B wishes to hedge its interest rate exposure to changes in the quarterly interest receipts on $100 million principal of those LIBOR-indexed variable-rate loans by entering into a 3-year interest rate swap that provides for quarterly net settlements based on Entity B receiving a fixed interest rate on a $100 million notional amount and paying a variable LIBOR-based rate on a $100 million notional amount. Entity B initially designates cash flow hedging relationships of interest rate risk and identifies as the related hedged forecasted transactions each of the variable interest receipts on a specified group of individual LIBOR-indexed variable-rate loans aggregating $100 million principal but then some of those loans experience prepayments, are sold, or experience credit difficulties.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7In this Case, Entity B designates the 30-Day Average SOFR (in arrears) interest rate swap (described in paragraph 815-20-55-89B) as hedging the cash flow variability attributable to changes in the interest payments received during each month for the next 3 years on a specified group of individual 30-Day Average SOFR-indexed (in arrears) variable-rate loans aggregating $100 million principal. Entity B elects to assess similar risk exposure in accordance with the method outlined in paragraph 815-20-55-23A(a). Consistent with the differences considered by Entity A in paragraph 815-20-55-96A, Entity B should consider differences between the individual forecasted transactions in the group and the contractual terms of the hedging instrument, including, for example, payment dates, reset dates, and interest rate floors.
","snippet":"In this Case, Entity B wishes to hedge its interest rate exposure to changes in the quarterly interest receipts on $100 million principal of those LIBOR-indexed variable-rate loans by entering into a 3-year interest rate…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5c7c8bdeafd81cb7c0b9b43aa741a2b060945fc21ef82010bb4a4dfdebe9b4f2","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-98","para":"55-98","html":"
This Case addresses whether the original cash flow hedging relationships remain intact if the composition of the group of loans whose interest payments are the hedged forecasted transactions is changed by replacing the principal amount of the specified loans with similar variable-rate interest-bearing loans. Entity B cannot conclude that the original cash flow hedging relationships have remained intact if the composition of the group of loans whose interest payments are the hedged forecasted transactions is changed by replacing the principal amount of the originally specified loans with similar variable-rate interest-bearing loans. Paragraph 815-20-25-15(a) requires that, for a cash flow hedge, the forecasted transaction be specifically identified as a single transaction or group of transactions. At inception, the entity designated cash flow hedging relationships for each of the variable interest receipts on a specified group of variable-rate loans. If a loan within the group experiences a prepayment, has been sold, or experiences an unexpected change in its expected cash flows due to credit difficulties, the remaining hedged interest payments to Entity B specifically related to that loan are now no longer probable of occurring. Pursuant to paragraphs
815-30-40-1 through 40-3
, Entity B must discontinue the hedging relationships with respect to the hedged forecasted transactions that are now no longer probable of occurring. However, had the hedged forecasted transactions been designated in a manner similar to that described in Case A, the consequences of a loan's prepayment, a loan sale, or an unexpected change in a loan's expected cash flows due to credit difficulties would not have been the same. How the forecasted transaction in a cash flow hedge is designated can have a significant effect on the application of the Derivatives and Hedging Topic.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7After designation, some of the specifically identified loans experience prepayments, are sold, or experience credit difficulties. This Case addresses whether the original cash flow hedging relationships remain intact if the composition of the group of loans whose interest payments are the hedged forecasted transactions is changed by replacing the principal amount of the specified loans that experience a prepayment, have been sold, or experience a change in expected cash flows due to credit difficulties with similar variable-rate interest-bearing loans. Entity B cannot conclude that the original cash flow hedging relationships have remained intact if the composition of the group of loans whose interest payments are the hedged forecasted transactions is changed by replacing the principal amount of the originally specified loans with similar variable-rate interest-bearing loans. Paragraph 815-20-25-15(a) requires that, for a cash flow hedge, the forecasted transaction be specifically identified as a single transaction or group of transactions. At inception, the entity designated cash flow hedging relationships for each of the variable interest receipts on a specified group of variable-rate loans. If a loan within the group experiences a prepayment, has been sold, or experiences an unexpected change in its expected cash flows due to credit difficulties, the remaining hedged interest payments to Entity B specifically related to that loan are now no longer probable of occurring. Pursuant to paragraphs
815-30-40-1 through 40-3
, Entity B must discontinue the hedging relationships with respect to the hedged forecasted transactions that are now no longer probable of occurring. However, had the hedged forecasted transactions been designated in a manner similar to that described in Case A, the consequences of a loan's prepayment, a loan sale, or an unexpected change in a loan's expected cash flows due to credit difficulties would not have been the same. How the forecasted transaction in a cash flow hedge is designated can have a significant effect on the application of the Derivatives and Hedging Topic.
","snippet":"This Case addresses whether the original cash flow hedging relationships remain intact if the composition of the group of loans whose interest payments are the hedged forecasted transactions is changed by replacing the p…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:90ebd74e823eb8da81d132c89d795d0d6ba03821d6db1fcf7fd7f183a32a078b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-99","para":"55-99","html":"
Changing the composition of the specified individual loans within the group of variable-rate interest-bearing loans due to prepayment, a loan sale, or an unexpected change in a loan's expected cash flows due to credit difficulties reflects a change in the probability of the identified hedged forecasted transactions for the hedging relationships related to the individual loans removed from the group of variable-rate interest-bearing loans. Consequently, the hedging relationships for future interest payments that are no longer probable of occurring must be terminated. The provisions related to immediately reclassifying a derivative instrument's gain or loss out of accumulated other comprehensive income into earnings are based on the hedged forecasted transaction being probable that it will not occur—not no longer being probable of occurring—and includes consideration of an additional two-month period of time. After the discontinuation of the hedging relationships for interest payments related to the individual loans removed from the group of variable-rate interest-bearing loans and the reclassification into earnings of the net gain or loss in accumulated other comprehensive income related to those hedging relationships, the derivative instrument (or a proportion thereof) specifically related to the hedging relationships that have been terminated is eligible to be redesignated as the hedging instrument in a new cash flow hedging relationship. However, paragraph 815-30-40-5 warns that a pattern of determining that hedged forecasted transactions are probable of not occurring would call into question both the entity's ability to accurately predict forecasted transactions and the propriety of using hedge accounting in the future for similar forecasted transactions.
","snippet":"Changing the composition of the specified individual loans within the group of variable-rate interest-bearing loans due to prepayment, a loan sale, or an unexpected change in a loan's expected cash flows due to credit di…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9a1b7e0beb4ab9009c4bc94b67bec955628bdc8cec40dcca4cd715c1def2913","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-99A","para":"55-99A","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7In this Case, Entity C designates the 30-Day Average SOFR (in arrears) interest rate swap (described in paragraph 815-20-55-89B) as hedging cash flow variability in the first interest payments received during each month for the next 3 years attributable to the contractually specified interest rates on $100 million of variable rate loans indexed to any combination of 30-Day Average SOFR (in arrears), 1-Month Term SOFR, and 30-Day Average Effective Federal Funds Rate (in arrears).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7In this Case, Entity C designates the 30-Day Average SOFR (in arrears) interest rate swap (described in paragraph 815-20-55-89B) …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:05e4ca4724025cc0c811a7f3b6668c58b06012448e28e7be4332b17c187d1344","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-99B","para":"55-99B","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7By designating the hedged forecasted transactions as the first interest payments received on 30-Day Average SOFR-indexed (in arrears), 1-Month Term SOFR-indexed, and 30-Day Average Effective Federal Funds Rate-indexed (in arrears) variable-rate loans, Entity C considers the first interest payments on any of those loans as the hedged forecasted transactions when they occur. This method of designation allows Entity C to fulfill its forecasted transactions across a broader population of loans if any variable-rate loans experience a prepayment, are sold, or experience a change in its expected cash flows related to credit difficulties.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7By designating the hedged forecasted transactions as the first interest payments received on 30-Day Average SOFR-indexed (in arre…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:46c9c3b388e94ba5d93046e083d055b8e6af0bc76cdc3c54b44ca61e10303961","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-99C","para":"55-99C","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If Entity C elects to assess similar risk exposure for the group of forecasted transactions using the method outlined in paragraph 815-20-55-23A(a) and determines that the similar risk exposure requirement is met, then Entity C also may reasonably conclude that the hedging relationship is expected to be highly effective at hedge inception if it documents the method described in paragraph 815-20-55-23A(a) as its method for assessing hedge effectiveness. Entity C should consider the differences between the individual forecasted transactions in the group and the contractual terms of the hedging instrument when performing those assessments. Those differences include, for example, interest rates, payment dates, reset dates, and interest rate floors.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7If Entity C elects to assess similar risk exposure for the group of forecasted transactions using the method outlined in paragrap…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cab1b22d9104aaaf9e022ec480d0a6521de1adc450bd43f60dc930f9c5b10151","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-99D","para":"55-99D","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Alternatively, if Entity C elects to assess similar risk exposure for the group of forecasted transactions using the method in paragraph 815-20-55-23A(b) and determines that the similar risk exposure requirement is met, then Entity C should perform a separate assessment to conclude that the hedging relationship is expected to be highly effective at hedge inception. Entity C should use the concepts underlying assessments of hedge effectiveness, such as the hypothetical derivative method and regression analysis, when assessing whether each hedged risk is similar to each other risk in the group. Entity C should consider the differences between the respective hedged risks of the individual forecasted transactions in the group when performing the similar risk exposure assessment. Those differences include attributes that affect the hedged indexes, for example, interest rates, reset dates, and interest rate floors.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Alternatively, if Entity C elects to assess similar risk exposure for the group of forecasted transactions using the method in pa…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ff4236ce7a55dff21141dda7cad45af6a988bb74e86288a42b68ff235bfdbb0","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-99E","para":"55-99E","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If Entity C determines as part of its ongoing assessments that one or more hedged risks related to individual forecasted transactions in the group are no longer similar, Entity C should dedesignate the hedging relationship as of the last date when all hedged risks in the group were assessed to have similar risk exposure, unless Entity C can determine the specific date that all hedged risks in the group were no longer similar. However, the determination that one or more hedged risks in the group are no longer similar does not affect Entity C’s probability assessment related to the hedged forecasted transactions performed in accordance with paragraphs
815-30-40-4 through 40-6
.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7If Entity C determines as part of its ongoing assessments that one or more hedged risks related to individual forecasted transact…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:169a7b508298303a70df8de5a6198ca4f42d55c4b2374524666114b63a4cf27a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-100","para":"55-100","html":"
This Example illustrates the application of paragraph 815-20-25-16(c).
","snippet":"This Example illustrates the application of paragraph 815-20-25-16(c).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:02af288114f0c1b4fc0ee0e79cf04a49c07bfa4eab63c26f048ac45cfb6c9bd1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-101","para":"55-101","html":"
A general contractor enters into a long-term contract to build a power plant. The long-term contract is to be completed within five years. As part of the construction project, the general contractor expects to subcontract a portion of the construction to a foreign entity with a functional currency different from its own. Because the subcontractor will be paid in its functional currency, the general contractor will have a foreign currency exposure that it desires to hedge. At the start of the project, the general contractor concludes it is probable that the subcontract work will be completed and paid for at the end of Year 2. However, the general contractor knows that the timing of a subcontractor's work, and thus the foreign-currency-denominated payment for its work, may possibly be delayed by a period of more than two months, even though it is probable that the overall project will remain on schedule in meeting the ultimate completion date. The contractor intends to hedge the exposure by using a forward contract with a maturity date that coincides with the current expected date of payment (that is, a two-year foreign currency forward) and the expected notional amount of the forecasted transaction.
","snippet":"A general contractor enters into a long-term contract to build a power plant. The long-term contract is to be completed within five years. As part of the construction project, the general contractor expects to subcontrac…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1164da74b7939b70fbee80abe23aa11e48f464595fe6d760d9b6328d4ec288c9","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-102","para":"55-102","html":"
The general contractor could document (as required by paragraph 815-20-25-3(d)(1)) that the hedged forecasted transaction is the foreign-currency-denominated payment to the foreign subcontractor to be paid within the five-year contract period of the overall project (which is the originally specified time period referred to in paragraphs
815-30-40-4 through 40-5
). In accordance with paragraph 815-20-25-16(c), as long as it remains probable that the forecasted transaction will occur by the end of the originally projected five-year period of the overall project, cash flow hedge accounting for that hedging relationship would continue. Consequently, if the subcontractor's payment is delayed by more than two months, but less than three years and two months, then the forecasted transaction would still be considered probable of occurrence within the originally specified time period.
","snippet":"The general contractor could document (as required by paragraph 815-20-25-3(d)(1)) that the hedged forecasted transaction is the foreign-currency-denominated payment to the foreign subcontractor to be paid within the fiv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5ece563b1a849851eea9c122f84993d7b020aabcd4ddc446c3f642d220a75601","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-103","para":"55-103","html":"
If the expected timing of the forecasted transaction changes, the contractor must first apply the requirements of paragraph 815-30-35-3 using its originally documented hedging strategy and the newly revised best estimate of the cash flows, and then reevaluate whether continuing hedge accounting is appropriate, pursuant to the requirements of paragraphs
815-30-40-1 through 40-3
. If hedge accounting is discontinued prospectively, the derivative instrument's gains or losses in other comprehensive income should be accounted for pursuant to paragraphs
815-30-35-38 through 35-41
(unless paragraphs
815-30-40-4 through 40-5
require reclassification into earnings).
","snippet":"If the expected timing of the forecasted transaction changes, the contractor must first apply the requirements of paragraph 815-30-35-3 using its originally documented hedging strategy and the newly revised best estimate…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ed28b79b9df8c2858d1d20add65f56769dede3eb8927585be8bd65017e494d2c","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-104","para":"55-104","html":"
If a quantitative assessment of hedge effectiveness is applied and the assessment of effectiveness is based on changes in forward rates, the most recent best estimate would be based on the current forward rate for the hedged transaction relevant for the probable date that the transaction will occur. If the assessment of effectiveness is based on changes in spot rates, the best estimate would be based on the current spot rate.
","snippet":"If a quantitative assessment of hedge effectiveness is applied and the assessment of effectiveness is based on changes in forward rates, the most recent best estimate would be based on the current forward rate for the he…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ef4c113c3db924c890a11bee0f764cb3d2808ccfce6223c23495980713932338","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-105","para":"55-105","html":"
This Example illustrates the application of paragraph 815-20-25-19. Consider an entity with existing variable-rate debt that is prepayable, resets monthly based on a specified bank's prime rate plus 1 percent as of the beginning of each month, and matures in 5 years. Although the variable-rate debt does, after each reset, have a fixed rate for each monthly period, it is inappropriate to characterize that debt as a series of fixed-rate debt instruments. When each reset occurs, it is not a new issuance of fixed-rate debt based on current market interest rates for that debtor; instead, it is a contractual continuation of a debtor-creditor relationship and the fixed rate for each month is explicitly (and contractually) based on a specific index (a specified bank's prime rate).
","snippet":"This Example illustrates the application of paragraph 815-20-25-19. Consider an entity with existing variable-rate debt that is prepayable, resets monthly based on a specified bank's prime rate plus 1 percent as of the b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b11ad6ad716d7b071b722309576e6d5cd414c521242b401f8cbd9bbe73ff2860","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-106","para":"55-106","html":"
This Example illustrates the application of paragraph 815-20-25-20.
","snippet":"This Example illustrates the application of paragraph 815-20-25-20.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:67f423ace7f6ba711f5622ec58e6c98ba868ca06257121d0a650dc79aac8ad58","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-107","para":"55-107","html":"
Entity A issues variable-rate debt that is prepayable at par on each interest rate reset date. The credit sector spread on the debt issuance is not reset on the interest rate reset dates. Specifically, the debt bears interest at a rate of LIBOR plus 100 basis points, with LIBOR reset every quarter. Entity A also enters into a receive-variable, pay-fixed interest rate swap that is designated as a hedge of the variability in the debt interest payments due to changes in the contractually specified interest rate (LIBOR). During the term of the hedging relationship (that is, the specific term of the interest rate swap), Entity A expects to issue new variable-rate debt (in the event the original debt is repaid before maturity) to maintain an aggregate debt principal balance equal to or greater than the notional amount of the interest rate swap, and expects the new debt (if any) to share the key characteristics of the original debt issuance (specifically, quarterly repricing to the LIBOR index and no minimum, maximum, or periodic constraints of the debt interest rate). The hedging relationship meets all of the criteria for shortcut method accounting beginning in paragraph 815-20-25-102 except for the criterion in paragraph 815-20-25-104(e); the debt is prepayable and the interest rate swap does not contain a mirror-image call option to match the call option embedded in the debt instrument, as required by that paragraph.
","snippet":"Entity A issues variable-rate debt that is prepayable at par on each interest rate reset date. The credit sector spread on the debt issuance is not reset on the interest rate reset dates. Specifically, the debt bears int…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a89db95de74be704468d2f34e927d48175bdade6f5570bd4d5c89ce0ee4b5f00","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-108","para":"55-108","html":"
Entity A wishes to apply the hypothetical derivative method (as described beginning in paragraph 815-30-35-25) for its initial and subsequent quantitative assessments of hedge effectiveness. Because the actual interest rate swap used in Entity A's hedging relationship already meets all of the criteria in paragraph 815-20-25-102 except the criterion in paragraph 815-20-25-104(e), this guidance would seem to suggest that the hypothetical interest rate swap would need to be the same as the actual interest rate swap except that a mirror-image call option would need to be added to meet the criterion in that paragraph and the guidance beginning in paragraph 815-30-35-10. However, Entity A observes that because the hedged transactions are the variable interest payments (on debt with a principal amount equal to the notional amount of the swap) due to changes in the contractually specified interest rate (LIBOR), and because the transaction had to be probable of occurring under paragraph 815-20-25-15(b) for it to qualify for hedge accounting, the actual swap would be expected to perfectly offset the hedged cash flows.
","snippet":"Entity A wishes to apply the hypothetical derivative method (as described beginning in paragraph 815-30-35-25) for its initial and subsequent quantitative assessments of hedge effectiveness. Because the actual interest r…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1bc099a875434c47c4f768e9a2f9bc31a5da52f7bc1ccee50fad1300f281b5d7","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-109","para":"55-109","html":"
In this fact pattern, the hypothetical interest rate swap under the guidance beginning paragraph 815-30-35-10 would be the same as the actual interest rate swap described in this Example. Because Entity A has concluded that if the original debt issuance is repaid before maturity, it is probable that a sufficient principal amount of variable-rate debt with key characteristics that match those of the original debt issuance (specifically quarterly repricing to the LIBOR index and no minimum, maximum, or periodic constraints of the debt interest rate) will be issued and remain outstanding during the term of the hedging relationship (providing exposure to LIBOR-interest-rate-based variable cash payments), the prepayment provisions of the debt instrument should not be considered in determining the appropriate hypothetical derivative under that guidance. The prepayment of the original variable-rate debt eliminates the contractual obligation to make those interest payments; however, this Subtopic permits replacing the hedged interest payments that are no longer contractually obligated to be paid without triggering the dedesignation of the original cash flow hedging relationship. Replacing the original debt issuance with a new variable-rate debt issuance is permissible in a cash flow hedge of interest rate risk and does not automatically result in the discontinuation of the original cash flow hedging relationship.
","snippet":"In this fact pattern, the hypothetical interest rate swap under the guidance beginning paragraph 815-30-35-10 would be the same as the actual interest rate swap described in this Example. Because Entity A has concluded t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7f03843ea07012e294e22be1c60bb838b2e151e90ed70e48fe5aa4be8d8ab28f","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-110","para":"55-110","html":"
Although the entity can terminate the debt at any interest rate reset date for reasons that may be totally unrelated to changes in the contractually specified interest rate (which is the hedged risk), it expects to be at risk for variability in cash flows due to changes in the contractually specified interest rate in an amount based on debt principal equal to or greater than the notional amount of the swap during the specific term of the interest rate swap. Therefore, the prepayment feature of the debt is not relevant for purposes of determining the appropriate hypothetical swap under the guidance beginning in paragraph 815-30-35-10 as long as the relevant conditions to qualify for cash flow hedge accounting have been met with respect to the hedged transaction.
","snippet":"Although the entity can terminate the debt at any interest rate reset date for reasons that may be totally unrelated to changes in the contractually specified interest rate (which is the hedged risk), it expects to be at…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f106ef14e14ca341c182bccc318fb8edd51d19135b01545775fa56c3d2944ac8","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-111","para":"55-111","html":"
The following Cases illustrate the application of paragraph 815-20-25-21:
  1. a
    Purchase of a nonfinancial asset (Case A)
  2. b
    Purchase of a financial asset (Case B).
","snippet":"The following Cases illustrate the application of paragraph 815-20-25-21:\n(a) Purchase of a nonfinancial asset (Case A)\n(b) Purchase of a financial asset (Case B).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8fb9a4ee7c9c245a2e1e2aa9c3620faf4e9f20e29d36d94206b62576ef02f7bd","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-112","para":"55-112","html":"
Settling a forward contract gross involves delivery of an asset in exchange for the payment of cash or other assets and is differentiated from settling net, which typically involves a payment for the change in a contract's value as the method of settling the contract.
","snippet":"Settling a forward contract gross involves delivery of an asset in exchange for the payment of cash or other assets and is differentiated from settling net, which typically involves a payment for the change in a contract…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1728e5614834251f192c17ca5255cae0ce5911ba6e58d1712b10e0c55a07cc2d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-113","para":"55-113","html":"
A forecasted purchase or sale meets the definition of forecasted transaction and, if it is probable, meets the criteria in paragraph 815-20-25-15 for designation as a hedged transaction. An entity concerned about variability in cash flows from its forecasted purchases or sales can economically fix the price of those purchases or sales by entering into a fixed-price contract. Because the fixed-price purchase or sale contract is a derivative instrument, it is eligible for use as a hedging instrument.
","snippet":"A forecasted purchase or sale meets the definition of forecasted transaction and, if it is probable, meets the criteria in paragraph 815-20-25-15 for designation as a hedged transaction. An entity concerned about variabi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0aeb199b25b619fa29a436df26c35189d78e05f1317112b33d4cf31cb7d75bca","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-114","para":"55-114","html":"
The forecasted purchase or sale at a fixed price is eligible for cash flow hedge accounting because the total consideration paid or received is variable. The total consideration paid or received for accounting purposes is the sum of the fixed amount of cash paid or received and the fair value of the fixed price purchase or sale contract, which is recognized as an asset or liability, and which can vary over time.
","snippet":"The forecasted purchase or sale at a fixed price is eligible for cash flow hedge accounting because the total consideration paid or received is variable. The total consideration paid or received for accounting purposes i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3c07979e7035ed551255256d27b1b2c0e0c547c86d6dfcc1566b35525cc203da","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-115","para":"55-115","html":"
Entity A plans to purchase a nonfinancial asset. To fix the price to be paid (that is, to hedge the price), Entity A enters into a contract that meets the definition of a firm commitment with an unrelated party to purchase the asset at a fixed price at a future date. Assume that the terms of the contract (such as net settlement under the default provisions) or the nature of the asset cause the contract to meet the definition of a derivative instrument and the contract is not excluded by paragraphs
815-10-15-13 through 15-82
from the scope of the Derivatives and Hedging Topic. As such, Entity A has entered into a derivative instrument under which it is expected to take delivery of the asset. Entity A may designate the fixed-price purchase contract (that is, the derivative instrument) as a cash flow hedge of the variability of the consideration to be paid for the purchase of the asset (that is, the forecasted transaction) even though the derivative instrument is the same contract under which the asset itself will be acquired.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity A plans to purchase a nonfinancial asset. To fix the price to be paid (that is, to hedge the price), Entity A enters into a contract that meets the definition of a firm commitment with an unrelated party to purchase the asset at a fixed price at a future date. Assume that the terms of the contract (such as net settlement under the default provisions) or the nature of the asset cause the contract to meet the definition of a derivative instrument and the contract is not excluded by paragraphs
815-10-15-13 through 15-60
and
815-10-15-62 through 15-82
from the scope of the Derivatives and Hedging Topic. As such, Entity A has entered into a derivative instrument under which it is expected to take delivery of the asset. Entity A may designate the fixed-price purchase contract (that is, the derivative instrument) as a cash flow hedge of the variability of the consideration to be paid for the purchase of the asset (that is, the forecasted transaction) even though the derivative instrument is the same contract under which the asset itself will be acquired.
","snippet":"Entity A plans to purchase a nonfinancial asset. To fix the price to be paid (that is, to hedge the price), Entity A enters into a contract that meets the definition of a firm commitment with an unrelated party to purcha…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:751758bf0967f606e48cd97ba7c8563a34ec15af105bf80e22d075550f3ec9aa","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-116","para":"55-116","html":"
Entity B plans to purchase U.S. government bonds and expects to classify those bonds in its available-for-sale portfolio. To fix the price to be paid (that is, to hedge the price), Entity B enters into a contract that meets the Derivatives and Hedging Topic's definition of a firm commitment with an unrelated party to purchase the bonds at a fixed price at a future date. Assume the contract meets the definition of a derivative instrument and is not excluded by paragraphs
815-10-15-13 through 15-82
from the scope of this Topic. As such, Entity B has entered into a derivative instrument under which it is expected to take delivery of the asset. Entity B may designate the fixed-price purchase contract (that is, the derivative instrument) as a cash flow hedge of the variability of the consideration to be paid for the purchase of the bonds (that is, the forecasted transaction) even though the derivative instrument is the same contract under which the asset itself will be acquired.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
815-10-65-8Entity B plans to purchase U.S. government bonds and expects to classify those bonds in its available-for-sale portfolio. To fix the price to be paid (that is, to hedge the price), Entity B enters into a contract that meets the Derivatives and Hedging Topic's definition of a firm commitment with an unrelated party to purchase the bonds at a fixed price at a future date. Assume the contract meets the definition of a derivative instrument and is not excluded by paragraphs
815-10-15-13 through 15-60
and
815-10-15-62 through 15-82
from the scope of this Topic. As such, Entity B has entered into a derivative instrument under which it is expected to take delivery of the asset. Entity B may designate the fixed-price purchase contract (that is, the derivative instrument) as a cash flow hedge of the variability of the consideration to be paid for the purchase of the bonds (that is, the forecasted transaction) even though the derivative instrument is the same contract under which the asset itself will be acquired.
","snippet":"Entity B plans to purchase U.S. government bonds and expects to classify those bonds in its available-for-sale portfolio. To fix the price to be paid (that is, to hedge the price), Entity B enters into a contract that me…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7753fc0ecb3f2faba28c6ac3494431e1c8a01aefb898427f0902a9a9c1be37a3","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-117","para":"55-117","html":"
The following Example illustrates the application of paragraph 815-20-25-10 to a currency collar.
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2016-01.
  2. b
    Subparagraph superseded by Accounting Standards Update No. 2016-01.
","snippet":"The following Example illustrates the application of paragraph 815-20-25-10 to a currency collar.\n(a) Subparagraph superseded by Accounting Standards Update No. 2016-01.\n(b) Subparagraph superseded by Accounting Standard…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:11879784ea4fc14f9e51df58504853e6344ae7e82471b1496324a1a27ea8c066","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-118","para":"55-118","html":"
Paragraph superseded by Accounting Standards Update No. 2016-01.
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Paragraph superseded by Accounting Standards Update No. 2016-01.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2016-01.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:58b46ad8acc767a36e8104c0174b7caf4e08368bc5282962b3dc1f09a97aca89","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-120","para":"55-120","html":"
Paragraph superseded by Accounting Standards Update No. 2016-01.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2016-01.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bdcc6854d1b0a4e4c4debfa430b63bedfe5c98acdf223cb35c57cc671ac1cd5a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-121","para":"55-121","html":"
Paragraph superseded by Accounting Standards Update No. 2016-01.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2016-01.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:927544497a55b9770ca1d739d021969d403374f1b459cdd24b5a7a0184109321","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-122","para":"55-122","html":"
Paragraph superseded by Accounting Standards Update No. 2016-01.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2016-01.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b2a8c856c142fdf62fd5e47efcda3f448bca687df5a78b1491c345c6842b79fd","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-123","para":"55-123","html":"
Entity B forecasts that it will purchase inventory that will cost 100 million foreign currency (FC) units. Entity B's functional currency is the U.S. dollar (USD). To limit the variability in USD-equivalent cash flows associated with changes in the USD-FC exchange rate, Entity B constructs a currency collar as follows:
  1. a
    A purchased call option providing Entity B the right to purchase FC 100 million at an exchange rate of USD 0.885 per FC 1.
  2. b
    A written put option obligating Entity B to purchase FC 50 million at an exchange rate of USD 0.80 per FC 1.
","snippet":"Entity B forecasts that it will purchase inventory that will cost 100 million foreign currency (FC) units. Entity B's functional currency is the U.S. dollar (USD). To limit the variability in USD-equivalent cash flows as…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:82fbb6e578abe3c514855376b47b0e99ba6f4e3ffb872c5f30fda8b67438720b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-124","para":"55-124","html":"
The purchased call option provides Entity B with protection when the USD-FC exchange rate increases above USD 0.885 per FC 1. The written put option partially offsets the cost of the purchased call option and obligates Entity B to give up some of the foreign currency gain related to the forecasted inventory purchase as the USD-FC exchange rate decreases below USD 0.80 per FC 1. (For both options, the underlying is the same—the USD-FC exchange rate.) Assuming that a net premium was not received for the combination of options and all the other criteria in paragraphs
815-20-25-89 through 25-90
have been met, if Entity B chooses to use the combination of options as a hedging instrument, it is not required to comply with the provisions contained in paragraph 815-20-25-94 related to written options.
","snippet":"The purchased call option provides Entity B with protection when the USD-FC exchange rate increases above USD 0.885 per FC 1. The written put option partially offsets the cost of the purchased call option and obligates E…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c8adcc64a75d555be135fc069b4cb13dc2bc9672514bce8a28276fa551b96495","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-125","para":"55-125","html":"
Entity B would like to designate the combination of options as a hedge of the variability in USD-equivalent cash flows of its forecasted purchase of inventory denominated in FC. Assume Entity B specifies in the hedge effectiveness documentation that the collar's time value would be excluded from the assessment of hedge effectiveness.
","snippet":"Entity B would like to designate the combination of options as a hedge of the variability in USD-equivalent cash flows of its forecasted purchase of inventory denominated in FC. Assume Entity B specifies in the hedge eff…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7e7e1c78ac85da102b8e6fe8c03fbbc48dd4c8e16c895e0c4550ead6e19192df","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-126","para":"55-126","html":"
The hedging relationship involving the currency collar designated as a hedge of the effect of fluctuations in the USD-FC exchange rate qualifies for cash flow hedge accounting. In that example, the hedged risk is the risk of changes in USD-equivalent cash flows attributable to foreign currency risk (specifically, the risk of fluctuations in the USD-FC exchange rate). The foreign currency collar is hedging the variability in USD-equivalent cash flows for 100 percent of the forecasted FC 100 million purchase price of inventory for USD-FC exchange rate movements above USD 0.885 per FC 1 and variability in USD-equivalent cash flows for 50 percent of the forecasted FC 100 million purchase price of inventory for USD-FC exchange rate movements below USD 0.80 per FC 1. Cash flow hedge effectiveness will be determined based on changes in the underlying (the USD-FC exchange rate) that cause changes in the collar's intrinsic value (that is, changes below USD 0.80 per FC 1 and above USD 0.885 per FC 1). Because the hedge's effectiveness is based on changes in the collar's intrinsic value, hedge effectiveness must be assessed based on the actual exchange rate changes by comparing the change in intrinsic value of the collar to the change in the specified quantity of the forecasted transaction for those changes in the underlying.
","snippet":"The hedging relationship involving the currency collar designated as a hedge of the effect of fluctuations in the USD-FC exchange rate qualifies for cash flow hedge accounting. In that example, the hedged risk is the ris…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8ae62e10543aa7137792d5b48b72d9e60ef8f8416128dcc6fd2bc0097ba66b0b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-127","para":"55-127","html":"
This Example illustrates the application of paragraph 815-20-55-38.
","snippet":"This Example illustrates the application of paragraph 815-20-55-38.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7b1ddb64b7a3642a77a340917eb35adec22433bf088a053fc074c9225716f1c5","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-128","para":"55-128","html":"
A U.S. parent entity (Parent A) with a U.S. dollar (USD) functional currency has a German subsidiary that has the Euro (EUR) as its functional currency. On January 1, 2001, Parent A issues a five-year, fixed-rate EUR-denominated debt instrument and designates that EUR-denominated debt instrument as a hedge of its net investment in the German subsidiary. On the same date, Parent A enters into a five-year EUR-denominated receive-fixed, pay-Euribor-interest rate swap. Parent A designates the interest rate swap as a hedge of the foreign-currency-denominated fair value of the fixed-rate EUR-denominated debt instrument attributable to changes in Euribor interest rates, which is considered the benchmark interest rate for a hedge of the EUR-denominated fair value of that instrument.
","snippet":"A U.S. parent entity (Parent A) with a U.S. dollar (USD) functional currency has a German subsidiary that has the Euro (EUR) as its functional currency. On January 1, 2001, Parent A issues a five-year, fixed-rate EUR-den…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e1f4001473bf8509770b27247b2cf2d251b5202bef1d9d93dbd3cdf16e427404","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-129","para":"55-129","html":"
As permitted by paragraph 815-20-55-38, Parent A may designate the EUR-denominated debt instrument as a hedge of its net investment in the German subsidiary and also as the hedged item in a fair value hedge of the debt instrument's foreign-currency-denominated fair value attributable to changes in the designated benchmark interest rate. As a result of applying fair value hedge accounting, the debt's carrying amount will be adjusted to reflect changes in its foreign-currency-denominated fair value attributable to interest rate risk. The notional amount of the debt that is designated as the hedging instrument in the net investment hedge will change over time such that it may not match the notional amount of the hedged net investment. The entity then applies the net investment hedge guidance in Subtopic 815-35 and the fair value hedge guidance in Subtopic 815-25. As discussed in paragraphs
815-35-35-13 through 35-14
, because the notional amount of the nonderivative instrument designated as a hedge of the net investment does not match the portion of the net investment designated as being hedged, hedge effectiveness is assessed by comparing the following two values:
  1. a
    The foreign currency transaction gain or loss based on the spot rate change (after tax effects, if appropriate) of that nonderivative hedging instrument
  2. b
    The transaction gain or loss based on the spot rate change (after tax effects, if appropriate) that would result from the appropriate hypothetical nonderivative instrument that has a notional amount that matches the portion of the net investment being hedged. The hypothetical nonderivative instrument also would have a maturity that matches the maturity of the actual nonderivative instrument designated as the net investment hedge.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7As permitted by paragraph 815-20-55-38, Parent A may designate the EUR-denominated debt instrument as a hedge of its net investment in the German subsidiary and also as the hedged item in a fair value hedge of the debt instrument's foreign-currency-denominated fair value attributable to changes in the designated benchmark interest rate. As a result of applying fair value hedge accounting, the debt's carrying amount will be adjusted to reflect changes in its foreign-currency-denominated fair value attributable to interest rate risk. Parent A should exclude the fair value hedge basis adjustment from the assessment of effectiveness in the designated net investment hedging relationship. Accordingly, the notional amount of the debt that is designated as the hedging instrument in the net investment hedge will not change over time as a result of applying fair value hedge accounting such that it may continue to match the portion of the net investment being hedged. The entity then applies the net investment hedge guidance in Subtopic 815-35 and the fair value hedge guidance in Subtopic 815-25. Because the debt’s fair value hedge basis adjustment is not included in the assessment of effectiveness of the net investment hedging relationship, the effect of changes in the spot rate on the fair value hedge basis adjustment is recognized currently in earnings in accordance with Subtopic 830-20.
","snippet":"As permitted by paragraph 815-20-55-38, Parent A may designate the EUR-denominated debt instrument as a hedge of its net investment in the German subsidiary and also as the hedged item in a fair value hedge of the debt i…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1d0f9ba3bf933f9c2fd7492816977681fcd915719f9ceaf3bb7a39a7b555b350","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-130","para":"55-130","html":"
This Example illustrates the application of paragraph 815-20-25-30(a)(2). If a dollar- (USD-) functional, second-tier subsidiary has a Euro (EUR) exposure, the USD-functional consolidated parent entity could designate its USD-EUR derivative instrument as a hedge of the second-tier subsidiary's exposure if the functional currency of the intervening first-tier subsidiary (that is, the parent of the second-tier subsidiary) is also USD. In contrast, if the functional currency of the intervening first-tier subsidiary was the Japanese yen (JPY) (thus requiring the financial statements of the second-tier subsidiary to be translated into JPY before the JPY-denominated financial statements of the first-tier subsidiary are translated into USD for consolidation), the consolidated parent entity could not designate its USD-EUR derivative instrument as a hedge of the second-tier subsidiary's exposure.
","snippet":"This Example illustrates the application of paragraph 815-20-25-30(a)(2). If a dollar- (USD-) functional, second-tier subsidiary has a Euro (EUR) exposure, the USD-functional consolidated parent entity could designate it…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bbd14a92ec3513edd6e5c593363c3645c59551dab4b5be9fecf5599710d6ca29","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-131","para":"55-131","html":"
hybrid instrumentembedded derivativeDuring January 1998, Entity A issued a $100 million structured note that pays quarterly a 3 percent annual rate of interest plus an additional quarterly return based on any increase in the Standard and Poor's S&P 500 Index for that quarter, with a guaranteed return of principal at maturity. Because of grandfathering provisions when the guidance in this Topic initially took effect, the embedded equity derivative instrument was not separated from the debt host contract. The following guidance relates to Entity A's ability to designate various fair value and cash flow hedging relationships involving the example structured note:
  1. a
    Entity A may designate a fair value hedge of the risk of changes in the structured note's overall fair value. Because Entity A must have an expectation at the inception of the hedge and on an ongoing basis that the hedging relationship will be highly effective in achieving offsetting changes in fair value during the period the hedge is designated, it must obtain a derivative instrument or combination of derivative instruments that would be a highly effective hedge of changes in the structured note's overall fair value. While this strategy is permitted, it may be difficult to construct a hedging instrument that is highly effective in offsetting the interest-rate-based and equity-based components of the structured note's return while also encompassing a hedge of credit risk exposure. However, if it is expected that the embedded equity-based component of the structured note will generate de minimis changes in fair value during the hedge period, an expectation of high effectiveness may be established.
  2. b
    Entity A may designate a fair value hedge of the risk of changes in the fair value of the embedded equity derivative that is not being accounted for separately. The equity-based component of the structured note is an equity derivative that provides the holder of the structured note with potential gains resulting from increases in the S&P 500 Index. That equity derivative can be identified as the hedged item because it is a portion of a recognized liability that meets the requirements in paragraph 815-20-25-12(b)(2)(iii).
  3. c
    Entity A may designate a fair value hedge of the risk of changes in the structured note's fair value attributable to changes in the designated benchmark interest rate (for example, the U.S. Treasury rate). Similar to the hedging relationship discussed under (a), Entity A must have an expectation at the inception of the hedge and on an ongoing basis that the hedging relationship will be highly effective in achieving offsetting changes in fair value attributable to the benchmark interest rate during the period the hedge is designated. If Entity A calculates the change in the fair value of the hedged item attributable to interest rate risk based on the full contractual coupon cash flows, it is unlikely that it could establish an expectation that a derivative instrument based on the benchmark interest rate would be highly effective as a hedge of the structured note's fair value attributable to interest rate risk because of the effect of the equity-based-component on the calculation of that change in fair value attributable to interest rate risk. Therefore, in employing this measurement methodology, Entity A must incorporate into that calculation the cash flows that will be generated by both the structured note's interest-rate-based component (based on the 3 percent fixed rate) and an estimation of the cash flows that will be generated by the equity-based component (based on expected increases in the S&P 500 Index). While this hedging relationship would typically be expected not to qualify as a fair value hedge of interest rate risk, if it is expected that the embedded equity-based component of the structured note will have a de minimis effect on the changes in fair value of the structured note during the hedge period, an expectation that the hedging relationship will be highly effective in achieving offsetting changes in fair value attributable to interest rate risk may be established. Alternatively, Entity A may calculate the change in the fair value of the hedged item attributable to interest rate risk using the benchmark interest rate component of the contractual coupon cash flows determined at hedge inception. In employing this measurement methodology, Entity A should not estimate the hedged item's cash flows expected to be generated by the equity-based component.
  4. d
    Entity A may designate a cash flow hedge of the risk of changes in the structured note's total quarterly cash flows. To be highly effective, the entity would be required to designate as the hedging instrument a derivative instrument that is expected to produce offsetting cash flows as the S&P 500 Index increases.
  5. e
    Entity A may not designate a cash flow hedge of interest rate risk of the structured note because it does not have a contractually specified interest rate.
","snippet":"hybrid instrumentembedded derivativeDuring January 1998, Entity A issued a $100 million structured note that pays quarterly a 3 percent annual rate of interest plus an additional quarterly return based on any increase in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ced29fcc067f35a83fbe37fbeaa2d6f9ee9678682dcbdcaef6ace595beac7c3a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-132","para":"55-132","html":"
The following Cases illustrate the application of paragraph 815-20-25-39(d) regarding whether all the variability in a hedged item's functional-currency-equivalent cash flows are eliminated by the effect of the hedge:
  1. a
    Difference in optionality (Case A)
  2. b
    Difference in reset dates (Case B)
  3. c
    Difference in notional amounts (Case C).
","snippet":"The following Cases illustrate the application of paragraph 815-20-25-39(d) regarding whether all the variability in a hedged item's functional-currency-equivalent cash flows are eliminated by the effect of the hedge:\n(a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3116c42c4eb6c78faf8b4aafad76666b2da0f89adacbc3968465db83f4f36df4","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-133","para":"55-133","html":"
An entity has issued a fixed-rate foreign-currency-denominated debt obligation that is callable (that is, by that entity) and desires to hedge its foreign currency exposure related to that obligation with a fixed-to-fixed cross-currency swap. A fixed-to-fixed currency swap could be used to hedge the fixed-rate foreign-currency-denominated debt instrument that is callable even though the swap does not contain a mirror-image call option as long as the terms of the swap and the debt instrument are such that they would be highly effective at providing offsetting cash flows and as long as it was probable that the debt instrument would not be called and would remain outstanding.
","snippet":"An entity has issued a fixed-rate foreign-currency-denominated debt obligation that is callable (that is, by that entity) and desires to hedge its foreign currency exposure related to that obligation with a fixed-to-fixe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2ce2722538b8bf741bc62a0746979fafc1f67a9d8e51333b87a8e7552bc32aab","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-134","para":"55-134","html":"
An entity has issued a variable-rate foreign-currency-denominated debt obligation and desires to hedge its foreign currency exposure related to that obligation. The entity uses a variable-to-fixed cross-currency interest rate swap in which it receives the same foreign currency based on the variable rate index contained in the debt obligation and pays a fixed amount in its functional currency. If the swap would otherwise meet this Subtopic's definition of providing high effectiveness in hedging the foreign currency exposure of the debt instrument, but there is a one day difference between the reset dates in the debt obligation and the swap (that is, the one day difference in reset dates results in the hedge being highly effective, but not perfectly effective), the variable-to-fixed cross-currency interest rate swap could be used to hedge the variable-rate foreign-currency-denominated debt instrument even though there is a one-day difference between the reset dates or a slight difference in the notional amounts in the debt instrument and the swap. This would be true as long as the difference in reset dates or notional amounts is not significant enough to cause the hedge to fail to be highly effective at providing offsetting cash flows.
","snippet":"An entity has issued a variable-rate foreign-currency-denominated debt obligation and desires to hedge its foreign currency exposure related to that obligation. The entity uses a variable-to-fixed cross-currency interest…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ac497c0cb2815582109f3e0812e0ae91308cded951067a35a70370b4719ca52","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-135","para":"55-135","html":"
This Case involves the same facts as in Case B, except that there is no difference in the reset dates. However, there is a slight difference in the notional amount of the swap and the hedged item. If the swap would otherwise meet this Subtopic's definition of providing high effectiveness in hedging the foreign currency exposure of the debt instrument, paragraph 815-20-25-39(d) does not preclude the swap from qualifying for hedge accounting simply because the notional amounts do not exactly match. The mismatch attributable to the slight difference in the notional amount of the swap and the hedged item could be eliminated by designating only a portion of the contract with the larger notional amount as either the hedging instrument or hedged item, as appropriate.
","snippet":"This Case involves the same facts as in Case B, except that there is no difference in the reset dates. However, there is a slight difference in the notional amount of the swap and the hedged item. If the swap would other…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:417a19bef0c0e1940408a1db7d5a1ad9d942347eb5faf648875c059ee341f80d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-136","para":"55-136","html":"
The following Cases illustrate hedging foreign exchange risk under the cash flow hedging model as discussed in paragraph 815-20-25-42 and others:
  1. a
    Firm commitment (Case A)
  2. b
    Fixed-price agreement (Case B).
","snippet":"The following Cases illustrate hedging foreign exchange risk under the cash flow hedging model as discussed in paragraph 815-20-25-42 and others:\n(a) Firm commitment (Case A)\n(b) Fixed-price agreement (Case B).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ae6172366064d40a4fd295f3f68008149cc8ac5f162369d4bc4b25dbf5f8573a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-137","para":"55-137","html":"
On January 1, an entity enters into an agreement to sell 1,000 tons of a nonfinancial asset to an unrelated party on June 30. The agreement meets the definition of a firm commitment. The firm commitment is denominated in the buyer's functional currency, which is not the seller's functional currency. Accordingly, the firm commitment exposes the seller to foreign currency risk. The seller may hedge the foreign currency exposure arising from the firm commitment under the fair value hedging model.
","snippet":"On January 1, an entity enters into an agreement to sell 1,000 tons of a nonfinancial asset to an unrelated party on June 30. The agreement meets the definition of a firm commitment. The firm commitment is denominated in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:086281d57402dbb0a0aecbb9cf9d11de70179db5fff9471e51734fad0ab4d248","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-138","para":"55-138","html":"
The seller may hedge its exposure to foreign currency risk under the cash flow hedging model even though the agreement meets the definition of a firm commitment. Accordingly, the seller may hedge the foreign currency exposure arising from the firm commitment to sell 1,000 tons of the nonfinancial asset under the cash flow hedging model, even though the seller has previously hedged its foreign currency exposure arising from another similar firm commitment under the fair value hedging model.
","snippet":"The seller may hedge its exposure to foreign currency risk under the cash flow hedging model even though the agreement meets the definition of a firm commitment. Accordingly, the seller may hedge the foreign currency exp…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:681e739a2f6effa698f1ff940b34185215be9bfb98eae2539aed5e8448d8df84","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-139","para":"55-139","html":"
On January 1, an entity enters into an agreement to sell 1,000 tons of a nonfinancial asset to an unrelated party on June 30. Although the agreement in this Case does not meet the definition of a firm commitment, the seller's assessment of the observable facts and circumstances is that performance under the agreement is probable. The agreement is denominated in the buyer's functional currency, which is not the seller's functional currency. Accordingly, the foreign-currency-denominated fixed-price agreement exposes the seller to foreign currency risk.
","snippet":"On January 1, an entity enters into an agreement to sell 1,000 tons of a nonfinancial asset to an unrelated party on June 30. Although the agreement in this Case does not meet the definition of a firm commitment, the sel…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:16959e9cb2e1b7828a2a9db629fea323dfe6d40d5a3dcbf134db9c6054f922e7","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-140","para":"55-140","html":"
If the agreement does not meet the definition of a firm commitment, but contains a fixed foreign-currency-denominated price, the seller may not hedge the foreign currency risk relating to the agreement to sell the nonfinancial asset under the fair value hedging model because the agreement is not a recognized asset, a recognized liability, or a firm commitment, which are the only items that can be designated as the hedged item in a fair value hedge. However, the seller may hedge the foreign currency risk relating to the agreement under the cash flow hedging model. The agreement is by definition a forecasted transaction because the sale of the nonfinancial assets will occur at the prevailing market price, that is, the fixed foreign-currency-denominated market price converted into the seller's functional currency at the prevailing exchange rate when the transaction occurs. Therefore, because the agreement includes a fixed foreign-currency-denominated price, the agreement exposes the seller to variability in the functional-currency-equivalent cash flows. Accordingly, the seller may not hedge the foreign currency risk relating to the agreement to sell 1,000 tons of the nonfinancial asset under the fair value hedging model but may hedge the foreign currency risk under the cash flow hedging model.
","snippet":"If the agreement does not meet the definition of a firm commitment, but contains a fixed foreign-currency-denominated price, the seller may not hedge the foreign currency risk relating to the agreement to sell the nonfin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:74fdfd60cbeb110c90fd7e475f798676cfa0a8f68284dfba0f602253a5fe9975","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-141","para":"55-141","html":"
The following Cases illustrate the application of paragraph 815-20-25-41 to fixed-rate and variable-rate foreign-currency-denominated debt:
  1. a
    Foreign-currency-denominated fixed-rate debt (Case A)
  2. b
    Foreign-currency-denominated variable-rate debt (Case B).
","snippet":"The following Cases illustrate the application of paragraph 815-20-25-41 to fixed-rate and variable-rate foreign-currency-denominated debt:\n(a) Foreign-currency-denominated fixed-rate debt (Case A)\n(b) Foreign-currency-d…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8bb267e2160d38aabc83e1bfe8be30ef66250af66314a36a5e2a1f6f882ee33b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-142","para":"55-142","html":"
Specifically, for each of the eight situations presented collectively in Cases A (see paragraph 815-20-55-143) and B (see paragraph 815-20-55-153), an entity can use cash flow hedge accounting to hedge the variability in the specific principal repayments, interest cash flows, or both by applying the guidance in paragraph 815-30-35-3(d) to the specifically identified hedged cash flows. Only an amount that would offset the transaction gain or loss arising from the remeasurement of a hedged cash flow would be reclassified each period from other comprehensive income to earnings. Also, the change in the fair value of the forward points (time value) attributable to the hedged future cash flows would be reported in other comprehensive income, while the change in the fair value of the forward points (time value) attributable to the unhedged future cash flows would be reported in earnings.
","snippet":"Specifically, for each of the eight situations presented collectively in Cases A (see paragraph 815-20-55-143) and B (see paragraph 815-20-55-153), an entity can use cash flow hedge accounting to hedge the variability in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c2084b580cc354871c5e14b685e4dc8bffc7f7b7924b3be8db383a0464086ac1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-143","para":"55-143","html":"
Entity ABC, a U.S. dollar (USD) functional entity, issues a five-year foreign-currency-denominated fixed-rate debt obligation that requires interest payments and partial principal payments annually in the foreign currency with the remaining principal due at the end of five years (maturity) in the foreign currency. More specifically, Entity ABC issues an FC 45 million debt obligation on December 31, 20X0, with FC 5 million due on December 31 of each of the next 4 years and FC 25 million due on December 31, 20X5. Interest payments at 10 percent are paid annually.
","snippet":"Entity ABC, a U.S. dollar (USD) functional entity, issues a five-year foreign-currency-denominated fixed-rate debt obligation that requires interest payments and partial principal payments annually in the foreign currenc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ddcdec9a98ca80b9bdbf2304a76850ec14e0ed47ea800c6874d02b1b5b6db424","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-144","para":"55-144","html":"
In this Case, Entity ABC can use cash flow hedge accounting to hedge the variability in its functional-currency-equivalent cash flows associated with any of the following:
  1. a
    All of the payments of both principal and interest of the debt
  2. b
    All of the payments of principal of the debt
  3. c
    All or a fixed portion of selected payments of either principal or interest of the debt (such as either principal or interest payments on December 31, 2001, and December 31, 2003)
  4. d
    Selected payments of both principal and interest of the debt (such as principal and interest payments on December 31, 2001, and December 31, 2003).
","snippet":"In this Case, Entity ABC can use cash flow hedge accounting to hedge the variability in its functional-currency-equivalent cash flows associated with any of the following:\n(a) All of the payments of both principal and in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e86a739e670a446021e58ddf3deb743ea7684692a67a7e3a9865aee7f7d28eee","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-145","para":"55-145","html":"
For instance, Entity ABC could use a receive-fixed-rate, pay-fixed-rate cross-currency interest rate swap or a series of forward contracts to eliminate variability attributable to foreign exchange rates.
","snippet":"For instance, Entity ABC could use a receive-fixed-rate, pay-fixed-rate cross-currency interest rate swap or a series of forward contracts to eliminate variability attributable to foreign exchange rates.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f0ce16f135f350048e5e576a00260621249a279fdf5a6d61788ccafec4786ca3","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-146","para":"55-146","html":"
The following illustrates the second option, hedging the variability in all principal cash flows attributable to foreign exchange risk.
","snippet":"The following illustrates the second option, hedging the variability in all principal cash flows attributable to foreign exchange risk.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eb98c1e5673597937ac1a864a8c2d4c081fd3a8cd341a55229be805c0f33bea2","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-147","para":"55-147","html":"
Entity ABC enters into the following five forward contracts to hedge all principal cash flows:
  1. a
    Forward contract to purchase FC 5,000 on December 31, 20X1, at a forward rate of 1.05061019
  2. b
    Forward contract to purchase FC 5,000 on December 31, 20X2, at a forward rate of 1.06061601
  3. c
    Forward contract to purchase FC 5,000 on December 31, 20X3, at a forward rate of 1.07066924
  4. d
    Forward contract to purchase FC 5,000 on December 31, 20X4, at a forward rate of 1.08076989
  5. e
    Forward contract to purchase FC 25,000 December 31, 20X5, at a forward rate of 1.090871.
","snippet":"Entity ABC enters into the following five forward contracts to hedge all principal cash flows:\n(a) Forward contract to purchase FC 5,000 on December 31, 20X1, at a forward rate of 1.05061019\n(b) Forward contract to purch…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1cda3c6f8a6500ca29529df78e5d340d45ef51a732aa3fa973e63a574e00e023","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-148","para":"55-148","html":"
Exchange rates are as follows.
","snippet":"Exchange rates are as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ca54c18f1d4cf3e0f1c04c7377e0f5ac9972682e55565ee47729707c4eccf2e1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-149","para":"55-149","html":"
Entity ABC would make the following journal entries.
","snippet":"Entity ABC would make the following journal entries.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3e236f477ad208aed44062c69ef1bc31dfdd3e44773d22607ed64d4ddb35b641","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-150","para":"55-150","html":"
The following schedules support the preceding entries.
","snippet":"The following schedules support the preceding entries.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f84f68e3350a47bbe82c8a789ed8465a2f9cb65e9d1dd1331baa45a4abbd8d1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-151","para":"55-151","html":"
Schedule 2 provides the amount of cost attributed to each period for each forward contract. Each period's cost is determined based on applying the interest method to each forward contract.
","snippet":"Schedule 2 provides the amount of cost attributed to each period for each forward contract. Each period's cost is determined based on applying the interest method to each forward contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d610ef931c09c2450ddf041b4b65f7ff8471e907f8a233d7f2a33e46c709da66","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-152","para":"55-152","html":"
Schedule 3 provides a breakdown for each year-end reporting period.
","snippet":"Schedule 3 provides a breakdown for each year-end reporting period.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c120bf203c6bcd9db8035e7e4a2a4831655cb26ec01ea311cc86d97be399f0e3","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-153","para":"55-153","html":"
Entity XYZ, a U.S. dollar (USD) functional entity issues a five-year foreign-currency-denominated variable-rate debt obligation that requires interest payments and partial principal payments annually in the foreign currency with the remaining principal due at the end of five years (maturity) in the foreign currency. More specifically, Entity XYZ issues an FC 45 million debt obligation on December 31, 20X0, with FC 5 million due on December 31 of each of the next 4 years and FC 25 million due on December 31, 20X5. Interest payments are paid annually based on LIBOR.
","snippet":"Entity XYZ, a U.S. dollar (USD) functional entity issues a five-year foreign-currency-denominated variable-rate debt obligation that requires interest payments and partial principal payments annually in the foreign curre…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3035e12736bf63c783aa597f9d8fd20f4196f1e84a04b164a679d89d7c624326","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-154","para":"55-154","html":"
In this Case the guidance in paragraph 815-20-25-41 provides that Entity XYZ can use cash flow hedge accounting to hedge the variability in its functional-currency-equivalent cash flows associated with any the following:
  1. a
    All of the payments of both principal and interest of the debt
  2. b
    All of the payments of principal of the debt
  3. c
    All or a fixed portion of selected payments of either principal or interest of the debt
  4. d
    Selected payments of both principal and interest of the debt (such as principal and interest payments on December 31, 2001, and December 31, 2003).
","snippet":"In this Case the guidance in paragraph 815-20-25-41 provides that Entity XYZ can use cash flow hedge accounting to hedge the variability in its functional-currency-equivalent cash flows associated with any the following:…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a03330dd122a00d1922ffbbd05e23395f82bbe3106a8da0399d46b04feb0d3d0","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-155","para":"55-155","html":"
An entity could use a receive-variable-rate, pay-fixed-rate cross-currency interest rate swap to eliminate variability attributable to interest rates and foreign exchange rates. In cash flow hedges of recognized foreign-currency-denominated assets and liabilities, the entity must assess whether the changes in cash flows attributable to the risk being hedged are expected to offset at the inception of the hedging relationship and on an ongoing basis. In a manner similar to that described beginning in paragraph 815-30-35-25, the entity would assess the effectiveness of the hedge using the hypothetical derivative method. After the initial quantitative assessment of hedge effectiveness, the entity may elect to assess hedge effectiveness on a qualitative or quantitative basis.
","snippet":"An entity could use a receive-variable-rate, pay-fixed-rate cross-currency interest rate swap to eliminate variability attributable to interest rates and foreign exchange rates. In cash flow hedges of recognized foreign-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8e71f4c84a6095979fa4c1329359e93aeddb4afb60d8105ef7d38025b991001d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-156","para":"55-156","html":"
This Example illustrates whether an oil-linked interest rate cap can be designated in a qualifying hedging relationship.
","snippet":"This Example illustrates whether an oil-linked interest rate cap can be designated in a qualifying hedging relationship.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:889f9548134393e7c0e9802a189677415658c24faed3e82d797ea9f7cc15b9b1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-157","para":"55-157","html":"
Entity A enters into a complex option contract with multiple underlyings for which no net premium is received. The payoffs under the contract are nontraditional. Entity A wishes to designate the option in a cash flow hedging relationship. Specifically, Entity A is an oil producer with five-year variable-rate debt (indexed to three-month LIBOR) and is concerned that an environment of falling oil prices and rising interest rates could affect its ability to meet increasing interest payments on the variable-rate debt. To limit its exposure, Entity A enters into a five-year oil-linked interest rate cap with a notional amount equal to the principal amount of Entity A's three-month LIBOR-based variable-rate debt.
","snippet":"Entity A enters into a complex option contract with multiple underlyings for which no net premium is received. The payoffs under the contract are nontraditional. Entity A wishes to designate the option in a cash flow hed…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b7113381b0a84a0161642134e50db77536a6839594310bc0469166235f3b0c9c","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-158","para":"55-158","html":"
Under the terms of the oil-linked interest rate cap (a complex option), Entity A receives specified payments if both of the following conditions exist:
  1. a
    3-month LIBOR is greater than 7 percent
  2. b
    The price of oil is less than $25 per barrel.
","snippet":"Under the terms of the oil-linked interest rate cap (a complex option), Entity A receives specified payments if both of the following conditions exist:\n(a) 3-month LIBOR is greater than 7 percent\n(b) The price of oil is …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:362e14f69bf8b9ae9633d4cb963c3f25ad3472c8b2f7735ab3ffb0f4cab71a7a","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-159","para":"55-159","html":"
Specifically, if both of the conditions in the preceding paragraph are met, Entity A receives payments under the oil-linked interest rate cap equal to the increased interest payments (that is, for floating-rate amounts above 7 percent) due on their floating-rate debt.
","snippet":"Specifically, if both of the conditions in the preceding paragraph are met, Entity A receives payments under the oil-linked interest rate cap equal to the increased interest payments (that is, for floating-rate amounts a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5f888e8f268e1e48e5578e8e2712be690c785f5c1b49e50d128142840afab424","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-160","para":"55-160","html":"
However, if the daily price of oil goes above $25 per barrel at any time during a quarter, the option is knocked out for only that specific quarter. The option's knock-out feature is reset each quarter such that the interest rate coverage is knocked out for a specific quarter only if the daily price of oil goes above $25 per barrel at any time during that specific quarter. Thus, the option limits Entity A's exposure to increases in interest rates for all quarters in which oil prices remain under $25 per barrel throughout the quarter.
","snippet":"However, if the daily price of oil goes above $25 per barrel at any time during a quarter, the option is knocked out for only that specific quarter. The option's knock-out feature is reset each quarter such that the inte…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:22f66a0050ba977b187afbe6182b548a2b285a4ecb1869f17a354ec45dd51846","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-161","para":"55-161","html":"
The oil-linked interest rate cap cannot be designated in a hedge of the variability in the difference between interest payments and sales proceeds on oil. The oil-linked interest rate cap purchased by Entity A is attempting to hedge Entity A's exposure to variability in the net cash flows related to certain revenue inflows and certain expense outflows. Entity A wishes to reduce the risk that an increase in cash outflows due to increases in interest rates will occur without a concurrent increase in cash inflows due to increases in the price of oil per barrel. Those are separate and dissimilar risks that Entity A wishes to hedge with a single derivative instrument. Thus, the hedged forecasted transaction cannot be a group of oil sales inflows and interest payment outflows. This Subtopic is not structured to permit hedge accounting for strategies involving hedges of a spread between revenues and expenses as Entity A is attempting to accomplish.
","snippet":"The oil-linked interest rate cap cannot be designated in a hedge of the variability in the difference between interest payments and sales proceeds on oil. The oil-linked interest rate cap purchased by Entity A is attempt…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51d7baca6a3fd1c2fb749066ab87daeae3c861564f71e9fa46ecbc41eafe6134","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-162","para":"55-162","html":"
The oil-linked interest rate cap cannot be designated in a hedge of the variability in interest cash flows attributable to changes in LIBOR above 7 percent. Entity A could not simply define its hedged risk as the risk of changes in cash flows attributable to changes in the three-month LIBOR rate for only those periods when the price of oil per barrel is below a specified dollar amount.
","snippet":"The oil-linked interest rate cap cannot be designated in a hedge of the variability in interest cash flows attributable to changes in LIBOR above 7 percent. Entity A could not simply define its hedged risk as the risk of…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ab350dc597e219290d5502bf0e5c257dfd22b1f09c1431608099b60d8a1a7f26","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-163","para":"55-163","html":"
If Entity A wanted to designate the oil-linked interest rate cap as a cash flow hedge of the variability in interest payments on the LIBOR-based variable-rate debt due to changes in interest rates above the contractually specified 7 percent rate in the interest rate cap, Entity A would be required to assess effectiveness whenever interest rates were above that 7 percent rate. Because the cap also has an underlying related to oil prices, there could be times when interest rates will be above the contractually specified interest rate in the cap but the complex option will not result in any cash flows because the selling price of oil is not below the contractually specified price per barrel ($25). In other words, the complex option will be out of the money but Entity A will be required to assess the option's effectiveness in offsetting the increase in interest payments for the effect of the excess of 3-month LIBOR over 7 percent.
","snippet":"If Entity A wanted to designate the oil-linked interest rate cap as a cash flow hedge of the variability in interest payments on the LIBOR-based variable-rate debt due to changes in interest rates above the contractually…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:64698ad8255f3237926f9b315afc285ef5c25c32ba08ae426a3e9c3497e1aeee","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-164","para":"55-164","html":"
Generally, it would be unlikely that Entity A could conclude that the oil-linked interest rate cap is expected to be highly effective in achieving offsetting cash flows if it is reasonably possible that the oil-linked option will knock out the cash inflows from the derivative instrument. In its assessment of the effectiveness of the hedge of the interest payments on the variable-rate debt, Entity A must consider the likelihood that the interest-rate protection from the oil-linked interest rate cap may be knocked out due to oil prices exceeding the contractually specified amount per barrel and it may not exclude from its assessment of effectiveness those periods when the interest rate protection is knocked out. For those quarters when the cap is knocked out, there are no cash flows from the cap to be used to offset the change in the cash flows on the hedged forecasted transaction.
","snippet":"Generally, it would be unlikely that Entity A could conclude that the oil-linked interest rate cap is expected to be highly effective in achieving offsetting cash flows if it is reasonably possible that the oil-linked op…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3a7020ebb12a8a7d27ae21c4d18eb44b39e4104e45af2719ef8a0b8ac468edb6","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-165","para":"55-165","html":"
In the unlikely event that Entity A was able to conclude that the relationship was expected to be highly effective (because the complex option was expected to be highly effective for all changes in the three-month LIBOR rate above the contractually specified rate due to the remoteness that the price of oil per barrel would not be below the contractually specified amount over the contractual life of the debt), the complex option could be used as the hedging derivative.
","snippet":"In the unlikely event that Entity A was able to conclude that the relationship was expected to be highly effective (because the complex option was expected to be highly effective for all changes in the three-month LIBOR …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c95d21cc40efd1da688e710fb8b7968686a4a9a6e7f2361ffa42abbf49c1fd57","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-166","para":"55-166","html":"
The oil-linked interest rate cap cannot be designated in a hedge of the variability in proceeds from the forecasted sale of oil. If Entity A wanted to designate the oil-linked interest rate cap as a cash flow hedge of the risk of overall changes in the sales proceeds from the forecasted sale of oil below the contractually specified price per barrel in the interest rate cap, the hedging relationship would fail to qualify under paragraph 815-20-25-75(b) because the cash inflows from the oil-linked interest rate cap are calculated based on the debt's principal amount and the excess of 3-month LIBOR over 7 percent. Because the cash inflows from the oil-linked interest rate cap are unrelated to the proceeds from oil sales, Entity A could not expect the proposed hedging relationship to be highly effective at achieving offsetting cash flows.
","snippet":"The oil-linked interest rate cap cannot be designated in a hedge of the variability in proceeds from the forecasted sale of oil. If Entity A wanted to designate the oil-linked interest rate cap as a cash flow hedge of th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f032a2081cafdd2e3221c26e306ffea142b897191d0951cd435b587c20e53e6c","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-167","para":"55-167","html":"
This Example illustrates the application of paragraph 815-20-25-60.
","snippet":"This Example illustrates the application of paragraph 815-20-25-60.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a05eb840e720351b4efedc71f90f781835279cbe466da3102d48a85440eec035","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-168","para":"55-168","html":"
A parent entity (Parent A) with the U.S. dollar (USD) as both its functional currency and reporting currency has a subsidiary with a Euro (EUR) functional currency (Subsidiary B). Subsidiary B enters into an unrecognized firm commitment with a third party that will result in Japanese yen (JPY) cash inflows. Concurrent with Subsidiary B entering into the firmly committed contract, Parent A extends a loan to Subsidiary B denominated in JPY, which is funded by a third-party, JPY-denominated borrowing by Parent A. Subsidiary B wishes to designate its JPY-denominated intra-entity loan payable as the hedging instrument in consolidated financial statements in a fair value hedge of foreign currency exposure related to its JPY-denominated unrecognized firm commitment to a third party.
","snippet":"A parent entity (Parent A) with the U.S. dollar (USD) as both its functional currency and reporting currency has a subsidiary with a Euro (EUR) functional currency (Subsidiary B). Subsidiary B enters into an unrecognized…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:729814dfd258d24086f60029201a5103698a9b30e52bee24c2cacd054d315fb0","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-169","para":"55-169","html":"
In accordance with paragraph 830-20-35-1, at each balance sheet date, Subsidiary B's JPY-denominated intra-entity loan payable would be remeasured from the foreign currency (JPY) into Subsidiary B's functional currency (EUR) at the current EUR/JPY spot rate. Similarly, Parent A's intra-entity JPY-denominated receivable and its third-party JPY-denominated loan payable are remeasured from the foreign currency (JPY) into Parent A's functional currency (USD) at the current USD/JPY spot rate. The transaction gains or losses that are generated from remeasurement into functional currency are recorded in net income. If Subsidiary B designates its JPY-denominated intra-entity loan payable as the hedging instrument in consolidated financial statements, the transaction gains and losses related to the intra-entity loan payable would offset the change in fair value of the firm commitment attributable to changes in foreign exchange rates in the consolidated income statement.
","snippet":"In accordance with paragraph 830-20-35-1, at each balance sheet date, Subsidiary B's JPY-denominated intra-entity loan payable would be remeasured from the foreign currency (JPY) into Subsidiary B's functional currency (…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:179212c2f72e93d183dfdea21dfd4403c1b22553b2a9cd47441ef41698c557eb","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-170","para":"55-170","html":"
In this Example, Subsidiary B's JPY-denominated intra-entity payable may be designated as a fair value hedge of the foreign exchange exposure arising from the third-party JPY-denominated firm commitment. Parent A has in place a third-party JPY-denominated borrowing that offsets the exposure of its JPY-denominated intra-entity receivable from Subsidiary B during the period the intra-entity loan receives hedge accounting.
","snippet":"In this Example, Subsidiary B's JPY-denominated intra-entity payable may be designated as a fair value hedge of the foreign exchange exposure arising from the third-party JPY-denominated firm commitment. Parent A has in …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9d30dd84d6513d8aaeaf99a03c30637896d636a927fcfe3540e4c6441cdf5d33","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-171","para":"55-171","html":"
This Example illustrates the application of paragraph 815-20-25-61(b)(2) in offsetting a subsidiary's exposure on a net basis in which neither leg of the third-party position is in the treasury center's functional currency.
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If a U.S. dollar (USD) functional currency treasury center was short 390 Euros (EUR) and long 40,684.80 yen (JPY) after netting its exposures obtained from internal derivatives and the forward exchange rate between EUR and JPY was EUR 1.00 = JPY 104.32, then the treasury center could enter into a third-party receive EUR 390, pay JPY 40,684.80 contract to offset the exposures. In contrast, if the treasury center was short EUR 390 and long JPY 51,000, then the treasury center would need to enter into 2 third-party contracts with the receive leg of the second third-party position being the treasury center's functional currency. For example, the treasury center could enter into a third-party receive EUR 390, pay JPY 40,684.80 contract to offset the EUR exposure and partially offset the JPY exposure. It would then need to enter into a receive functional currency, pay JPY contract to hedge the remainder of its JPY exposure.
","snippet":"If a U.S. dollar (USD) functional currency treasury center was short 390 Euros (EUR) and long 40,684.80 yen (JPY) after netting its exposures obtained from internal derivatives and the forward exchange rate between EUR a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a77db28577f8595946a30cb6efe4e1517dd2ef19d95f2ff0973763db86aa4b7","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-173","para":"55-173","html":"
This Example illustrates the application of paragraphs 815-20-25-12(b)(1) and 815-20-25-75 to a hedge of a portfolio of fixed-rate financial assets.
","snippet":"This Example illustrates the application of paragraphs 815-20-25-12(b)(1) and 815-20-25-75 to a hedge of a portfolio of fixed-rate financial assets.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8ff3790ee8ff86a7f5ac35ce161ff6d66295993a7a4783c40260f225d0685245","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-174","para":"55-174","html":"
Entity A has a portfolio of seasoned, one to four family, fixed-rate mortgages that it wishes to designate as the hedged item in a fair value hedge of the benchmark interest rate (LIBOR). Each loan within the portfolio has similar settlement terms, is collateralized by property in the same geographic region, and has similar scheduled maturities. The loans are all within a specified interest rate band and are prepayable at par; each of the loans contained in the portfolio is expected to react in a generally proportionate manner to changes in the benchmark interest rate based on calculations performed by Entity A.
","snippet":"Entity A has a portfolio of seasoned, one to four family, fixed-rate mortgages that it wishes to designate as the hedged item in a fair value hedge of the benchmark interest rate (LIBOR). Each loan within the portfolio h…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:901b1588c52a74a0a18ef92e4f79c9635b312a0925003ba2286cc28d07852db0","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-175","para":"55-175","html":"
Entity A enters into a pay-fixed, receive-LIBOR interest rate swap with a fair value of zero at the inception of the hedging relationship. The stated maturity of the interest rate swap is consistent with the stated maturities of the loans. The notional amount of the interest rate swap amortizes based on a schedule that is expected to approximate the principal repayments of the loans (excluding prepayments). There is no optionality included in the interest rate swap. As part of its documented risk management strategy associated with this hedging relationship, on a quarterly basis, Entity A intends to do both of the following:
  1. a
    Assess effectiveness of the existing hedging relationship on a quantitative basis for the past three-month period
  2. b
    Consider possible changes in value of the hedging derivative and the hedged item over the next three months in deciding whether it has an expectation that the hedging relationship will continue to be highly effective at achieving offsetting changes in fair value.
","snippet":"Entity A enters into a pay-fixed, receive-LIBOR interest rate swap with a fair value of zero at the inception of the hedging relationship. The stated maturity of the interest rate swap is consistent with the stated matur…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:be46af051850a4aa5be406224ed5fc78c70c2e424d5cdb293af2ce58b9de668b","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-176","para":"55-176","html":"
Entity A's portfolio of loans satisfies the requirements of paragraph 815-20-25-12(b)(1) regarding the grouping of similar assets because the portfolio of loans has been defined in a restrictive manner and Entity A determined, by calculation, that each of the loans contained in the portfolio is expected to react in a generally proportionate manner to changes in the benchmark interest rate. Even though certain of the loans may prepay, each loan still may be considered to have the same exposure to prepayment risk because each loan has a similar prepayment option. When aggregating loans in a portfolio, an entity is permitted to consider among other things prepayment history of the loans (if seasoned) and expected prepayment performance in varying interest rate scenarios.
","snippet":"Entity A's portfolio of loans satisfies the requirements of paragraph 815-20-25-12(b)(1) regarding the grouping of similar assets because the portfolio of loans has been defined in a restrictive manner and Entity A deter…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ea918b78876bdcb0ba242ba4e63008fbe94472ecfda741a3c9ff9cd2138797bf","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-177","para":"55-177","html":"
Entity A's documented hedging strategy meets the requirements of paragraph 815-20-25-75 for a prospective assessment of effectiveness provided the entity established that the hedging relationship is expected to be highly effective in achieving offsetting changes in fair value attributable to the hedged risk during the period that the hedge is designated.
","snippet":"Entity A's documented hedging strategy meets the requirements of paragraph 815-20-25-75 for a prospective assessment of effectiveness provided the entity established that the hedging relationship is expected to be highly…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bbe4ca90fb1186ca88bf277b6d29daec9cd1bbd4dc5bb4cec45364bae95e14d9","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-178","para":"55-178","html":"
Paragraph 815-20-25-79(a) explains that a probable future change in fair value will be more heavily weighted than a reasonably possible future change. For example, Entity A could assign a probability weighting to each possible future change in value of the hedged portfolio. Depending on the level of market interest rates and the expected prepayment rates for the types of loans in the hedged portfolio, Entity A may reach a conclusion that the change in fair value of the swap will be highly effective at offsetting the change in the value of the portfolio of loans, inclusive of the prepayment option. As a result of this analysis, management would conclude that hedge accounting is permitted for the hedging relationship for the next three-month period. Management is required to assess the effectiveness of the existing hedging relationship for the past three-month period. If necessary, the notional amount of the swap in excess of the portfolio balance at the end of each three-month period must be dedesignated to allow high effectiveness to continue in the future.
","snippet":"Paragraph 815-20-25-79(a) explains that a probable future change in fair value will be more heavily weighted than a reasonably possible future change. For example, Entity A could assign a probability weighting to each po…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f133d10db70031dd05b5ebf40b348ecd60bdee81c1d86c9780b16c958546daf9","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-179","para":"55-179","html":"
The following Cases illustrate the application of paragraph 815-20-25-91 to combinations of options in which either the strike price or the notional amount in either the written option component or the purchased option component can fluctuate over the life of the respective component:
  1. a
    Changes in strike prices (Case A)
  2. b
    Changes in notional amounts (Case B).
","snippet":"The following Cases illustrate the application of paragraph 815-20-25-91 to combinations of options in which either the strike price or the notional amount in either the written option component or the purchased option c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ec5db2256e71b856fa50290ed1d4662bf17762b5e65cb59285f164aaa7f74a1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-180","para":"55-180","html":"
Cases A and B share the following assumptions:
  1. a
    An entity wishes to hedge its forecasted sales of a commodity by entering into a five-year commodity-price collar.
  2. b
    Under the collar, the entity will do both of the following:
    1. 1
      Purchase commodity-price put option components (a floor)
    2. 2
      Write commodity-price call option components (a cap).
  3. c
    Each of the alternative collars discussed otherwise meets the criteria established in paragraphs
    815-20-25-89 through 25-90
    including all of the following:
    1. 1
      No net premium is received at inception of the combination of options. Paragraph 815-20-25-94 addresses, in part, whether a net premium is received at any point during the life of the combination of options that the strike price or notional amount is changed.
    2. 2
      The components of the combination of options are based on the same underlying (that is, the same commodity price).
    3. 3
      The components of the combination of options have the same maturity date.
    4. 4
      The notional amount of the written option component is not greater than the notional amount of the purchased option component. Paragraph 815-20-25-94 addresses, in part, whether this criterion should be applied to only the entire contractual term to maturity or to some part thereof.
","snippet":"Cases A and B share the following assumptions:\n(a) An entity wishes to hedge its forecasted sales of a commodity by entering into a five-year commodity-price collar.\n(b) Under the collar, the entity will do both of the f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7bb9c70d788a06f48735c267d74f1e5f957d97077d1f2bec65e5c32cf0535dee","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-181","para":"55-181","html":"
The following table presents both of the following:
  1. a
    Commodity prices implied by the forward price curve based on market prices
  2. b
    The strike prices of two alternative collars.
The minimum prices for each collar represent the strike prices of the purchased put options. The maximum prices for each collar represent the strike prices of the written call options. (Assume that the notional amounts of the two option components are identical and constant over the life of the option components.)
","snippet":"The following table presents both of the following:\n(a) Commodity prices implied by the forward price curve based on market prices\n(b) The strike prices of two alternative collars.\nThe minimum prices for each collar repr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d96ee66633e74a18da9af1e6d44fa8298afeff7452afe79d09679c40954ad42e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-182","para":"55-182","html":"
Note that the 5-year averages of the minimum prices (98.3 cents) and the maximum prices (110.6 cents) of the 2 collars are identical and are consistent with the 5-year average implied by the forward price curve. (That is, 104.5 cents equals the average of the 98.3-cent minimum strike price and the 110.6-cent maximum strike price.) No net premium is received at inception for either collar taking into consideration the entire contractual term of the combination of options from inception to maturity.
","snippet":"Note that the 5-year averages of the minimum prices (98.3 cents) and the maximum prices (110.6 cents) of the 2 collars are identical and are consistent with the 5-year average implied by the forward price curve. (That is…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:65c696a893c2ce94ce98a23f5db5c77c86ec914c9d77e9603d937f7a59a64668","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-183","para":"55-183","html":"
For Collar 2, premiums are received in early periods as consideration for entering into net written options in later periods. Specifically, the (higher-than-average) strike prices in years 20X2 and 20X3 are received (that is, receipt of a net premium) in return for accepting less favorable (lower-than-average) strike prices in years 20X4 through 20X6 (that is, net written options). Thus, at the inception of the hedge and over its life, Collar 2 would be subject to the provisions of paragraph 815-20-25-94.
","snippet":"For Collar 2, premiums are received in early periods as consideration for entering into net written options in later periods. Specifically, the (higher-than-average) strike prices in years 20X2 and 20X3 are received (tha…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:83ef2ffe03824fd8df4883b452f5e45de4e2e83bfd3ba3b35692bd4151f4dc49","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-184","para":"55-184","html":"
The following table presents the notional amounts of two alternative collars. (Assume that the strike prices of the two collars are identical and constant over the life of the collars.)
","snippet":"The following table presents the notional amounts of two alternative collars. (Assume that the strike prices of the two collars are identical and constant over the life of the collars.)","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:42d1ec04536db2a4233181cc06cb6a25e256f0130e4cf63a757ff62efa5947e5","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-185","para":"55-185","html":"
Note that both the sum and average of the notional amounts of the written option component for all periods are not greater than the sum and average of the notional amounts of the purchased option component for all periods.
","snippet":"Note that both the sum and average of the notional amounts of the written option component for all periods are not greater than the sum and average of the notional amounts of the purchased option component for all period…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3db3ef66e34eb6b069250475fc75cf364b370e600bc913f3ad643c978ea0f761","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-186","para":"55-186","html":"
For Collar 4, favorable terms are received in early periods (net purchased options) as consideration for entering into net written options in later periods. Specifically, the (higher-than-average) notional amounts on the purchased put option in years 20X2 through 20X4 are received in return for accepting a less favorable notional amount in years 20X5 and 20X6. Thus, at the inception of the hedge and over its life, Collar 4 in Case B would be subject to the provisions of paragraph 815-20-25-94.
","snippet":"For Collar 4, favorable terms are received in early periods (net purchased options) as consideration for entering into net written options in later periods. Specifically, the (higher-than-average) notional amounts on the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f23097a00120be4fe7c2345a82f7bf5a4e08a6b8c54cd55d8391d5907887d45d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-187","para":"55-187","html":"
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Paragraph superseded by Accounting Standards Update No. 2016-01.
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The following Cases illustrate the application of paragraph 815-20-25-100 to situations in which the hedged item or hedged forecasted transaction may have a risk exposure that is limited, but the derivative instrument that the entity desires to designate as a hedging instrument does not have comparable limits:
  1. a
    Fair value hedge (Case A)
  2. b
    Cash flow hedge (Case B).
","snippet":"The following Cases illustrate the application of paragraph 815-20-25-100 to situations in which the hedged item or hedged forecasted transaction may have a risk exposure that is limited, but the derivative instrument th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f0523bddc3f0914b5e35770e85309992fd641bc653d520feb15f70a79e433d0e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-194","para":"55-194","html":"
For the purposes of both Cases A and B, it is assumed that the shortcut method may not be applied.
","snippet":"For the purposes of both Cases A and B, it is assumed that the shortcut method may not be applied.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d56398c1cd3e2039842bc72eec496dd7c18d86cff553c490f8778200bf671f34","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-195","para":"55-195","html":"
Entity A issues 10-year fixed-rate debt that is callable at the end of the fifth year. It decides to convert the interest payments on the bond from fixed-rate to variable-rate by entering into a 10-year receive-fixed, pay-variable interest rate swap. The interest rate swap is not cancelable at the end of the fifth year. From Entity A's perspective, if interest rates increase, there is a gain on the debt (the liability's fair value decreases) and a loss on the swap (fair value either decreases as an asset or increases as a liability). If interest rates decrease, there is a loss on the debt (the liability's fair value increases) and a gain on the swap (fair value either increases as an asset or decreases as a liability). However, during the first five years, if interest rates decrease, the gain on the swap will exceed the loss on the debt because the debt's fair value change will consider the impact of the call feature, which is in the money when interest rates fall below the stated rate on the debt. Entity A wishes to designate the interest rate swap as the hedging instrument in a fair value hedge of interest rate risk of the fixed-rate debt. The conclusions for Case A and Case B are discussed in paragraph 815-20-55-197.
","snippet":"Entity A issues 10-year fixed-rate debt that is callable at the end of the fifth year. It decides to convert the interest payments on the bond from fixed-rate to variable-rate by entering into a 10-year receive-fixed, pa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:786c42f55e83f95661b2e68b96f86a2d0591db5be67b8fd41005bc81c38973b2","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-196","para":"55-196","html":"
Entity B issues 10-year, variable-rate debt that reprices based on 6-month LIBOR. The interest rate on the debt is capped at 9 percent. Entity B decides to convert the interest payments on the debt from variable-rate to fixed-rate by entering into a receive-variable, pay-fixed interest rate swap. There is no cap on the variable-rate leg of the interest rate swap. From Entity B's perspective, if interest rates decrease, there will be a cumulative reduction in the expected future cash outflows on the debt and a cumulative reduction in the expected future cash inflows on the swap. If interest rates increase, there will be a cumulative increase in the expected future cash outflows on the debt and a cumulative increase in the expected future cash inflows on the swap. However, if interest rates increase such that the variable rate on the swap would be greater than 9 percent, the cumulative increase in the expected future cash inflows on the swap will exceed the cumulative increase in the expected future cash outflows on the debt because of the interest rate cap on the debt, which is in the money if interest rates increase such that the variable rate on the debt would exceed 9 percent. Entity B wishes to designate the interest rate swap as the hedging instrument in a cash flow hedge of interest rate risk of the variable-rate debt.
","snippet":"Entity B issues 10-year, variable-rate debt that reprices based on 6-month LIBOR. The interest rate on the debt is capped at 9 percent. Entity B decides to convert the interest payments on the debt from variable-rate to …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9cbfa46da0f6d5a66c3cf2f04ebe767d17ee7d95837f8bb44bfe3370ed61e5a8","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-197","para":"55-197","html":"
In both Cases A and B, the entity must assess, based on an appropriate methodology, whether the changes in fair value or cash flows of the interest rate swap could be expected to be highly effective in offsetting changes in fair value or cash flows of the debt attributable to interest rate risk taking into account the effect of the embedded call option (Case A) or the effect of the interest rate cap (Case B). As required by paragraph 815-20-25-6, the effect of an embedded derivative of the same risk class must be considered in designating a hedge of an individual risk. Therefore, if the options in Cases A and B are expected to be out of the money based on a probability-weighted analysis of the range of possible changes in interest rates, then those options would be expected to have a minimal effect on changes in fair value or cash flows of the debt, and the hedging relationships could meet the requirement for an expectation of high effectiveness. In the case of a fair value hedge of callable debt discussed in Case A, in accordance with paragraph 815-20-25-6B, Entity A may assess hedge effectiveness on the basis of whether the debt will be called at the end of the fifth year because of expected changes in benchmark interest rates, but not because of other factors potentially affecting the exercise of the call feature. Entity A intends to assess hedge effectiveness on this basis.
","snippet":"In both Cases A and B, the entity must assess, based on an appropriate methodology, whether the changes in fair value or cash flows of the interest rate swap could be expected to be highly effective in offsetting changes…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c97c8552dfba07e8dcd5a19eee33b0374461c624521123314f7b54440b3307ba","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-198","para":"55-198","html":"
Paragraph superseded by Accounting Standards Update No. 2016-02.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2016-02.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2d88dd75386a0ed833de6a858e05e9c6a7cd74cc5efef3dbef3e1d5610484a67","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-199","para":"55-199","html":"
This Example addresses whether the shortcut method in paragraph 815-20-25-102 can be applied in the circumstances illustrated. This Example has the following assumptions:
  1. a
    Entity A acquires Entity B in a business combination. A business combination is accounted for as the acquisition of one entity by another entity. The acquiring entity, Entity A, records the assets acquired and liabilities assumed at fair value.
  2. b
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  3. c
    At the date of the business combination, Entity A and Entity B both have certain hedging relationships that have met the requirements as discussed beginning in paragraph 815-20-25-102 and that are being accounted for by the respective entities under the shortcut method of accounting.
  4. d
    At the date of the business combination, the fair value of the hedging swaps in Entity B's hedging relationships is other than zero.
","snippet":"This Example addresses whether the shortcut method in paragraph 815-20-25-102 can be applied in the circumstances illustrated. This Example has the following assumptions:\n(a) Entity A acquires Entity B in a business comb…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:df738ad17c485d389f897df72677e57ebde91ccd86370fa13f81d3160d8f33b2","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-200","para":"55-200","html":"
Unless the applicable hedging relationships meet the requirements in paragraph 815-20-25-102 at the date of the business combination (which would be highly unlikely because the swap's fair value would rarely be zero at that date) and the combined entity chooses to designate the swaps and the hedged items as hedging relationships to be accounted for under the shortcut method, the acquiror cannot continue to use the shortcut method of accounting for the hedging relationships of the acquiree that were being accounted for by the acquiree under the shortcut method of accounting at the date of the business combination.
","snippet":"Unless the applicable hedging relationships meet the requirements in paragraph 815-20-25-102 at the date of the business combination (which would be highly unlikely because the swap's fair value would rarely be zero at t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8a704e40dd17104964c7f7bbf3fe23068b60f472270ebb7b918a6c2ef6597df","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-201","para":"55-201","html":"
Entity A is acquiring the individual assets and liabilities of Entity B at the date of the business combination and accordingly any preexisting hedging relationships of old Entity B must be designated anew by the combined entity at the date of the business combination in accordance with the relevant requirements of this Subtopic.
","snippet":"Entity A is acquiring the individual assets and liabilities of Entity B at the date of the business combination and accordingly any preexisting hedging relationships of old Entity B must be designated anew by the combine…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:442fe299d7dbdf6156bd6cac1b84bec27ad4b3023b4bdbd3dcf4395eef9b0ce8","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-202","para":"55-202","html":"
In part, this Example entails a determination of whether the business combination results in a new inception date for the combined entity for hedging relationships entered into by the acquiree before the consummation of the business combination that remain ongoing at the date of the business combination. The concept of acquisition accounting follows the accounting for acquisitions of individual assets and liabilities. That is, the combined entity should account for the assets and liabilities acquired in the business combination consistent with how it would be required to account for those assets and liabilities if they were acquired individually in separate transactions. The acquisition method is based on the premise that in an acquisition, the acquired entity (Entity B) ceases to exist and only the acquiring entity (Entity A) survives. Thus, the postacquisition hedging relationship designated by Entity A is a new relationship that has a new inception date.
","snippet":"In part, this Example entails a determination of whether the business combination results in a new inception date for the combined entity for hedging relationships entered into by the acquiree before the consummation of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a24ad3bec1cd2fbc9d32a30c2e98acd51e97de0976dcd821bf885b317b900328","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-203","para":"55-203","html":"
Even in the unlikely circumstance that the new hedging relationship qualifies for the shortcut method, there would be no continuation of the shortcut method of accounting that had been applied by the acquired entity.
","snippet":"Even in the unlikely circumstance that the new hedging relationship qualifies for the shortcut method, there would be no continuation of the shortcut method of accounting that had been applied by the acquired entity.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:181ba0a59588a76026061c845ab5c94a0aa7b92ce85c1215c4864413bd54b747","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-204","para":"55-204","html":"
This Example illustrates the application of paragraph 815-20-25-118. Under the guidance in that paragraph, if a derivative instrument with a five-year term is designated as the hedging instrument in a fair value hedge of a financial asset that also has a five-year term, an entity may base its expectation that the hedging relationship will be highly effective in achieving offsetting changes in fair value for the risk being hedged by considering the possible changes in value occurring only over a shorter period than the life of the derivative instrument, such as over only the first three months of the derivative instrument's five-year life. For example, an entity may specify, in documenting its risk management strategy, that every three months it will do both of the following:
  1. a
    It will assess the effectiveness of the existing hedging relationship for the past three-month period.
  2. b
    It intends to consider possible changes in value of the hedging derivative and the hedged item over the next three months in deciding whether it has an expectation that the hedging relationship will continue to be highly effective at achieving offsetting changes in fair value.
","snippet":"This Example illustrates the application of paragraph 815-20-25-118. Under the guidance in that paragraph, if a derivative instrument with a five-year term is designated as the hedging instrument in a fair value hedge of…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:84628e9db4a5553b50ff6b7f4e9bd82fc2a0b6af963022d850ec1ac6d3f60c25","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-205","para":"55-205","html":"
This Example illustrates the application of paragraph 815-20-25-124.
","snippet":"This Example illustrates the application of paragraph 815-20-25-124.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:872e96750df7f5c1dd1c7c53ebb06353d3a58d073990013756998e48ca8d4873","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-206","para":"55-206","html":"
Entity XYZ, a U.S. dollar (USD) functional currency entity forecasts the purchase of goods with the payment denominated in pounds sterling (GBP). To hedge the foreign currency exposure from the forecasted purchase, Entity XYZ purchases an at-the-money call option on GBP. The notional amount of the option equals the forecasted value of goods to be purchased, and the option exercise date is the date the purchase consummates. At inception of the hedging relationship the strike price and the forward market exchange rate for GBP 1 are both USD 1.50. The time value component on the option is USD 0.15 per GBP. The foreign currency option in this Example could be effective as a hedging instrument only if effectiveness for that hedging relationship were based solely on either of the following:
  1. a
    Changes in the option's intrinsic value
  2. b
    Changes in the option's entire fair value.
","snippet":"Entity XYZ, a U.S. dollar (USD) functional currency entity forecasts the purchase of goods with the payment denominated in pounds sterling (GBP). To hedge the foreign currency exposure from the forecasted purchase, Entit…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a2771da6177da1065cb0cb4ee7ac63b671d249fcd1fd8815a34f0b1f1cf3897d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-207","para":"55-207","html":"
As stated in paragraph 815-20-25-124, it is inappropriate to assert that only limited risk exposures are being hedged, such as exposures related only to currency-exchange-rate changes above USD 1.65 per GBP.
","snippet":"As stated in paragraph 815-20-25-124, it is inappropriate to assert that only limited risk exposures are being hedged, such as exposures related only to currency-exchange-rate changes above USD 1.65 per GBP.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a0671230f06e262010bb474e9c5a2e4769d3d38a8fbe2c0d27f404e18f865b0","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-208","para":"55-208","html":"
This Example illustrates the application of paragraph 815-20-25-126.
","snippet":"This Example illustrates the application of paragraph 815-20-25-126.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:96909656c0f03e4e6b3e9a28dfb9da6b9236aa650fc07d18cd36cffe0d0ac467","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-209","para":"55-209","html":"
An entity forecasts that 1 year later it will purchase 1,000 ounces of gold at then current market prices for use in its operations. The entity wishes to protect itself against increases in the cost of gold above the current market price of $275 per ounce. The entity purchases a 1-year cash-settled at-the-money gold option on 1,000 ounces of gold, paying a premium of $10,000. If the price of gold is above $275 at the maturity (settlement) date, the counterparty will pay the entity 1,000 times the difference. If the price of gold is $275 or below at the maturity date, the contract expires worthless. The option cannot be exercised before its contractual maturity date. The entity designates the purchased option contract as a hedge of the variability in the purchase price (cash outflow) of the 1,000 ounces of gold for prices above $275 per ounce.
","snippet":"An entity forecasts that 1 year later it will purchase 1,000 ounces of gold at then current market prices for use in its operations. The entity wishes to protect itself against increases in the cost of gold above the cur…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d7f8eaa60385636082e41695b8585f9cfabc415bb65ec4892be025e8d5de4878","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-210","para":"55-210","html":"
In assessing the effectiveness of the cash flow hedge, the entity would determine that because the change in the expected future pay-off amount of the purchased option completely offsets the change in the expected future cash flows on the purchase of 1,000 ounces of gold above $275 per ounce, the hedging relationship is expected to be highly effective under paragraph 815-20-25-75(b).
","snippet":"In assessing the effectiveness of the cash flow hedge, the entity would determine that because the change in the expected future pay-off amount of the purchased option completely offsets the change in the expected future…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0dc81bfd2c862ff79de2e3459a0eb9baf0e54a2080bfa37ca558f3bbadb47054","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-211","para":"55-211","html":"
The entity would conclude there is perfect effectiveness because all of the following conditions exist:
  1. a
    All the critical terms of the hedging derivative completely match the hedged forecasted transaction.
  2. b
    The strike price of the hedging instrument matches the specified level ($275) beyond which the entity's exposure is being hedged.
  3. c
    The hedging derivative's inflows at expiration completely offset the hedged transaction's outflows for any increase in the price of gold above $275 per ounce.
  4. d
    The hedging option cannot be exercised before its contractual maturity date.
","snippet":"The entity would conclude there is perfect effectiveness because all of the following conditions exist:\n(a) All the critical terms of the hedging derivative completely match the hedged forecasted transaction.\n(b) The str…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:00bf19098338eb9850951cd4ffebf89e6a4acf90ea9d537cd0c56f45e4f2fdd8","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-212","para":"55-212","html":"
This Example illustrates the application of paragraph 815-20-25-131.
","snippet":"This Example illustrates the application of paragraph 815-20-25-131.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:268041869b1aa971352adfea608edca13fb78730eb8b1b8128a28cde81cc9a02","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-213","para":"55-213","html":"
Entity JPN is a Japanese subsidiary of a U.S. entity. Entity JPN's functional currency is the Japanese yen (JPY). Entity JPN has forecasted inventory purchases to be paid in U.S. dollars (USD). As a result, Entity JPN is exposed to changes in the JPY-USD exchange rate: its functional currency cash outflows will increase (loss) if JPY weakens versus USD and decrease (gain) if JPY strengthens versus USD.
","snippet":"Entity JPN is a Japanese subsidiary of a U.S. entity. Entity JPN's functional currency is the Japanese yen (JPY). Entity JPN has forecasted inventory purchases to be paid in U.S. dollars (USD). As a result, Entity JPN is…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ad55b02ea0f566640c0e9f44fb94b0bcfd0d92a1b92a96ac81aaa1da29ae5e91","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-214","para":"55-214","html":"
Entity JPN would like to hedge the foreign currency exposure related to the forecasted transaction by entering into a combination of foreign-currency-denominated option contracts designated as a single hedging instrument.
","snippet":"Entity JPN would like to hedge the foreign currency exposure related to the forecasted transaction by entering into a combination of foreign-currency-denominated option contracts designated as a single hedging instrument…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e346f0018cb8e77f46679115ea8b62f4ff04dc8d7c71070b034dc2b9b2c556ad","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-215","para":"55-215","html":"
For purposes of this discussion, assume all of the following:
  1. a
    Entity JPN has met the qualifying criteria regarding forecasted transactions eligible for designation as hedged transactions pursuant to paragraph 815-20-25-15 and the options are entered into contemporaneously with the same counterparty and can be transferred independently of each other.
  2. b
    The combination of foreign currency option contracts meets all of the conditions in paragraphs
    815-20-25-89 through 25-90
    to be considered a net purchased option (that is, considered not to be a net written option subject to the requirements of paragraph 815-20-25-94).
","snippet":"For purposes of this discussion, assume all of the following:\n(a) Entity JPN has met the qualifying criteria regarding forecasted transactions eligible for designation as hedged transactions pursuant to paragraph 815-20-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f6b43ba78056f0c9caf5fb81127fc074a055d90f561b4bdf88552e51da8494f8","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-216","para":"55-216","html":"
Entity JPN employs the following hedging strategy:
  1. a
    The forecasted transaction is estimated at USD 150,000,000. The at-the-money forward rate is JPY 120 per USD 1.
  2. b
    Entity JPN's documented hedge objective is to offset the foreign exchange risk to the functional currency equivalent cash flows at levels above JPY 125/USD 1 and in the range from JPY 113/USD 1 to JPY 108/USD 1. In the range JPY 113/USD 1 to JPY 125/USD 1 and at levels below JPY 108/USD 1, Entity JPN chooses not to offset the foreign exchange risk to the functional currency equivalent cash flows.
  3. c
    To implement this hedge objective, Entity JPN enters into all three of the following option contracts and jointly designates them as the hedging instrument:
    1. 1
      Option 1. One purchased option that gives Entity JPN the right to purchase USD 150,000,000 at an exchange rate of JPY 125/USD 1. Premium paid: USD 1,536,885.
    2. 2
      Option 2. One sold (written) option that, if exercised, obligates Entity JPN to purchase USD 150,000,000 at an exchange rate of JPY 113/USD 1. Premium received: USD 1,536,885.
    3. 3
      Option 3. One purchased option that gives Entity JPN the right to sell USD 150,000,000 at an exchange rate of JPY 108/USD 1. Premium paid: USD 737,705.
","snippet":"Entity JPN employs the following hedging strategy:\n(a) The forecasted transaction is estimated at USD 150,000,000. The at-the-money forward rate is JPY 120 per USD 1.\n(b) Entity JPN's documented hedge objective is to off…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dc868397a5a1ccffc6fd2c8fba9915788d3cae7b551107fb6ef31bb1acc85e5e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-217","para":"55-217","html":"
The time value of the combination of options is to be excluded from the assessment of effectiveness and, therefore, effectiveness is based only on changes in intrinsic value related to the combination of options.
","snippet":"The time value of the combination of options is to be excluded from the assessment of effectiveness and, therefore, effectiveness is based only on changes in intrinsic value related to the combination of options.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:10d0e6b62a30adcdeb444f3ad614302f20b059d06f6f8989aad92697a49f4e55","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-218","para":"55-218","html":"
The purpose of Option 1 is to protect Entity JPN when the JPY-USD exchange rate increases above JPY 125/USD 1. As the JPY-USD exchange rate increases, Entity JPN will be required to purchase the USD 150,000,000 inventory at a greater JPY-equivalent cost. As the JPY-USD exchange rate increases above JPY 125/USD 1, the intrinsic value of the option increases as the option is increasingly in the money. That increase in the option's intrinsic value is expected to offset the increase in the JPY-equivalent expenditure on the forecasted transaction.
","snippet":"The purpose of Option 1 is to protect Entity JPN when the JPY-USD exchange rate increases above JPY 125/USD 1. As the JPY-USD exchange rate increases, Entity JPN will be required to purchase the USD 150,000,000 inventory…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ee585a9c76a5d723be0154475a2cccc8253e1b446d5168b5d073007fef4584bf","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-219","para":"55-219","html":"
Entity JPN also writes an option (Option 2) that obligates Entity JPN to purchase USD from the counterparty at an exchange rate of JPY 113/USD 1. The counterparty will exercise the option whenever the JPY-USD exchange rate is below JPY 113/USD 1. As the JPY-USD exchange rate decreases, Entity JPN will be required to purchase the USD 150,000,000 inventory at a lesser JPY-equivalent cost. As the JPY-USD exchange rate decreases below JPY 113/USD 1, Entity JPN's losses related to increases in the intrinsic value of the written option are expected to offset the decrease in the JPY-equivalent expenditure on the forecasted transaction.
","snippet":"Entity JPN also writes an option (Option 2) that obligates Entity JPN to purchase USD from the counterparty at an exchange rate of JPY 113/USD 1. The counterparty will exercise the option whenever the JPY-USD exchange ra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a7116e9221ddfe472afc7f20978de5e30d7f1bf3b82227db7f66d35881c946c1","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-220","para":"55-220","html":"
Entity JPN also purchases an option to sell USD (Option 3) for a notional amount equal to the notional of the written option (Option 2) with a strike price of JPY 108/USD 1. Entity JPN will exercise Option 3 whenever the JPY-USD exchange rate is below JPY 108/USD 1. When the exchange rate is below JPY 108/USD 1, although Entity JPN will be obligated to make a payment in relation to Option 2, it will also receive a payment in relation to Option 3. As a result of purchasing Option 3, Entity JPN will be exposed to exchange rate fluctuations on Option 2 only when the exchange rate is between JPY 113/USD 1 and JPY 108/USD 1. Hence, with Options 2 and 3, Entity JPN has effectively limited its hedge offset to changes in cash flows on the forecasted item to levels between JPY 113/USD 1 and JPY 108/USD 1. Changes in the exchange rate below JPY 108/USD 1 result in no change in the intrinsic value of the combination of options because the change in Option 2 offsets the change in Option 3. However, when the exchange rate is below JPY 108/USD 1, the combination of options has an intrinsic value other than zero.
","snippet":"Entity JPN also purchases an option to sell USD (Option 3) for a notional amount equal to the notional of the written option (Option 2) with a strike price of JPY 108/USD 1. Entity JPN will exercise Option 3 whenever the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3be4de4fafac9f6126169efb074ed55fa5215a355cb8382a34e647705ff6386e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-221","para":"55-221","html":"
In summary, potential changes in intrinsic value related to this combination option hedge construct (Options 1, 2, and 3) would limit the hedge offset to corresponding changes in functional currency cash flows on the forecasted transaction only at levels above JPY 125/USD 1 and in the range JPY 108/USD 1 to JPY 113/USD 1, consistent with Entity JPN's documented hedge objective.
","snippet":"In summary, potential changes in intrinsic value related to this combination option hedge construct (Options 1, 2, and 3) would limit the hedge offset to corresponding changes in functional currency cash flows on the for…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1b02433605ed8a7f33fb0be6c45d106cb348b643272b950151ca9af94795dca8","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-222","para":"55-222","html":"
The cash flow hedging relationship in this Example involving a combination of options may be considered effective at offsetting the change in cash flows due to foreign currency exchange rate movements related to the forecasted transaction. Specifically, Entity JPN may assess the effectiveness of the hedge based only on changes in the underlying that cause a change in the intrinsic value of the combination of options. Thus, in that case, Entity JPN would assess effectiveness of the hedge only when the JPY-USD exchange rate is above JPY 125/USD 1 and between JPY 113/USD 1 and JPY 108/USD 1. Likewise, Entity JPN's assessment would exclude changes in the JPY-USD exchange rate between JPY 113/USD 1 and JPY 125/USD 1 and below JPY 108/USD 1.
","snippet":"The cash flow hedging relationship in this Example involving a combination of options may be considered effective at offsetting the change in cash flows due to foreign currency exchange rate movements related to the fore…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a4933144604427afea160b8e0b105f4dc8c4a16323bb1c844b32077c8864951","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-223","para":"55-223","html":"
The combination of options used by Entity JPN as a hedging instrument is deemed to be a net purchased option based on the provisions of this Subtopic. Therefore, the hedging relationship avoids being subject to the hedge effectiveness test for written options in paragraph 815-20-25-94.
","snippet":"The combination of options used by Entity JPN as a hedging instrument is deemed to be a net purchased option based on the provisions of this Subtopic. Therefore, the hedging relationship avoids being subject to the hedge…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b86bf7828bb8e2e43c50e2751417b772ba2aa93413e8e62a83a38b5383d69da5","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-224","para":"55-224","html":"
In particular, as it relates to paragraph 815-20-25-89(a), the aggregate premium (that is, the time values) for the three options comprising the hedging instrument results in Entity JPN paying a net premium.
","snippet":"In particular, as it relates to paragraph 815-20-25-89(a), the aggregate premium (that is, the time values) for the three options comprising the hedging instrument results in Entity JPN paying a net premium.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:203dfe939ed609d2f7ec141af16335fd8f7d43ceb6fddbbc05357a4e5c040460","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-225","para":"55-225","html":"
The evaluation of whether a net premium has been received under paragraph 815-20-25-89(a) must include consideration of only the time value components of the options designated as the hedging instrument. That evaluation must not include the intrinsic value, if any, of the options.
","snippet":"The evaluation of whether a net premium has been received under paragraph 815-20-25-89(a) must include consideration of only the time value components of the options designated as the hedging instrument. That evaluation …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5950da5f96052255849b792b7abc65c0c85903a9c5e3ab059d396722309aa476","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-226","para":"55-226","html":"
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This Example illustrates the application of paragraph 815-20-25-95.
","snippet":"This Example illustrates the application of paragraph 815-20-25-95.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:61271d05a478087b861392b4c01bfc58fc53da290daf5b608765d114c4fd412e","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-231","para":"55-231","html":"
Entity X has LIBOR-indexed floating-rate debt. To hedge its exposure to variability in expected future cash outflows attributable to changes in LIBOR swap rate (the contractually specified interest rate), it enters into an interest rate collar with a bank when the current LIBOR swap rate is 6 percent. The collar also is indexed to LIBOR and consists of a purchased cap with the strike rate equal to 8 percent and a written floor with the strike rate equal to 5 percent. The purchased cap goes into effect when LIBOR increases above 8 percent, and the written floor goes into effect when LIBOR decreases below 5 percent. Thus, the interest collar has the effect of limiting the interest rate of the floating-rate debt to a range between 5 percent and 8 percent. On the basis of market conditions as of the collar transaction date, Entity X received a net premium from the bank.
","snippet":"Entity X has LIBOR-indexed floating-rate debt. To hedge its exposure to variability in expected future cash outflows attributable to changes in LIBOR swap rate (the contractually specified interest rate), it enters into …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f2ad82f1f007afe116e392f12964889013409934cc535bebeb9029eb5f2223fd","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-232","para":"55-232","html":"
In accordance with paragraphs
815-20-25-88 through 25-90
, the combination of options in the collar in this Example is a net written option from Entity X's perspective. Therefore, the written-option test in paragraphs
815-20-25-94 through 25-95
must be applied to determine whether the hedging relationship between the debt and the collar qualifies for cash flow hedge accounting. That test requires that the combination of the hedged item and the written option provides at least as much potential for favorable cash flows as exposure to unfavorable cash flows for all possible percentage changes (from zero percent to 100 percent) in the LIBOR index.
","snippet":"In accordance with paragraphs 815-20-25-88 through 25-90, the combination of options in the collar in this Example is a net written option from Entity X's perspective. Therefore, the written-option test in paragraphs 815…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5ed8c176ddb20a94df9ad86bb86f4fea9990feb1d7bd59b63a5e27cec31a57f","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-233","para":"55-233","html":"
The following table shows the calculation of the favorable cash flows and unfavorable cash flows for LIBOR changes of 50 percent.
","snippet":"The following table shows the calculation of the favorable cash flows and unfavorable cash flows for LIBOR changes of 50 percent.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f5f84374d4aabfb6c4a02c3bbaf968a71b74fe70c9103b458fb52a6830501df9","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-234","para":"55-234","html":"
The calculations in the table in paragraph 815-20-55-233 demonstrate that for a 50 percent fluctuation in the LIBOR rate, the collar would fail the written-option test in paragraph 815-20-25-94 because a 50 percent favorable change in LIBOR (that is, a decrease) would not provide at least as much favorable cash flows as unfavorable cash flows that would result from a 50 percent unfavorable change in LIBOR (that is, an increase). Therefore, the combination of options would not be an eligible hedging instrument.
","snippet":"The calculations in the table in paragraph 815-20-55-233 demonstrate that for a 50 percent fluctuation in the LIBOR rate, the collar would fail the written-option test in paragraph 815-20-25-94 because a 50 percent favor…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:537916118ab2ddba670949c2c732a257b053ba1bad7dc32d577c4e411d04b747","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-235","para":"55-235","html":"
This Example illustrates the application of paragraph 815-20-25-83A.
","snippet":"This Example illustrates the application of paragraph 815-20-25-83A.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d6abda3cf37af160890fa8df707d621a603938cd5919145d330f73211929f9ef","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-236","para":"55-236","html":"
On December 31, 20X0, an entity intends to purchase 1,000 barrels of crude oil in December 20X4. The entity decides to hedge changes in the price of the crude oil by purchasing an at-the-money call option on 1,000 barrels of crude oil. The entity purchases the option on December 31, 20X0, with an initial premium of $9,250, a strike price of $75, and a maturity date of December 31, 20X4. The entity designates the option as the hedging instrument in a cash flow hedge of a forecasted purchase of crude oil.
","snippet":"On December 31, 20X0, an entity intends to purchase 1,000 barrels of crude oil in December 20X4. The entity decides to hedge changes in the price of the crude oil by purchasing an at-the-money call option on 1,000 barrel…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:de1c5a6507d6056139089a68ba16de9eecad37d1b5f80f52a060038ed30a57b0","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-237","para":"55-237","html":"
The entity elects to exclude the time value of the option from the assessment of effectiveness in accordance with paragraph 815-20-25-82 and applies the amortization approach for recognizing excluded components in accordance with paragraph 815-20-25-83A. The entity applies a straight-line amortization method and, based on the initial option premium of $9,250, the entity determines an annual amortization amount of $2,313. The entity records all changes in fair value over the term of the derivative in other comprehensive income and records amortization in earnings each period with an offsetting entry to other comprehensive income. The changes in value of the option over the life of the hedging relationship are as follows.
","snippet":"The entity elects to exclude the time value of the option from the assessment of effectiveness in accordance with paragraph 815-20-25-82 and applies the amortization approach for recognizing excluded components in accord…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6495478bb8ec0b9afcd654e4f12f49fbb7202bb52280b11f79b61de6e969e27","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"citation":"815-20-55-238","para":"55-238","html":"
On December 31, 20X4, the entity purchases 1,000 barrels of crude oil, and the option expires with an intrinsic value of $6,000. This amount will remain in accumulated other comprehensive income until the commodity is sold in 20X5. The journal entries over the life of the hedging relationship are as follows.
","snippet":"On December 31, 20X4, the entity purchases 1,000 barrels of crude oil, and the option expires with an intrinsic value of $6,000. This amount will remain in accumulated other comprehensive income until the commodity is so…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1c17d3a8ec9221de7b366617570e02350d46b7df55ac60ee15f166810143c0c0","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a652deb56bdcd981b1871b225631df96c53389c96a445ef6ab434b2a0d7d018","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8edd2719d01b74b815297e1f2a8063926b8079da5704d504aaa16495c1c8153d","downloaded_from":"2026-09-10T01:36:55.855Z","last_downloaded_at":"2026-09-10T01:36:55.855Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480561","source_sha256":"1b956af94bf017390956d9d224599bcf794d8042285e60136ddfffa7b103f375"}},{"number":"65","label":"65 Transition and Open Effective Date Information","anchor":"65-transition-and-open-effective-date-information","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-20-65-1","para":"65-1","html":"
Paragraph superseded on 07/02/2014 after the end of the transition period stated in Accounting Standards Update No. 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnight Index Swap Rate) as a Benchmark Interest Rate for Hedge Accounting Purposes.
","snippet":"Paragraph superseded on 07/02/2014 after the end of the transition period stated in Accounting Standards Update No. 2013-10, Derivatives and Hedging (Topic 815): Inclusion of the Fed Funds Effective Swap Rate (or Overnig…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a7cf4c45fc29566062cf2488327d104860c0be28892b79845e707f27471546b","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}},{"citation":"815-20-65-2","para":"65-2","html":"
Paragraph superseded on 07/17/2019 after the end of the transition period stated in Accounting Standards Update No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships.
","snippet":"Paragraph superseded on 07/17/2019 after the end of the transition period stated in Accounting Standards Update No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ebb8762da1bc67dc953a1cda192d01369662e00e7a52095900d975af89c6a84d","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}},{"citation":"815-20-65-3","para":"65-3","html":"
Paragraph superseded on 07/10/2023 after the end of the transition period stated in Accounting Standards Updates No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.
","snippet":"Paragraph superseded on 07/10/2023 after the end of the transition period stated in Accounting Standards Updates No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activitie…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2a74dbc43389fdddf2d9e93bb99483b45b703f9576827476920f1aeae5246cf3","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}},{"citation":"815-20-65-4","para":"65-4","html":"
Paragraph superseded on 12/14/2022 after the end of the transition period stated in Accounting Standards Update No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes.
","snippet":"Paragraph superseded on 12/14/2022 after the end of the transition period stated in Accounting Standards Update No. 2018-16, Derivatives and Hedging (Topic 815): Inclusion of the Secured Overnight Financing Rate (SOFR) O…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bcba49483cc9be464290d97861c4ab2ffd0146cc0a9cc5ee15cdd8fdd058a4c6","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}},{"citation":"815-20-65-5","para":"65-5","html":"
Paragraph superseded on 12/14/2022 after the end of the transition period stated in Accounting Standards Update No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.
","snippet":"Paragraph superseded on 12/14/2022 after the end of the transition period stated in Accounting Standards Update No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0c73b992b746bc4d3d375f81ee0732cef55f81811af4a34861ab2c30de599880","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}},{"citation":"815-20-65-6","para":"65-6","html":"
Paragraph superseded on 06/30/2025 after the end of the transition period stated in Accounting Standards Update No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method.
","snippet":"Paragraph superseded on 06/30/2025 after the end of the transition period stated in Accounting Standards Update No. 2022-01, Derivatives and Hedging (Topic 815): Fair Value Hedging—Portfolio Layer Method.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09a51b3771703a00a80f799af581c708857a9c1bb3a24855eaa2c0cabecc4143","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9e98b120450b9da46f9e0d3bb40a1cfe8f003f7d0d5b356937700284afc9ecf","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}},{"block":null,"heading":"Transition Related to Accounting Standards Update No. 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements","paragraphs":[{"citation":"815-20-65-7","para":"65-7","html":"
Accounting Standards Update 2025-09
2029-06-13
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2026-12-16
2027-12-16
2027-12-16
2027-12-16
2027-12-16
2027-12-16
2027-12-16
The following represents the transition and effective date information related to Accounting Standards Update No. 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements:
Effective date and early adoption
  1. a
    For public business entities, the pending content that links to this paragraph shall be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods.
  2. b
    For entities other than public business entities, the pending content that links to this paragraph shall be effective for annual reporting periods beginning after December 15, 2027, and interim reporting periods within those annual reporting periods.
  3. c
    Early adoption of the pending content that links to this paragraph is permitted for all entities on any date on or after November 25, 2025.
Transition method
  1. d
    An entity shall apply the pending content that links to this paragraph on a prospective basis, including the guidance described in (e) for existing hedging relationships (that is, the hedging instrument has not expired, been sold, terminated, or exercised, or the entity has not removed the designation of the hedging relationship) beginning on or after the date of adoption.
  2. e
    For cash flow hedges existing as of the date of adoption, without dedesignating the hedging relationship, an entity may:
    1. 1
      For hedges of variability in cash flows attributable to a group of individual forecasted transactions, modify its method for assessing similar risk exposure to a method described in paragraph 815-20-55-23A. If an entity is applying one of the methods described in paragraph 815-20-55-23A, it may elect to change to the other method. If an entity modifies its method of assessing similar risk exposure to the method described in paragraph 815-20-55-23A(a), the entity also may change its method of assessing hedge effectiveness if the revised method leverages the similar risk assessment in determining that the hedging relationship is highly effective. An entity is not required to apply the guidance in paragraph 815-20-25-81 when comparing hedging relationships executed before and after the date of adoption in relation to the guidance in (e)(1).
    2. 2
      For hedges of variability in cash flows attributable to changes in the overall price or the contractually specified component of the price in a forecasted purchase or sale of a nonfinancial asset, modify the fhedging relationship to designate the hedged risk as variability in cash flows attributable to changes in a component (or subcomponent) of the forecasted purchase price or sales price of a nonfinancial asset in accordance with paragraph 815-20-25-22C. The entity is not required to amend its hedge documentation for hedges of a contractually specified component to reflect amendments in accordance with paragraph 815-20-25-22C if the hedged risk is unchanged.
    3. 3
      For hedges of variability in cash flows attributable to a group of individual forecasted transactions:
      1. i
        Modify the hedging relationship to add an additional hedged risk or risks to an existing portfolio if the hedging relationship continues to meet all other requirements to apply cash flow hedge accounting.
      2. ii
        Migrate some or all of the individual forecasted transactions from one existing pool or pools to a new pool or pools, an existing pool or pools, or a combination of new and existing pools.
      3. iii
        Reassign and reorder existing hedging instruments to a new or existing pool.
    4. 4
      For hedges of forecasted interest payments on an existing choose-your-rate debt instrument:
      1. i
        Amend the hedging relationship to include interest payments on replacement debt.
      2. ii
        Specify the quantitative method that an entity will use in the event that it must assess hedge effectiveness on a quantitative basis in subsequent periods (for entities assessing hedge effectiveness on a qualitative basis).
    5. 5
      For hedges of forecasted interest payments that may include interest payments on an existing choose-your-rate debt instrument designated as part of a group of forecasted transactions under the first-payments-received technique:
      1. i
        Amend the hedging relationship to include only interest payments on the individual existing choose-your-rate debt instrument and replacement debt.
      2. ii
        Specify the quantitative method that an entity will use in the event that it must assess hedge effectiveness on a quantitative basis in subsequent periods (for entities assessing hedge effectiveness on a qualitative basis).
  3. f
    For hedges that were discontinued before the date of adoption for which amounts are still reported in accumulated other comprehensive income at the date of adoption, an entity may migrate the individual forecasted transactions to align with the pools of existing hedges considering the migration described in (e)(3)(ii).
  4. g
    Gains or losses on hedging instruments that are reported in accumulated other comprehensive income at the date of adoption shall be reassigned using a systematic and rational manner to align with the pool or pools after the migrations described in (e)(3)(ii) and (f) and reassignments and reorderings described in (e)(3)(iii). Amounts from accumulated other comprehensive income shall be reclassified to earnings when the hedged forecasted transaction affects earnings in accordance with paragraphs
    815-30-35-38 through 35-41
    .
  5. h
    If adoption of the pending content that links to this paragraph in (e) changes the designated hedged risk, an entity shall create the terms of the instrument used to estimate the change in value of the hedged risk (under the originally designated method, for example, the hypothetical derivative method, or another acceptable method in Subtopic 815-30) in the assessment of hedge effectiveness and the similar risk assessment, if applicable, on the basis of market data as of the inception of the hedging relationship. Furthermore, an entity shall amend hedge documentation upon adoption, including documentation of critical terms, the hedged forecasted transactions, hedge effectiveness assessments, and similar risk assessments, as needed to apply the pending content in (e) through (g) for all existing and discontinued hedging relationships.
Transition disclosures
  1. i
    An entity shall disclose the nature of and reason for the change in accounting principle, as well as the method of applying the change, in both the interim reporting period and the annual reporting period that the entity adopts the pending content that links to this paragraph.
","snippet":"Accounting Standards Update 2025-09The following represents the transition and effective date information related to Accounting Standards Update No. 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvem…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:49aa2e8cb671204cb944ee3ba734e8c0fe767bcbe8e6eeadeda4f07d1cb1ba1f","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a0e0b1aa719ea9b72bb872d468cad4a8e018e28ec2a17b37a146419cc6e02825","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6082909f38829e9aa64247441c909e30ab77b010f2a5351abcf2077700fcfce","downloaded_from":"2026-09-10T01:36:59.448Z","last_downloaded_at":"2026-09-10T01:36:59.448Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480528","source_sha256":"4b1b1fa56f2a696e9b137a1e9282728bce9966a58018c8baf623e6a66637cf67"}}],"enrichment":{"summary":"ASC 815-20 sets the general \"gatekeeping\" rules for hedge accounting that apply to all three hedge types — fair value, cash flow, and net investment hedges. It requires formal designation and documentation at hedge inception (risk management objective, hedging instrument, hedged item, hedged risk, and the effectiveness assessment method), and it specifies which items and transactions may be designated as hedged items, which risks may be designated as the hedged risk, which instruments may be hedging instruments, and how effectiveness must be assessed. Items outside those criteria (e.g., equity method investments, most intra-entity transactions, an entity's own equity) simply cannot be hedged for accounting purposes.","key_points":["Hedge accounting requires concurrent, formal documentation at inception of the hedging relationship, the risk management objective and strategy, the hedging instrument, the hedged item or transaction, the nature of the hedged risk, and the method of assessing effectiveness (815-20-25-3(b)); without it an entity could retroactively engineer a desired accounting result.","An initial prospective effectiveness assessment must be quantitative (dollar-offset or regression) unless an exception applies — e.g., shortcut method, matched critical terms, the private-company simplified approach, or spot/forward-rate net investment methods (815-20-25-3(b)(2)(iv)(01)) — and is deemed concurrent if completed by the earliest of the dates listed in (02).","For fair value hedges the hedged item must be a specifically identified recognized asset or liability, unrecognized firm commitment, or portfolio of similar items sharing the hedged risk, and must present an exposure that could affect earnings (815-20-25-12); a 'specific portion' may be a percentage, selected contractual cash flows, an embedded put/call, or a lessor's residual value.","For financial items the hedged risk may be overall fair value, benchmark interest rate risk, foreign exchange risk, or credit risk (or combinations), while for nonfinancial items generally only overall fair value or FX may be hedged — crude oil price cannot be the hedged risk for gasoline (815-20-25-12(e)–(f)).","Cash flow hedges require the forecasted transaction to be specifically identified, probable, with an external party (limited intra-entity FX exceptions), and to present cash flow variability that could affect earnings (815-20-25-15); 'probable' requires significantly greater likelihood than 'more likely than not' (815-20-25-16(e)).","The portfolio layer method permits designating a hedged layer of a closed portfolio of financial assets or beneficial interests if the entity documents an analysis supporting that the layer will be outstanding for the hedge period, assuming prepayments and defaults are applied first to the unhedged portion (815-20-25-12A).","Certain items are specifically ineligible as hedged items: equity method investments, noncontrolling interests, transactions with stockholders as stockholders (treasury stock purchases, dividends), most intra-entity transactions, the entity's own equity instruments, and interest rate risk on held-to-maturity securities (815-20-25-43)."],"categories":["Derivatives and hedging","Financial instruments","Foreign currency","Recognition"],"audience_level":"advanced","student_note":"This is the qualification checklist for hedge accounting — most failures in practice are documentation failures, not economic ones, because documentation must be complete and concurrent at inception and cannot be created after the fact. A common misunderstanding is that any economic hedge qualifies: the hedged risk must be one the Codification specifically permits (for nonfinancial items, generally total price or FX risk, not an ingredient's price), and some items (equity method investees, own equity, dividends, most intra-entity transactions) are flatly ineligible.","related_topics":["815-10","815-25","815-30","815-35","815-15","830-20"],"key_concepts":["hedge designation and documentation","hedge effectiveness assessment","hedged item eligibility","forecasted transaction probability","benchmark interest rate","portfolio layer method","contractually specified component","functional currency exposure"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c3b8de3035d99bcf028704a276e569dc7c1498bdd7ba80979ae263a35f7e8b56","downloaded_from":"2026-09-10T01:36:33.249Z","last_downloaded_at":"2026-09-10T01:37:01.175Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"815-30","title":"Cash Flow Hedges","topic_title":"Derivatives and Hedging","score":0.789,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:72763280690dd33b352fcb2a4ced5517d71b6aaf671884c71114e45d0ea6bd1b","downloaded_from":"2026-09-10T01:37:35.233Z","last_downloaded_at":"2026-09-10T01:38:16.160Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-35","title":"Net Investment Hedges","topic_title":"Derivatives and Hedging","score":0.7854,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6be7c65a775f43bd9a18a27436626e41401168591a4dab4c28ac0ca1578367f5","downloaded_from":"2026-09-10T01:38:18.840Z","last_downloaded_at":"2026-09-10T01:38:43.011Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-25","title":"Fair Value Hedges","topic_title":"Derivatives and Hedging","score":0.7617,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ce50f7d9723c8b011423439a066842d0906ea157ca4a6500a949f4a836d0f051","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:31.976Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-15","title":"Embedded Derivatives","topic_title":"Derivatives and Hedging","score":0.7279,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:58bbbeeee26668ae784c4908bd07489da9fe620c64456ddfd05f99c28e708e53","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:36:30.992Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-40","title":"Contracts in Entity's Own Equity","topic_title":"Derivatives and Hedging","score":0.7103,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:189d3c26174dc8df3b22553ef83c084025fd07c64962b45580ffd4ef2e871ff4","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"825-10","title":"Overall","topic_title":"Financial Instruments","score":0.7008,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f9141687d129f3990facda629273142703ef55dbdc6863a07473e0ae0c469fab","downloaded_from":"2026-09-10T01:44:11.504Z","last_downloaded_at":"2026-09-10T01:44:42.941Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}}],"prev":{"number":"815-15","title":"Embedded Derivatives","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a6aed11e6a893807e6034a6052279b844ab530d6b213142daaec63d2ba36707","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:36:30.992Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"next":{"number":"815-25","title":"Fair Value Hedges","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c0cd20b1342260850462e96ea524fd791f8ea3504abbf13b8bbdd043f5a089a","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:31.976Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:af457e7f721c98d91db029e3e95409b1f8dce35ec1b3ae54cfb018b0da89aab8","downloaded_from":"2026-09-10T01:36:33.249Z","last_downloaded_at":"2026-09-10T01:37:01.175Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-25","topic":"815","title":"Fair Value Hedges","area":"Broad Transactions","paragraphs":162,"summary":"ASC 815-25 supplies the incremental accounting rules for fair value hedges that qualify under the designation criteria in ASC 815-20. The core mechanic (815-25-35-1) is that the gain or loss on the hedging instrument goes to current earnings, and the change in fair value of the hedged item attributable to the hedged risk adjusts the hedged item's carrying amount and also goes to current earnings, both presented in the same income statement line item as the hedged item's earnings effect; any mismatch therefore falls automatically into earnings. The Subtopic also governs basis adjustments and their amortization, portfolio layer method hedges of closed portfolios, interaction with impairment/credit loss rules, and mandatory or voluntary discontinuation of hedge accounting.","concepts":["fair value hedge","hedged item basis adjustment","portfolio layer method","closed portfolio breach","excluded components","benchmark interest rate","hedge dedesignation","firm commitment"],"categories":["Derivatives and hedging","Subsequent measurement","Financial instruments","Fair value"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-25-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Beneficial InterestsAddedAccounting Standards Update No. 2022-0103/28/2022
Financial InstrumentAmendedAccounting Standards Update No. 2024-0203/29/2024
Hedged LayerAddedAccounting Standards Update No. 2022-0103/28/2022
Interest Rate RiskAmendedAccounting Standards Update No. 2017-1208/28/2017
London Interbank Offered Rate (LIBOR) Swap RateAddedAccounting Standards Update No. 2018-1610/25/2018
London Interbank Offered Rate Swap RateSupersededAccounting Standards Update No. 2018-1610/25/2018
Other Comprehensive IncomeAddedMaintenance Update 2014-20 (PDF)09/29/2014
Readily Convertible to CashAmendedAccounting Standards Update No. 2024-0203/29/2024
Recorded InvestmentAmendedAccounting Standards Update No. 2015-1006/12/2015
Spot RateAddedAccounting Standards Update No. 2014-0603/14/2014
TransactionAmendedAccounting Standards Update No. 2024-0203/29/2024
815-25-05-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-35-1AmendedAccounting Standards Update No. 2022-0103/28/2022
815-25-35-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-35-2SupersededAccounting Standards Update No. 2017-1208/28/2017
815-25-35-3SupersededAccounting Standards Update No. 2017-1208/28/2017
815-25-35-4AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-35-5SupersededAccounting Standards Update No. 2017-1208/28/2017
815-25-35-6AmendedAccounting Standards Update No. 2022-0103/28/2022
815-25-35-6AmendedAccounting Standards Update No. 2016-0101/05/2016
815-25-35-6AmendedMaintenance Update 2014-20 (PDF)09/29/2014
815-25-35-7AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-35-7AAmendedAccounting Standards Update No. 2022-0103/28/2022
815-25-35-7AAddedAccounting Standards Update No. 2017-1208/28/2017
815-25-35-9 through 35-12
AmendedAccounting Standards Update No. 2022-0103/28/2022
815-25-35-9AAmendedAccounting Standards Update No. 2019-0404/25/2019
815-25-35-9AAddedAccounting Standards Update No. 2017-1208/28/2017
815-25-35-10 through 35-12
AmendedAccounting Standards Update No. 2016-1306/16/2016
815-25-35-11 through 35-14
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-35-11AmendedAccounting Standards Update No. 2015-1006/12/2015
815-25-35-13AAddedAccounting Standards Update No. 2017-1208/28/2017
815-25-35-13BAmendedAccounting Standards Update No. 2022-0103/28/2022
815-25-35-13BAmendedAccounting Standards Update No. 2019-0404/25/2019
815-25-35-13BAddedAccounting Standards Update No. 2017-1208/28/2017
815-25-35-19AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-40-1AAddedAccounting Standards Update No. 2016-0503/10/2016
815-25-40-2AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-40-7 through 40-9
AddedAccounting Standards Update No. 2017-1208/28/2017
815-25-40-7AAddedAccounting Standards Update No. 2022-0103/28/2022
815-25-40-8AmendedAccounting Standards Update No. 2022-0103/28/2022
815-25-40-8AAddedAccounting Standards Update No. 2022-0103/28/2022
815-25-40-9AmendedAccounting Standards Update No. 2022-0103/28/2022
815-25-40-9AAddedAccounting Standards Update No. 2022-0103/28/2022
815-25-50-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-1SupercededAccounting Standards Update No. 2022-0103/28/2022
815-25-55-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-1A through 55-1E
AddedAccounting Standards Update No. 2022-0103/28/2022
815-25-55-4AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-6 through 55-8
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-10 through 55-13
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-17AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-18 through 55-22
SupersededAccounting Standards Update No. 2016-0101/05/2016
815-25-55-23AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-26AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-27AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-29 through 55-31
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-34 through 55-36
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-38AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-39AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-42AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-43AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-46AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-49AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-51AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-52AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-55 through 55-58
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-56AAddedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-56BAddedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-61AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-61A through 55-61C
AddedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-62 through 55-68
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-63 through 55-67
AmendedMaintenance Update 2014-07 (PDF)03/17/2014
815-25-55-65AmendedAccounting Standards Update No. 2016-0101/05/2016
815-25-55-65AmendedAccounting Standards Update No. 2014-0603/14/2014
815-25-55-71AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-72AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-74 through 55-77
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-78 through 55-83
SupersededAccounting Standards Update No. 2017-1208/28/2017
815-25-55-85 through 55-87
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-85AmendedAccounting Standards Update No. 2016-1306/16/2016
815-25-55-88AmendedAccounting Standards Update No. 2016-1306/16/2016
815-25-55-88AAddedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-89AmendedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-89AmendedAccounting Standards Update No. 2016-1306/16/2016
815-25-55-91 through 55-108
AddedAccounting Standards Update No. 2017-1208/28/2017
815-25-55-99AmendedAccounting Standards Update No. 2019-0404/25/2019
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nBeneficial Interests | Added | Accounting Standards Update No. 2022-01 | 03/28/2022 |\nFi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5769ce981ffa92c1b42891d811903a232be908c7ea447c1c5878f4d425cd4379","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:04.984Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480466","source_sha256":"31ff5ce5f662e6eb95c36c01caf892c813c2670952b15cf6f131db21bcba2dbe"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b60079b82978f7f1c5fd251a30166942a924e8a3b852be6ac7c0ce33af1f1924","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:04.984Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480466","source_sha256":"31ff5ce5f662e6eb95c36c01caf892c813c2670952b15cf6f131db21bcba2dbe"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f4d3df87211eb6f7c1f1eceed5080dc578acab33de8fd3a5ef31f8a095f9390","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:04.984Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480466","source_sha256":"31ff5ce5f662e6eb95c36c01caf892c813c2670952b15cf6f131db21bcba2dbe"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-25-05-1","para":"05-1","html":"
This Subtopic provides incremental guidance on accounting for and financial reporting of fair value hedges established under the criteria in Subtopic 815-20, such as subsequent measurement and dedesignation of a fair value hedging relationship. Implementation guidance and examples specific to fair value hedges are included in both Subtopic 815-20 and this Subtopic.
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This Subtopic follows the same Scope and Scope Exceptions as outlined in Subtopic 815-20, see Section 815-20-15.
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See Section 815-20-25 for the criteria under which an entity may designate a derivative instrument as hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof (hedged item) that is attributable to a particular risk. Paragraph 815-10-05-5 states that references to an asset or a liability in this Topic include a firm commitment.
","snippet":"See Section 815-20-25 for the criteria under which an entity may designate a derivative instrument as hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof (hedged …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1f2b436006fcef08d2857d24688835ab97d0d6d054386748efb297b11e3f75b3","downloaded_from":"2026-09-10T01:37:15.880Z","last_downloaded_at":"2026-09-10T01:37:15.880Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480352","source_sha256":"89f4a9550fe96fc386696961a1d2013b65c3cbd08a57bd9dff40673cd1247aab"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a1faeaed3340d74c2d6266edeb5789f319ffb37f697b517b893c3e7749e33cc","downloaded_from":"2026-09-10T01:37:15.880Z","last_downloaded_at":"2026-09-10T01:37:15.880Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480352","source_sha256":"89f4a9550fe96fc386696961a1d2013b65c3cbd08a57bd9dff40673cd1247aab"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:343c2b18b553d8944ca15073ed99a0fcb0fb9bee7bbf0c555b370b8bf289f1a6","downloaded_from":"2026-09-10T01:37:15.880Z","last_downloaded_at":"2026-09-10T01:37:15.880Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480352","source_sha256":"89f4a9550fe96fc386696961a1d2013b65c3cbd08a57bd9dff40673cd1247aab"}},{"number":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-25-30-1","para":"30-1","html":"
Section not used.
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Gains and losses on a qualifying fair value hedge shall be accounted for as follows:
  1. a
    The gain or loss on the hedging instrument shall be recognized currently in earnings, except for amounts excluded from the assessment of effectiveness that are recognized in earnings through an amortization approach in accordance with paragraph 815-20-25-83A. All amounts recognized in earnings shall be presented in the same income statement line item as the earnings effect of the hedged item.
  2. b
    The gain or loss (that is, the change in fair value) on the hedged item attributable to the hedged risk shall adjust the carrying amount of the hedged item and be recognized currently in earnings except as described in (c).
  3. c
    For one or more existing hedged layer or layers that are designated under the portfolio layer method in accordance with paragraph 815-20-25-12A, the gain or loss (that is, the change in fair value) on the hedged item attributable to the hedged risk shall not adjust the carrying value of the individual beneficial interest or individual assets in or removed from the closed portfolio. Instead, that amount shall be maintained on a closed portfolio basis and recognized currently in earnings.
","snippet":"Gains and losses on a qualifying fair value hedge shall be accounted for as follows:\n(a) The gain or loss on the hedging instrument shall be recognized currently in earnings, except for amounts excluded from the assessme…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:60765e73ca36dafafaffb202a8fadbdc8ef5fce79d1ae40cf5378d328b250107","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-2","para":"35-2","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
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Paragraph superseded by Accounting Standards Update No. 2017-12.
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Although a hedging relationship must comply with an entity's established policy range of what is considered highly effective pursuant to paragraphs
815-20-25-75 through 25-85
for that relationship to qualify for hedge accounting, that compliance does not assure perfect offset between the gain or loss on the hedging instrument and the hedged item attributable to the hedged risk. Any gain or loss on the hedging instrument that does not offset the gain or loss on the hedged item attributable to the hedged risk is recognized in earnings in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A.
","snippet":"Although a hedging relationship must comply with an entity's established policy range of what is considered highly effective pursuant to paragraphs 815-20-25-75 through 25-85 for that relationship to qualify for hedge ac…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:90f67798960dca5d3727ded757ec55423e40052834b3edf61fa2865e722f7c1b","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-5","para":"35-5","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
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If a hedged item is otherwise measured at fair value with changes in fair value reported in other comprehensive income (such as an available-for-sale debt security), the adjustment of the hedged item's carrying amount discussed in paragraph 815-25-35-1(b) shall be recognized in earnings rather than in other comprehensive income to offset the gain or loss on the hedging instrument. If the hedged item is a hedged layer designated in a portfolio layer method hedge on a closed portfolio in accordance with paragraph 815-20-25-12A and the closed portfolio includes only available-for-sale debt securities, the entire gain or loss (that is, the change in fair value) on the hedged item attributable to the hedged risk shall be recognized in earnings rather than in other comprehensive income to offset the gain or loss on the hedging instrument. If the closed portfolio includes available-for-sale debt securities and assets that are not available-for-sale debt securities, an entity shall determine the portion of the change in fair value on the hedged item attributable to the hedged risk associated with the available-for-sale debt securities using a systematic and rational method. That amount shall be recognized in earnings rather than in other comprehensive income. However, an entity shall not adjust the carrying amount of the individual available-for-sale debt securities included in the closed portfolio in accordance with paragraph 815-25-35-1(c).
","snippet":"If a hedged item is otherwise measured at fair value with changes in fair value reported in other comprehensive income (such as an available-for-sale debt security), the adjustment of the hedged item's carrying amount di…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6ab5bcc15905a1168ce1ddaa2e32dd898646500a3baa9d570add6bc53d8cd2aa","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-7","para":"35-7","html":"
If an entity has designated and documented that it will assess effectiveness and measure hedge results on an after-tax basis as permitted by paragraph 815-20-25-3(b)(2)(vi),the portion of the gain or loss on the hedging instrument that exceeded the loss or gain on the hedged item shall be included as an offset to the related tax effects in the period in which those tax effects are recognized.
","snippet":"If an entity has designated and documented that it will assess effectiveness and measure hedge results on an after-tax basis as permitted by paragraph 815-20-25-3(b)(2)(vi),the portion of the gain or loss on the hedging …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c010590b895ecb462e402e6a87370635b48e0c1dc2821c0f636aedb05606393","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e347e14a224ae3979351df0118fc944d2112c00416b15f9cb0e284c690ddaf2c","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"block":null,"heading":"Existing Portfolio Layer Method Hedges","paragraphs":[{"citation":"815-25-35-7A","para":"35-7A","html":"
For each closed portfolio with one or more hedging relationships designated and accounted for under the portfolio layermethod in accordance with paragraph 815-20-25-12A, an entity shall perform and document at each effectiveness assessment date an analysis that supports the entity's expectation that the hedged layer or layers in aggregate is still anticipated to be outstanding for the designated hedge period. That analysis shall incorporate the entity's current expectations of prepayments, defaults, and other factors affecting the timing and amount of cash flows associated with the closed portfoliousing a method consistent with the method used to perform the analysis in paragraph 815-20-25-12A(a) and (b).
","snippet":"For each closed portfolio with one or more hedging relationships designated and accounted for under the portfolio layermethod in accordance with paragraph 815-20-25-12A, an entity shall perform and document at each effec…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e055a018868642c8b9a13702d987b26e32b36e507611f3d74c3b45f29f67859a","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66d34966622c2c7c431ef24ec1ca09b2d95da65b9366f07b20a38222085304f2","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"block":null,"heading":"Changes in Fair Value of Hedged Item","paragraphs":[{"citation":"815-25-35-8","para":"35-8","html":"
The adjustment of the carrying amount of a hedged asset or liability required by paragraph 815-25-35-1(b) shall be accounted for in the same manner as other components of the carrying amount of that asset or liability. For example, an adjustment of the carrying amount of a hedged asset held for sale (such as inventory) would remain part of the carrying amount of that asset until the asset is sold, at which point the entire carrying amount of the hedged asset would be recognized as the cost of the item sold in determining earnings.
","snippet":"The adjustment of the carrying amount of a hedged asset or liability required by paragraph 815-25-35-1(b) shall be accounted for in the same manner as other components of the carrying amount of that asset or liability. F…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e823956f7b63a3e6dfb4ad3259765ec656091476f83e74a564c8fdce0643169f","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-9","para":"35-9","html":"
An adjustment of the carrying amount of a hedged interest-bearing financial instrument that is required by paragraph 815-25-35-1(b) and an adjustment that is maintained on a closed portfolio basis in a portfolio layer method hedge in accordance with paragraph 815-25-35-1(c) shall be amortized to earnings. Amortization shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
","snippet":"An adjustment of the carrying amount of a hedged interest-bearing financial instrument that is required by paragraph 815-25-35-1(b) and an adjustment that is maintained on a closed portfolio basis in a portfolio layer me…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cda5a164d38564c64fb76204d960a8cd80e3895434ba4de183b3704bd6b8591b","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-9A","para":"35-9A","html":"
If, as permitted by paragraph 815-25-35-9, an entity amortizes the adjustment to the carrying amount of the hedged item during an existing partial-term hedge of an interest-bearing financial instrument or amortizes the basis adjustment in an existing portfolio layer method hedge, the entity shall fully amortize that adjustment by the hedged item's assumed maturity date in accordance with paragraph 815-25-35-13B. For a discontinued hedging relationship, all remaining adjustments to the carrying amount of the hedged item shall be amortized over a period that is consistent with the amortization of other discounts or premiums associated with the hedged item in accordance with other Topics (for example, Subtopic Check output number.310-20 on receivables—nonrefundable fees and other costs). See paragraphs
815-25-40-9 through 40-9A
for further guidance on accounting for a basis adjustment attributable to a discontinued portfolio layer method hedge.
","snippet":"If, as permitted by paragraph 815-25-35-9, an entity amortizes the adjustment to the carrying amount of the hedged item during an existing partial-term hedge of an interest-bearing financial instrument or amortizes the b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aeca00726b6bc90cb36a5147eccab0801d78ec5684623e557abde4f9d874b21d","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-10","para":"35-10","html":"
An asset or liability that has been designated as being hedged and accounted for pursuant to this Section remains subject to the applicable requirements in generally accepted accounting principles (GAAP) for assessing impairment or credit losses for that type of asset or for recognizing an increased obligation for that type of liability. Those impairment or credit loss requirements shall be applied after hedge accounting has been applied for the period and the carrying amount of the hedged asset or liability has been adjusted pursuant to paragraph 815-25-35-1(b). A portfolio layer method basis adjustment that is maintained on a closed portfolio basis for an existing hedge in accordance with paragraph 815-25-35-1(c) shall not be considered when assessing the individual assets or individual beneficial interest included in the closed portfolio for impairment or when assessing a portfolio of assets for impairment. An entity may not apply this guidance by analogy to other components of amortized cost basis. Because the hedging instrument is recognized separately as an asset or liability, its fair value or expected cash flows shall not be considered in applying those impairment or credit loss requirements to the hedged asset or liability.
","snippet":"An asset or liability that has been designated as being hedged and accounted for pursuant to this Section remains subject to the applicable requirements in generally accepted accounting principles (GAAP) for assessing im…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ce2041978dd2ff3d64d8905848243710f193db6ad16bf63bec5bff421ed562a3","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-11","para":"35-11","html":"
This Subtopic implicitly affects the measurement of credit losses under Subtopic 326-20 on financial instruments measured at amortized cost by requiring the present value of expected future cash flows to be discounted by the new effective rate based on the adjusted amortized cost basis in a hedged loan. Paragraph 326-20-55-9 requires that, when the amortized cost basis of a loan has been adjusted under fair value hedge accounting, the effective rate is the discount rate that equates the present value of the loan's future cash flows with that adjusted amortized cost basis. That paragraph states that the adjustment under fair value hedge accounting for changes in fair value attributable to the hedged risk under this Subtopic shall be considered to be an adjustment of the loan's amortized cost basis. As discussed in that paragraph, the loan's original effective interest rate becomes irrelevant once the recorded amount of the loan is adjusted for any changes in its fair value. Because paragraph 815-25-35-10 requires that the loan's amortized cost basis be adjusted for hedge accounting before the requirements of Subtopic 326-20 are applied, this Subtopic implicitly supports using the new effective rate and the adjusted amortized cost basis. A portfolio layer method basis adjustment that is maintained on a closed portfolio basis for an existing hedge in accordance with paragraph 815-25-35-1(c) shall not adjust the amortized cost basis of the individual assets or individual beneficial interest included in the closed portfolio. An entity may not apply this guidance by analogy to other components of amortized cost basis.
","snippet":"This Subtopic implicitly affects the measurement of credit losses under Subtopic 326-20 on financial instruments measured at amortized cost by requiring the present value of expected future cash flows to be discounted by…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:518d2e97c16328ca278b00c42762b206c4a967a30b615dc84fa2e275ae548841","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-12","para":"35-12","html":"
This guidance applies to all entities applying Subtopic 326-20 to financial assets that are hedged items in a fair value hedge, regardless of whether those entities have delayed amortizing to earnings the adjustments of the loan's amortized cost basis arising from fair value hedge accounting until the hedging relationship is dedesignated. The guidance on recalculating the effective rate is not intended to be applied to all other circumstances that result in an adjustment of a loan's amortized cost basis and is not intended to be applied to the individual assets or individual beneficial interest in an existing portfolio layer method hedge closed portfolio.
","snippet":"This guidance applies to all entities applying Subtopic 326-20 to financial assets that are hedged items in a fair value hedge, regardless of whether those entities have delayed amortizing to earnings the adjustments of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5ea1cc5ee72222df1f90cdd5d7458f3dac7d3d94caa6e36ef3f5706fef5d8520","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-13","para":"35-13","html":"
In calculating the change in the hedged item's fair value attributable to changes in the benchmark interest rate (see paragraph 815-20-25-12(f)(2)), the estimated coupon cash flows used in calculating fair value shall be based on either the full contractual coupon cash flows or the benchmark rate component of the contractual coupon cash flows of the hedged item determined at hedge inception.
","snippet":"In calculating the change in the hedged item's fair value attributable to changes in the benchmark interest rate (see paragraph 815-20-25-12(f)(2)), the estimated coupon cash flows used in calculating fair value shall be…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2ce44de7714dcb20891fa58d9f8498f10071ac9144ce5c068abdbcbc2fdb7d6f","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-13A","para":"35-13A","html":"
In a hedge of interest rate risk in which the hedged item is a prepayable instrument in accordance with paragraph 815-20-25-6, the factors incorporated for the purpose of adjusting the carrying amount of the hedged item shall be the same factors that the entity incorporated for the purpose of assessing hedge effectiveness in accordance with paragraph 815-20-25-6B. For example, if an entity considers only how changes in the benchmark interest rate affect an obligor's decision to prepay a debt instrument when assessing hedge effectiveness, it shall consider only that factor when adjusting the carrying amount of the hedged item. The election to consider only how changes in the benchmark interest rate affect an obligor's decision to prepay a debt instrument does not affect an entity's election to use either the full contractual coupon cash flows or the benchmark rate component of the contractual coupon cash flows determined at hedge inception for purposes of measuring the change in fair value of the hedged item in accordance with paragraph 815-25-35-13.
","snippet":"In a hedge of interest rate risk in which the hedged item is a prepayable instrument in accordance with paragraph 815-20-25-6, the factors incorporated for the purpose of adjusting the carrying amount of the hedged item …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:39d759529bbc7cd499176c701ea7ed20c8021dead2b8690cde121a28d9feef65","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-13B","para":"35-13B","html":"
For a fair value hedge of interest rate risk in which the hedged item is designated for a partial term in accordance with paragraph 815-20-25-12(b)(2)(ii), an entity may measure the change in the fair value of the hedged item attributable to interest rate risk using an assumed term that begins when the first hedged cash flow begins to accrue and ends at the end of the designated hedge period. The assumed issuance of the hedged item occurs on the date that the first hedged cash flow begins to accrue. The assumed maturity of the hedged item occurs at the end of the designated hedge period.An entity may measure the change in fair value of the hedged item attributable to interest rate risk in accordance with this paragraph when the entity is designating the hedged item in a hedge of both interest rate risk and foreign exchange risk. In that hedging relationship, the change in carrying value of the hedged item attributable to foreign exchange risk shall be measured on the basis of changes in the foreign currency spot rate in accordance with paragraph 815-25-35-18. Additionally, an entity may have one or more separately designated partial-term hedging relationships outstanding at the same time for the same debt instrument (for example, 2 outstanding hedging relationships for consecutive interest cash flows in Years 1-3 and consecutive interest cash flows in Years 5-7 of a 10-year debt instrument).
","snippet":"For a fair value hedge of interest rate risk in which the hedged item is designated for a partial term in accordance with paragraph 815-20-25-12(b)(2)(ii), an entity may measure the change in the fair value of the hedged…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a87612c1e8f1cd67180c1e74aae5a4c685cef64a51efcb7906d46b515091941d","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-14","para":"35-14","html":"
Amounts recorded in an entity's income statement as interest costs shall be reflected in the capitalization rate under Subtopic 835-20. Those amounts could include amortization of the adjustments of the carrying amount of the hedged liability, under paragraphs 815-25-35-9 through 35-9A, if an entity elects to begin amortization of those adjustments during the period in which interest is eligible for capitalization.
","snippet":"Amounts recorded in an entity's income statement as interest costs shall be reflected in the capitalization rate under Subtopic 835-20. Those amounts could include amortization of the adjustments of the carrying amount o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eb68e21aec56aa4db6e49280a659f76ac4fbca19958aea9a5fb562efaec9cd03","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-15","para":"35-15","html":"
Gains and losses on a qualifying foreign currency fair value hedge shall be accounted for as specified in Section 815-25-40 and paragraphs
815-25-35-1 through 35-10
.
","snippet":"Gains and losses on a qualifying foreign currency fair value hedge shall be accounted for as specified in Section 815-25-40 and paragraphs 815-25-35-1 through 35-10.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:16ec5da837fd0e1f33832d8920227b30117ec2cace8e49575f59100eff296b64","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-16","para":"35-16","html":"
If a nonderivative instrument qualifies as a hedging instrument under paragraph 815-20-25-58, the gain or loss on the nonderivative hedging instrument attributable to foreign currency risk shall be the foreign currency transaction gain or loss as determined under Subtopic 830-20. The foreign currency transaction gain or loss on a hedging instrument shall be determined, consistent with paragraph 830-20-35-1, as the increase or decrease in functional currency cash flows attributable to the change in spot exchange rates between the functional currency and the currency in which the hedging instrument is denominated. That foreign currency transaction gain or loss shall be recognized currently in earnings along with the change in the carrying amount of the hedged firm commitment.
","snippet":"If a nonderivative instrument qualifies as a hedging instrument under paragraph 815-20-25-58, the gain or loss on the nonderivative hedging instrument attributable to foreign currency risk shall be the foreign currency t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e9cd4838bfbee22116abf3f1ffe7595edbfdabeeb736e438754134beb40b9d12","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-17","para":"35-17","html":"
Paragraph not used.
","snippet":"Paragraph not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1885250a4daf7a4c79c2c7d8f0860da3861fe17c93970891e38e23af2ffab933","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"citation":"815-25-35-18","para":"35-18","html":"
Remeasurement of hedged foreign-currency-denominated assets and liabilities is based on the guidance in Subtopic 830-20, which requires remeasurement based on spot exchange rates, regardless of whether a fair value hedging relationship exists.
","snippet":"Remeasurement of hedged foreign-currency-denominated assets and liabilities is based on the guidance in Subtopic 830-20, which requires remeasurement based on spot exchange rates, regardless of whether a fair value hedgi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1379f0e8583ba5abf3d80720e8c9f17ca30e4fc8d92b5b50e0304ca79c64db20","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ed159eeee6afe9e16a0cfcad2b93661f57a7957bb9e77df8ff416c7b38aa517a","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"block":null,"heading":"Entities That Do Not Report Earnings","paragraphs":[{"citation":"815-25-35-19","para":"35-19","html":"
An entity that does not report earnings as a separate caption in a statement of financial performance (for example, a not-for-profit entity [NFP] or a defined benefit pension plan) shall recognize the gain or loss on a hedging instrument as a change in net assets in the period of change unless the hedging instrument is designated as a hedge of the foreign currency exposure of a net investment in a foreign operation. In that circumstance, the provisions of paragraphs 815-20-25-66 and
815-35-35-1 through 35-2
shall be applied. Entities that do not report earnings shall recognize the changes in the carrying amount of the hedged item pursuant to paragraphs 815-25-35-1 and 815-25-35-4 in a fair value hedge as a change in net assets in the period of change.
","snippet":"An entity that does not report earnings as a separate caption in a statement of financial performance (for example, a not-for-profit entity [NFP] or a defined benefit pension plan) shall recognize the gain or loss on a h…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c9cc0117d88d82147f0f35817dbc504dbd565f5b8b8a1a505cae5a650e7e64fb","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8e635664baaaba073dcf0f22e7ffeadb6ed218ae361e413286bb3f1db69ff5c5","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fa4621fc4ebe2108454e94a71052f15cfcd66f4b06139af1e95109a9023d7bad","downloaded_from":"2026-09-10T01:37:20.445Z","last_downloaded_at":"2026-09-10T01:37:20.445Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480295","source_sha256":"f156796d49e910140f4f777221c79f0452723121c4a7adb5639463597c1ebce5"}},{"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"}},{"number":"50","label":"50 Disclosure","anchor":"50-disclosure","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-25-50-1","para":"50-1","html":"
See Section 815-10-50 for overall guidance on disclosures.
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  2. b
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"See Section 815-10-50 for overall guidance on disclosures.\n(a) Subparagraph superseded by Accounting Standards Update No. 2017-12.\n(b) Subparagraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d5da967eb13fdc006546abcc029729cdcdb0a7fe6104d2865c395dfd6630c6d3","downloaded_from":"2026-09-10T01:37:25.983Z","last_downloaded_at":"2026-09-10T01:37:25.983Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480238","source_sha256":"9ad6638e63ad135398e28d5a079e3b91ffd2ad647cb2d6d59bdbb43bcfb7acab"}},{"citation":"815-25-50-2","para":"50-2","html":"
For guidance on qualitative disclosures, see paragraph 815-10-50-5.
","snippet":"For guidance on qualitative disclosures, see paragraph 815-10-50-5.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:22970ecf8fd79c349bbf80ace3a2a132c97b9befce6370108f948aedbf8cc806","downloaded_from":"2026-09-10T01:37:25.983Z","last_downloaded_at":"2026-09-10T01:37:25.983Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480238","source_sha256":"9ad6638e63ad135398e28d5a079e3b91ffd2ad647cb2d6d59bdbb43bcfb7acab"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e383c4baaeba69d4136bf7d5fe0538e8c0978bdea9afa1b82da251a7c058a846","downloaded_from":"2026-09-10T01:37:25.983Z","last_downloaded_at":"2026-09-10T01:37:25.983Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480238","source_sha256":"9ad6638e63ad135398e28d5a079e3b91ffd2ad647cb2d6d59bdbb43bcfb7acab"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a67dd1bd54460237a3bcf9008de0b4579b54018ddee6991857a6ae1b68f6d3c2","downloaded_from":"2026-09-10T01:37:25.983Z","last_downloaded_at":"2026-09-10T01:37:25.983Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480238","source_sha256":"9ad6638e63ad135398e28d5a079e3b91ffd2ad647cb2d6d59bdbb43bcfb7acab"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-25-55-1","para":"55-1","html":"
Paragraph superseded by Accounting Standards Update No. 2022-01.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2022-01.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:749555561ad473ecbb3033ce33e8789e6c6a9848e9de5e45f1b8291fa8d9aeda","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f286374deedf1622181262b7d8f59a2babc955f61d0cce6409dd743c8ed46fa5","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"block":null,"heading":"Implementation Guidance","paragraphs":[{"citation":"815-25-55-1A","para":"55-1A","html":"
This implementation guidance demonstrates how an entity should apply the following aspects of the portfolio layer method if it elects to designate multiple hedged layers of a single closed portfolio:
  1. a
    Performing the similar-asset assessment upon initial designation of a portfolio layer method hedge
  2. b
    Evaluating whether the entity may continue to apply the guidance for a portfolio layer method hedge after initial designation.
","snippet":"This implementation guidance demonstrates how an entity should apply the following aspects of the portfolio layer method if it elects to designate multiple hedged layers of a single closed portfolio:\n(a) Performing the s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3063b6bebfc5eecd8d871a5b2ea60a44e57763b9c571d0c82b516b3647662912","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-1B","para":"55-1B","html":"
For the purposes of illustrating the guidance in paragraph 815-25-55-1A, the implementation guidance in paragraphs
815-25-55-1C through 55-1D
assumes that Entity A designates multiple hedged layers of a closed portfolio of 5-year and 10-year prepayable loans originated on the hedge inception date.
","snippet":"For the purposes of illustrating the guidance in paragraph 815-25-55-1A, the implementation guidance in paragraphs 815-25-55-1C through 55-1D assumes that Entity A designates multiple hedged layers of a closed portfolio …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:266cea94f9795338ec367cba056ee3a97b686df8b4c76a6058db1598da8d8b64","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-1C","para":"55-1C","html":"
Entity A designates hedged layers with assumed maturity dates of three years and seven years, respectively. When applying the similar-asset assessment for a portfolio hedge in accordance with paragraph 815-20-25-12(b)(1), Entity A should consider all assets in the closed portfolio for the 3-year hedged layer but consider only the 10-year assets for the 7-year hedged layer. That is, an entity should consider the assets that support the hedged layer.
","snippet":"Entity A designates hedged layers with assumed maturity dates of three years and seven years, respectively. When applying the similar-asset assessment for a portfolio hedge in accordance with paragraph 815-20-25-12(b)(1)…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:58b71e2e3c9cf1d17e2d951adb648e4ca1b7c9114c080183d94279a04ce438d0","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-1D","para":"55-1D","html":"
After initial hedge designation, Entity A should continue to assess whether the individual three-year and seven-year hedged layers meet the requirements in paragraph 815-25-35-7A on the basis of the same assets used to perform the similar-asset assessments in accordance with paragraph 815-25-55-1C. For Years 1–3, the entity should consider whether the hedged layers in aggregate are anticipated to be outstanding.
","snippet":"After initial hedge designation, Entity A should continue to assess whether the individual three-year and seven-year hedged layers meet the requirements in paragraph 815-25-35-7A on the basis of the same assets used to p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6d226ecff60f4592e2382a3873b1d0141631d1223182bda8a6beddb10198f08d","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f067f8decb9360017d156fd3f702e3ae8004dfc029b5b94fa9e00767b96fa7e7","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"815-25-55-1E","para":"55-1E","html":"
This Example illustrates the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of natural gas inventory with futures contracts. Assume that the hedge satisfied all of the criteria for hedge accounting at inception.
","snippet":"This Example illustrates the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of natural gas inventory with futures contracts. Assume that th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f255759f09e8f3160f3bdb3096e84ce006be8ac98918d3120a15e5fcaa4112bf","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-2","para":"55-2","html":"
Entity A has 20,000 million British thermal units of natural gas stored at its location in West Texas. To hedge the fair value exposure of the natural gas, Entity A sells the equivalent of 20,000 million British thermal units of natural gas futures contracts on a national mercantile exchange. The futures contracts prices are based on delivery of natural gas at the Henry Hub gas collection point in Louisiana.
","snippet":"Entity A has 20,000 million British thermal units of natural gas stored at its location in West Texas. To hedge the fair value exposure of the natural gas, Entity A sells the equivalent of 20,000 million British thermal …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6ef5f5fbc9fd8434843212199108d0587a42315fc64d03a5e9f094875756a739","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-3","para":"55-3","html":"
The price of Entity A's natural gas inventory in West Texas and the price of the natural gas that is the underlying for the futures contracts it sold will differ as a result of regional factors (such as location, pipeline transmission costs, and supply and demand). Entity A therefore may not automatically assume that the hedge will be highly effective at achieving offsetting changes in fair value, and it cannot assess effectiveness by looking solely to the change in the price of natural gas delivered to the Henry Hub. The use of a hedging instrument with a different underlying basis than the item or transaction being hedged is generally referred to as a cross-hedge. The principles for cross-hedges illustrated in this Example also apply to hedges involving other risks. For example, the effectiveness of a hedge of interest rate risk in which one interest rate is used as a surrogate for another interest rate would be evaluated in the same way as the natural gas cross-hedge in this Example.
","snippet":"The price of Entity A's natural gas inventory in West Texas and the price of the natural gas that is the underlying for the futures contracts it sold will differ as a result of regional factors (such as location, pipelin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a7bca2266b519036d24f64d4ef08f042c440348ca4eae5b7eb3abd5fcae9220","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-4","para":"55-4","html":"
Both at inception of the hedge and on an ongoing basis, Entity A might assess the hedge's expected effectiveness on a quantitative basis based on the extent of correlation in recent years for periods similar to the spot prices term of the futures contracts between the spot prices of natural gas in West Texas and at the Henry Hub. If those prices have been and are expected to continue to be highly correlated, Entity A might reasonably expect the changes in the fair value of the futures contracts attributable to changes in the spot price of natural gas at the Henry Hub to be highly effective in offsetting the changes in the fair value of its natural gas inventory. In assessing effectiveness during the term of the hedge, Entity A must take into account actual changes in spot prices in West Texas and at the Henry Hub. The period of time over which correlation of prices should be assessed would be based on management's judgment in the particular circumstance.
","snippet":"Both at inception of the hedge and on an ongoing basis, Entity A might assess the hedge's expected effectiveness on a quantitative basis based on the extent of correlation in recent years for periods similar to the spot …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f4bc132330d03f5d7c4bbcbe951c3c891be6beb84f5ed1a895176b60325d3224","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-5","para":"55-5","html":"
Entity A may not assume that the change in the spot price of natural gas located at Henry Hub, Louisiana, is the same as the change in fair value of its West Texas inventory. The physical hedged item is natural gas in West Texas, not natural gas at the Henry Hub. In identifying the price risk that is being hedged, Entity A also may not assume that its natural gas in West Texas has a Louisiana natural gas component. Use of a price for natural gas located somewhere other than West Texas to assess the effectiveness of a fair value hedge of natural gas in West Texas would be inconsistent with this Subtopic and could result in an assumption that a hedge was highly effective when it was not. If the price of natural gas in West Texas is not readily available, Entity A might use a price for natural gas located elsewhere as a base for estimating the price of natural gas in West Texas. However, that base price must be adjusted to reflect the effects of factors, such as location, transmission costs, and supply and demand, that would cause the price of natural gas in West Texas to differ from the base price.
","snippet":"Entity A may not assume that the change in the spot price of natural gas located at Henry Hub, Louisiana, is the same as the change in fair value of its West Texas inventory. The physical hedged item is natural gas in We…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a32d5a48bc6c3b6cc9578514d5944ec41971e6003241e4b99f209118a6356fde","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-6","para":"55-6","html":"
Consistent with Entity A's method of assessing whether the hedge is expected to be highly effective, the hedge would not be perfectly effective and there would be a net earnings effect to the extent that the actual change in the fair value of the futures contracts attributable to changes in the spot price of natural gas at the Henry Hub did not offset the actual change in the spot price of natural gas in West Texas per million British thermal units multiplied by 20,000.
","snippet":"Consistent with Entity A's method of assessing whether the hedge is expected to be highly effective, the hedge would not be perfectly effective and there would be a net earnings effect to the extent that the actual chang…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5045ecc19fc4098839352d8738392c2fedafb95ecee0869786a387bdea56b05b","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-7","para":"55-7","html":"
That method excludes the change in the fair value of the futures contracts attributable to changes in the difference between the spot price and the forward price of natural gas at the Henry Hub in assessing effectiveness. The excluded amount would be recognized in earnings through an amortization approach in accordance with paragraph 815-20-25-83A or a mark-to-market approach in accordance with paragraph 815-20-25-83B and presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A.
","snippet":"That method excludes the change in the fair value of the futures contracts attributable to changes in the difference between the spot price and the forward price of natural gas at the Henry Hub in assessing effectiveness…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:58fc8d7649b242be9863a3195752fd6393eb7e455fa7d25a249cbe645f459e3c","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-8","para":"55-8","html":"
This Example illustrates the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of tire inventory with a forward contract. Assume that the hedge satisfied all of the criteria for hedge accounting at inception.
","snippet":"This Example illustrates the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of tire inventory with a forward contract. Assume that the hedg…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:46edf91f6581e90ced8939d1d32f8f852abc509df5d1f2247e1790be2be62f0a","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-9","para":"55-9","html":"
Entity B manufactures tires. The production of those tires incorporates a variety of physical components, of which rubber and steel are the most significant, as well as labor and overhead. Entity B hedges its exposure to changes in the fair value of its inventory of 8,000 steel-belted radial tires by entering into a forward contract to sell rubber at a fixed price.
","snippet":"Entity B manufactures tires. The production of those tires incorporates a variety of physical components, of which rubber and steel are the most significant, as well as labor and overhead. Entity B hedges its exposure to…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2ae192c40ef7fc1c1228757a8965c1ee7431a7d0fd5a3af07f1f711b1fdaf6c4","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-10","para":"55-10","html":"
Entity B decides to perform subsequent hedge effectiveness assessments on a quantitative basis and bases its assessment on changes in the fair value of the forward contract attributable to changes in the spot price of rubber. To determine whether the forward contract is expected to be highly effective at offsetting the change in fair value of the tire inventory, Entity B could estimate and compare such changes in the fair value of the forward contract and changes in the fair value of the tires (computed as the market price per tire multiplied by 8,000 tires) for different rubber and tire prices. Entity B also should consider the extent to which past changes in the spot prices of rubber and tires have been correlated. Because tires are a nonfinancial asset and rubber is only an ingredient in manufacturing them, Entity B may not assess hedge effectiveness by looking to the change in the fair value of only the rubber component of the steel-belted radial tires (see paragraph 815-20-25-12(e)). Both at inception of the hedge and during its term, Entity B must base its assessment of hedge effectiveness on changes in the market price of steel-belted radial tires and changes in the fair value of the forward contract attributable to changes in the spot price of rubber.
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It is unlikely that this transaction would be highly effective in achieving offsetting changes in fair value. However, if Entity B concludes that the hedge will be highly effective and the hedge otherwise qualifies for hedge accounting, the hedge would have a net earnings effect to the extent that the actual changes in the following amounts did not offset:
  1. a
    The fair value of the forward contract attributable to the change in the spot price of rubber
  2. b
    The market price of steel-belted radials multiplied by the number of tires in inventory.
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Because Entity B bases its assessment of effectiveness on changes in spot prices, the change in the fair value of the forward contract attributable to changes in the difference between the spot and forward price of rubber would be excluded from the assessment of effectiveness, recognized in earnings through an amortization approach in accordance with paragraph 815-20-25-83A or a mark-to-market approach in accordance with paragraph 815-20-25-83B, and presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A.
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This Example illustrates the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of growing wheat with futures contracts. Assume that the hedge satisfied all of the criteria for hedge accounting at inception.
","snippet":"This Example illustrates the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of growing wheat with futures contracts. Assume that the hedge …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:757303b19545c3b5204e18ba9878006f0b7fe1ed682b6d26c905321a797fbefd","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-14","para":"55-14","html":"
Entity C has a tract of land on which it is growing wheat. Historically, Entity C has harvested at least 40,000 bushels of wheat from that tract of land. Two months before its expected harvest, Entity C sells 2-month futures contracts for 40,000 bushels of wheat, which it wants to designate as a fair value hedge of its growing wheat, rather than as a cash flow hedge of the projected sale of the wheat after harvest.
","snippet":"Entity C has a tract of land on which it is growing wheat. Historically, Entity C has harvested at least 40,000 bushels of wheat from that tract of land. Two months before its expected harvest, Entity C sells 2-month fut…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:34d3ad2512e5543592b78b5ccbd3771bfba79cb33dd0bed1d57e8aa544c5f815","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-15","para":"55-15","html":"
Even though the futures contracts are for the same type of wheat that Entity C expects to harvest in two months, the futures contracts and hedged wheat have different bases because the futures contracts are based on fully grown, harvested wheat, while the hedged item is unharvested wheat with two months left in its growing cycle. Entity C therefore may not automatically assume that the hedge will be highly effective in achieving offsetting changes in fair value.
","snippet":"Even though the futures contracts are for the same type of wheat that Entity C expects to harvest in two months, the futures contracts and hedged wheat have different bases because the futures contracts are based on full…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:db3a0552bab259cad086a003eafef12f33c81a47641633ee393744d4112c461e","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-16","para":"55-16","html":"
To determine whether the futures contracts are expected to be highly effective in providing offsetting changes in fair value for the growing wheat, Entity C would need to estimate and compare the fair value of its growing wheat and of the futures contracts for different levels of wheat prices. Entity C may not base its estimate of the value of its growing wheat solely on the current price of wheat because that price is for grown, harvested wheat. Entity C might, however, use the current price of harvested wheat together with other relevant factors, such as additional production and harvesting costs and the physical condition of the growing wheat, to estimate the current fair value of its growing wheat crop.
","snippet":"To determine whether the futures contracts are expected to be highly effective in providing offsetting changes in fair value for the growing wheat, Entity C would need to estimate and compare the fair value of its growin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47fdc318f286af94b9bb0751dcd33e45017409626bf03df1fb860281dbe98174","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-17","para":"55-17","html":"
It is unlikely that wheat futures contracts would be highly effective in offsetting the changes in value of growing wheat.
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This Example illustrates the guidance in Sections 815-20-25,815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of a U.S. Treasury bond with put options. Assume that the hedge satisfied all of the criteria for hedge accounting at inception.
","snippet":"This Example illustrates the guidance in Sections 815-20-25,815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of a U.S. Treasury bond with put options. Assume that the hedge …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:307adda3f2cd9cf575aca8c4763d9345e082c0c51b27942d4e72cbcebc6da32e","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-24","para":"55-24","html":"
Entity E owns a U.S. Treasury bond and wants to protect itself against the fair value exposure to declines in the price of the bond. Entity E purchases an at-the-money put option on a U.S. Treasury security with the same terms (remaining maturity, notional amount, and interest rate) as the U.S. Treasury bond held and designates the option as a hedge of the fair value exposure of the U.S. Treasury bond. Entity E plans to hold the put option until it expires.
","snippet":"Entity E owns a U.S. Treasury bond and wants to protect itself against the fair value exposure to declines in the price of the bond. Entity E purchases an at-the-money put option on a U.S. Treasury security with the same…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9d911412f5bdc8dd37381287c1e0c0797f2c1f2da596515efb4498d494672257","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-25","para":"55-25","html":"
Because Entity E plans to hold the put option (a static hedge) rather than manage the position with a delta-neutral strategy, it could assess whether it expects the hedge to be highly effective at achieving offsetting changes in fair value by calculating and comparing the changes in the intrinsic value of the option and changes in the price (fair value) of the U.S. Treasury bond for different possible market prices. In assessing the expectation of effectiveness on an ongoing basis, Entity E also must consider the actual changes in the fair value of the U.S. Treasury bond and in the intrinsic value of the option during the hedge period.
","snippet":"Because Entity E plans to hold the put option (a static hedge) rather than manage the position with a delta-neutral strategy, it could assess whether it expects the hedge to be highly effective at achieving offsetting ch…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e4ee04951a738116b5b4e7f5d2023074f9675aa42873bd5edeef525198462646","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-26","para":"55-26","html":"
However, because the pertinent critical terms of the option and the bond are the same in this Example, Entity E could expect the changes in value of the bond attributable to changes in interest rates and changes in the intrinsic value of the option to offset completely during the period that the option is in the money. That is, the hedging relationship will be perfectly effective because Entity E has chosen to exclude changes in the option's time value from the assessment of hedge effectiveness. Entity E may elect to account for changes in the time value of the option through an amortization approach in accordance with paragraph 815-20-25-83A or through a mark-to-market approach in accordance with paragraph 815-20-25-83B. Under either of those approaches, it should present the portion of excluded components recognized in earnings in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A.
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This Example illustrates the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of an embedded purchased option with a written option. Assume that the hedge satisfied all of the criteria for hedge accounting at inception.
","snippet":"This Example illustrates the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 for how an entity may assess hedge effectiveness in a fair value hedge of an embedded purchased option with a written option. Assume t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ba6dc48fa49606ff9c095986b938f5d6749128bb9a31092872dd296a065c11a","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-28","para":"55-28","html":"
Entity F issues five-year, fixed-rate debt with an embedded (purchased) call option and, with a different counterparty, writes a call option to neutralize the call feature in the debt. The embedded call option and the written call option have the same effective notional amount, underlying fixed interest rate, and strike price. (The strike price of the option in the debt usually is referred to as the call price.) The embedded option also can be exercised at the same times as the written option. Entity F designates the written option as a fair value hedge of the embedded prepayment option component of the fixed-rate debt.
","snippet":"Entity F issues five-year, fixed-rate debt with an embedded (purchased) call option and, with a different counterparty, writes a call option to neutralize the call feature in the debt. The embedded call option and the wr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e71125ec772bd2060b3850fe296a5a71f4f6cc261852222e792b407c9e2e811","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-29","para":"55-29","html":"
To assess whether the hedge is expected to be highly effective in achieving offsetting changes in fair value, Entity F could estimate and compare the changes in fair values of the two options for different market interest rates. Because this Subtopic does not permit derivative instruments, including embedded derivatives whether or not they are required to be accounted for separately, to be separated into components, Entity F can only designate a hedge of the entire change in fair value of the embedded purchased call option. The resulting changes in fair value will be included currently in earnings. Changes in the fair value of the written option also will be included currently in earnings and presented in the same income statement line item as the earnings effect of the hedged item. Any mismatch between the changes in fair values of the hedging instrument and the hedged item attributable to the hedged risk, thus, will be automatically reflected in earnings. (The hedge is likely to have some earnings effect because the premium for the written call option is unlikely to be the same as the premium for the embedded purchased call option.)
","snippet":"To assess whether the hedge is expected to be highly effective in achieving offsetting changes in fair value, Entity F could estimate and compare the changes in fair values of the two options for different market interes…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:11a2ce64efcf664196b2d21c97ba3757047ce0ccdc44a7817a0c116bca074b9b","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-30","para":"55-30","html":"
The following Cases illustrate application of the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 to a fair value hedge of a commodity inventory:
  1. a
    The terms of the hedging derivative have been negotiated such that the hedging relationship is perfectly effective (Case A).
  2. b
    The hedging relationship is not perfectly effective (Case B).
","snippet":"The following Cases illustrate application of the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 to a fair value hedge of a commodity inventory:\n(a) The terms of the hedging derivative have been negotiated such…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66614b910129a60b07399821c684f538c1bfbc41501de8f83140878250ac1258","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-31","para":"55-31","html":"
To simplify the illustration and focus on basic concepts, the derivative instrument in Cases A and B is assumed to have no time value. In practice, a derivative instrument used for a fair value hedge of a commodity would have a time value that would change over the term of the hedging relationship. The changes in that time value may be accounted for through an amortization approach in accordance with paragraph 815-20-25-83A or a mark-to-market approach in accordance with paragraph 815-20-25-83B. Under either of those approaches, the portion of excluded components recognized in earnings should be presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A.
","snippet":"To simplify the illustration and focus on basic concepts, the derivative instrument in Cases A and B is assumed to have no time value. In practice, a derivative instrument used for a fair value hedge of a commodity would…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9df30480770a6020a244e527fc6fe9e0e571c34c833d515f327fb1f346c3e118","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-32","para":"55-32","html":"
Other Examples in this Section illustrate accounting for the time value component of a derivative instrument.
","snippet":"Other Examples in this Section illustrate accounting for the time value component of a derivative instrument.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:607f3e18ea1193ae9dc46c29ad2d56cf8d7f1c7645deb65b4bcd8ef22eb18582","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-33","para":"55-33","html":"
For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c5138f4142043c6f649636f349c840bfdbb27fd6fac35074c203da00d4669272","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-34","para":"55-34","html":"
Cases A and B share all of the following assumptions:
  1. a
    Entity ABC decides to hedge the risk of changes during the period in the overall fair value of its entire inventory of Commodity A by entering into a derivative instrument, Derivative Z.
  2. b
    On the first day of Period 1, Entity ABC enters into Derivative Z and neither receives nor pays a premium (that is, the fair value at inception is zero).
  3. c
    Entity ABC designates the derivative instrument as a hedge of the changes in fair value of the inventory due to changes in the price of Commodity A during Period 1.
  4. d
    The hedging relationship qualifies for fair value hedge accounting. Entity ABC will assess effectiveness on a quantitative basis both initially and subsequently by comparing the entire change in fair value of Derivative Z with the change in the market price of the hedged commodity inventory.
","snippet":"Cases A and B share all of the following assumptions:\n(a) Entity ABC decides to hedge the risk of changes during the period in the overall fair value of its entire inventory of Commodity A by entering into a derivative i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c808bc7c9fed40bdf174a0b5bf51ab5d4546008d2498c0ae9517bb2cab00f255","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-35","para":"55-35","html":"
In this Case, Entity ABC expects the hedge to be perfectly effective because both of the following conditions exist:
  1. a
    The notional amount of Derivative Z matches the amount of the hedged inventory (that is, Derivative Z is based on the same number of bushels as the number of bushels of the commodity that Entity ABC designated as hedged).
  2. b
    The underlying of Derivative Z is the price of the same variety and grade of Commodity A as the inventory at the same location.
","snippet":"In this Case, Entity ABC expects the hedge to be perfectly effective because both of the following conditions exist:\n(a) The notional amount of Derivative Z matches the amount of the hedged inventory (that is, Derivative…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c1e450caf46871935e80864817b2aaa2255336f77d09fd9c727db3a667cf3e15","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-36","para":"55-36","html":"
At inception of the hedge, Derivative Z has a fair value of zero and the hedged inventory has a carrying amount of $1,000,000 and a fair value of $1,100,000. On the last day of Period 1, the fair value of Derivative Z has increased by $25,000, and the fair value of the inventory has decreased by $25,000. The inventory is sold, and Derivative Z is settled on the last day of Period 1. The following table illustrates the accounting for the situation described in this Case.
","snippet":"At inception of the hedge, Derivative Z has a fair value of zero and the hedged inventory has a carrying amount of $1,000,000 and a fair value of $1,100,000. On the last day of Period 1, the fair value of Derivative Z ha…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1c16608ee3f1094c6039b5c4767418d31d1fa0f1b55a2f45a78fd2b33e13dc60","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-37","para":"55-37","html":"
If Entity ABC had sold the hedged inventory at the inception of the hedge, its gross profit on that sale would have been $100,000. This Case illustrates that, by hedging the risk of changes in the overall fair value of its inventory, Entity ABC recognized the same gross profit at the end of the hedge period even though the fair value of its inventory decreased by $25,000.
","snippet":"If Entity ABC had sold the hedged inventory at the inception of the hedge, its gross profit on that sale would have been $100,000. This Case illustrates that, by hedging the risk of changes in the overall fair value of i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0e3faefb91604827621eaa547e67a3ce7195e1037024cf91861de839fd8f68b0","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-38","para":"55-38","html":"
The hedge in Case A was perfectly effective because the gain on Derivative Z exactly offsets the loss on the inventory. However, in this Case, assume the terms of Derivative Z do not perfectly match the inventory and its fair value has increased by $22,500 as compared with the decline in fair value of the inventory of $25,000. The mismatch of $2,500 has to be recognized in earnings and presented in the same income statement line item as the earnings effect of the hedged item. The following table illustrates the accounting for the situation described in this Case.
","snippet":"The hedge in Case A was perfectly effective because the gain on Derivative Z exactly offsets the loss on the inventory. However, in this Case, assume the terms of Derivative Z do not perfectly match the inventory and its…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:41a0a5f01cdac615ea312d35562352fd35fe7df2ff27cd272ef2b55990f9b7f0","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-39","para":"55-39","html":"
The difference between the effect on earnings in Case B and the effect on earnings in Case A is $2,500.
","snippet":"The difference between the effect on earnings in Case B and the effect on earnings in Case A is $2,500.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:51fd05e919604595f0c8f727a995a0bb98f8a18e0a0ae19bf72e67eb9dc002db","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-40","para":"55-40","html":"
This Example demonstrates the guidance in Subtopic 815-20 and this Subtopic as applied to the mechanics of reporting an interest rate swap used as a fair value hedge of an interest-bearing liability. It is not intended to demonstrate how to compute the fair value of an interest rate swap or an interest-bearing liability. This Example has been simplified by assuming that the interest rate applicable to a payment due at any future date is the same as the rate for a payment due at any other date (that is, the yield curve is flat). Although that is an unrealistic assumption, it makes the amounts used easier to understand without detracting from the purpose of the Example. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"This Example demonstrates the guidance in Subtopic 815-20 and this Subtopic as applied to the mechanics of reporting an interest rate swap used as a fair value hedge of an interest-bearing liability. It is not intended t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f49bd9adf446c8d25a1d70c121799aa454a8ea6b6048968053d228cb66993a41","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-41","para":"55-41","html":"
The fair values of the interest rate swap in this Example are determined using the zero-coupon method. The zero-coupon method is not the only acceptable method. Explanations of other acceptable methods of determining the fair value of an interest rate swap can be obtained from various published sources. Fair values also may be available from dealers in interest rate swaps and other derivative instruments.
","snippet":"The fair values of the interest rate swap in this Example are determined using the zero-coupon method. The zero-coupon method is not the only acceptable method. Explanations of other acceptable methods of determining the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6045e4a62895d8539405da4e3d6ff08c4140e8ee9c84e679d673f107ce7cedd0","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-42","para":"55-42","html":"
In this Example, the term and notional amount of the interest rate swap match the term and principal amount of the interest-bearing liability being hedged. The fixed and variable interest rates used to determine the net settlements on the interest rate swap match the current yield curve, and the sum of the present values of the expected net settlements is zero at inception. Thus, paragraphs
815-20-25-102 through 25-106
permit the reporting entity to assume perfect effectiveness. Assessment of effectiveness at one of the interest rate swap's repricing dates would confirm the validity of that assumption.
","snippet":"In this Example, the term and notional amount of the interest rate swap match the term and principal amount of the interest-bearing liability being hedged. The fixed and variable interest rates used to determine the net …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5db39ad39724bb26b8b95e9e509b56bac7630e8697742fe8477113f9171dfdd3","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-43","para":"55-43","html":"
A shortcut method (see paragraphs
815-20-25-102 through 25-106
) can be used to produce the same reporting results as the method illustrated in this Example. This shortcut is only appropriate for a fair value hedge of a fixed-rate asset or liability using an interest rate swap and only if the assumption of perfect effectiveness is appropriate. The steps in the shortcut method are as follows:
  1. a
    Determine the difference between the fixed rate to be received on the interest rate swap and the fixed rate to be paid on the bonds.
  2. b
    Combine that difference with the variable rate to be paid on the interest rate swap.
  3. c
    Compute and recognize interest expense using that combined rate and the fixed-rate liability's principal amount. (Amortization of any purchase premium or discount on the liability also must be considered, although that complication is not incorporated in this Example.)
  4. d
    Determine the fair value of the interest rate swap.
  5. e
    Adjust the carrying amount of the interest rate swap to its fair value and adjust the carrying amount of the liability by an offsetting amount.
","snippet":"A shortcut method (see paragraphs 815-20-25-102 through 25-106) can be used to produce the same reporting results as the method illustrated in this Example. This shortcut is only appropriate for a fair value hedge of a f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:45f152cfff74347caa5552784ab13b86d9c0d5b4ee17b3a5709ad149530c8afb","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-44","para":"55-44","html":"
Amounts determined using the shortcut method and the facts in this Example will match the amounts in paragraph 815-25-55-48 even though the shortcut does not involve explicitly amortizing the hedge accounting adjustments on the debt. That is, the quarterly adjustments of the debt and explicit amortization of previous adjustments will have the same net effect on earnings as the shortcut method.
","snippet":"Amounts determined using the shortcut method and the facts in this Example will match the amounts in paragraph 815-25-55-48 even though the shortcut does not involve explicitly amortizing the hedge accounting adjustments…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:70e0e09842082acf364bac1024dd2847f157bab142b164704ff284a6d4b5e47d","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-45","para":"55-45","html":"
A slightly different shortcut method for interest rate swaps used as cash flow hedges is illustrated in Example 6 (see paragraph 815-30-55-24).
","snippet":"A slightly different shortcut method for interest rate swaps used as cash flow hedges is illustrated in Example 6 (see paragraph 815-30-55-24).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9fb6d69c2f994598f55f6a6969932753cfad288942f016948411fcd9b57e0f44","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-46","para":"55-46","html":"
On July 1, 20X1, Entity ABC borrows $1,000,000 to be repaid on June 30, 20X3. On that same date, Entity ABC also enters into a two-year receive-fixed, pay-variable interest rate swap. Entity ABC designates the interest rate swap as a hedge of the changes in the fair value of the fixed-rate debt attributable to changes in the designated benchmark interest rate. Entity ABC designates changes in London Interbank Offered Rate (LIBOR) swap rates as the benchmark interest rate in hedging interest rate risk. The terms of the interest rate swap and the debt are as follows.
","snippet":"On July 1, 20X1, Entity ABC borrows $1,000,000 to be repaid on June 30, 20X3. On that same date, Entity ABC also enters into a two-year receive-fixed, pay-variable interest rate swap. Entity ABC designates the interest r…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c51c78b19aee55e1b7df1caa4bcaf269858b366ecfa9d5d14d9869348c0db045","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-47","para":"55-47","html":"
The USD LIBOR rates that are in effect at inception of the hedging relationship and at each of the quarterly reset dates are assumed to be as follows.
","snippet":"The USD LIBOR rates that are in effect at inception of the hedging relationship and at each of the quarterly reset dates are assumed to be as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f147ad87100fa947ae94b819fe9037dfec8b0c7414f4f00a6c400381f3a8f6ee","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-48","para":"55-48","html":"
The following table summarizes the fair values of the debt and the interest rate swap at each quarter end, the details of the changes in the fair values during each quarter (including accrual and payment of interest, the effect of changes in rates, and level-yield amortization of hedge accounting adjustments), the expense for each quarter, and the net cash payments for each quarter. The calculations of fair value of both the debt and the interest rate swap are made using LIBOR. (A discussion of the appropriate discount rate appears in paragraph 815-20-25-111.)
","snippet":"The following table summarizes the fair values of the debt and the interest rate swap at each quarter end, the details of the changes in the fair values during each quarter (including accrual and payment of interest, the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f1cb404c100e5e43ed9fa3632263847f1eb944e5a67e5b7ba5d81cd5b8ae65c2","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-49","para":"55-49","html":"
The preceding table demonstrates two important points that explain why the shortcut method described in paragraphs
815-25-55-43 through 55-45
produces the same results as the computation in the preceding table if the hedging relationship is perfectly effective:
  1. a
    In every quarter, the effect of changes in rates on the interest rate swap completely offsets the effect of changes in rates on the debt. That is as expected because the hedge is perfectly effective.
  2. b
    In every quarter except the last when the principal is repaid, the expense equals the cash payment.
","snippet":"The preceding table demonstrates two important points that explain why the shortcut method described in paragraphs 815-25-55-43 through 55-45 produces the same results as the computation in the preceding table if the hed…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6f3e59a405cce35a1cac635dabee263b1e4cd394b85cb8bbdd1eed7cf1a1cb81","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-50","para":"55-50","html":"
The following table illustrates the computation of interest expense using the shortcut method described in paragraphs
815-25-55-43 through 55-45
. The results are the same as the results computed in the preceding table.
","snippet":"The following table illustrates the computation of interest expense using the shortcut method described in paragraphs 815-25-55-43 through 55-45. The results are the same as the results computed in the preceding table.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e14e1fec07c4842cfb8f4a46685d1a81989d7681537d0a0533bb90c1e27c638c","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-51","para":"55-51","html":"
As stated in the introduction to this Example, a flat yield curve is assumed for simplicity. An upward-sloping yield curve would have made the computations more complex. Paragraph 815-25-55-47 would have shown different interest rates for each quarterly repricing date, and the present value of each future payment would have been computed using a different rate (as described in paragraph 815-25-55-41). However, the basic principles are the same. As long as the hedging relationship meets the criteria for the shortcut method, perfect effectiveness can be assumed.
","snippet":"As stated in the introduction to this Example, a flat yield curve is assumed for simplicity. An upward-sloping yield curve would have made the computations more complex. Paragraph 815-25-55-47 would have shown different …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6187e5ba2c9e88294af57db75f4d34852935f9577a02445c28a3771c9ff8aafc","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-52","para":"55-52","html":"
In this Example of a fair value hedge of fixed-rate interest-bearing debt, it is assumed that Entity ABC elects to immediately begin amortizing the adjustments of the carrying amount of the fixed-rate debt while the hedge is still in place. Because the change in fair value of the interest rate swap attributable to the passage of time is recognized as interest expense by Entity ABC, the amounts recorded as expenses in the table in paragraph 815-25-55-48 would be eligible for capitalization under Subtopic 835-20.
","snippet":"In this Example of a fair value hedge of fixed-rate interest-bearing debt, it is assumed that Entity ABC elects to immediately begin amortizing the adjustments of the carrying amount of the fixed-rate debt while the hedg…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:56496b4b500824013d4fcb9513e66fddb5c36e94a57fa577bab5bcee3a00d043","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-53","para":"55-53","html":"
This Example illustrates one method that could be used pursuant to paragraph 815-20-25-12(f)(2) in determining the hedged item's change in fair value attributable to changes in the benchmark interest rate. Other methods could be used in determining the hedged item's change in fair value attributable to changes in the benchmark interest rate as long as those methods meet the criteria in that paragraph. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"This Example illustrates one method that could be used pursuant to paragraph 815-20-25-12(f)(2) in determining the hedged item's change in fair value attributable to changes in the benchmark interest rate. Other methods …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bf89d243c0e7e76a4b75ae69c51c8b6946e536fdad0d6dfe788159124e8251f1","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-54","para":"55-54","html":"
On January 1, 20X0, Entity GHI issues at par a $100,000 BBB-quality 5-year fixed-rate noncallable debt instrument with an annual 10 percent interest coupon. On that date, Entity GHI enters into a 5-year interest rate swap based on the LIBOR swap rate and designates it as the hedging instrument in a fair value hedge of the $100,000 liability. Under the terms of the interest rate swap, Entity GHI will receive fixed interest at 7 percent and pay variable interest at LIBOR. The variable leg of the interest rate swap resets each year on December 31 for the payments due the following year. This Example has been simplified by assuming that the interest rate applicable to a payment due at any future date is the same as the rate for a payment at any other date (that is, the yield curve is flat). During the hedge period, the gain or loss on the interest rate swap will be recorded in earnings. The Example assumes that immediately before the interest rate on the variable leg resets on December 31, 20X0, the LIBOR swap rate increased by 50 basis points to 7.50 percent, and the change in fair value of the interest rate swap for the period from January 1 to December 31, 20X0, is a loss in value of $1,675.
","snippet":"On January 1, 20X0, Entity GHI issues at par a $100,000 BBB-quality 5-year fixed-rate noncallable debt instrument with an annual 10 percent interest coupon. On that date, Entity GHI enters into a 5-year interest rate swa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e34feceac3cffa7a8254a0653ac01b986089d84d0110654ccc6a2a4a53f84ae1","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-55","para":"55-55","html":"
Under this method, the change in a hedged item's fair value attributable to changes in the benchmark interest rate for a specific period is determined as the difference between two present value calculations that use the remaining cash flows as of the end of the period and reflect in the discount rate the effect of the changes in the benchmark interest rate during the period.
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  2. b
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Under this method, the change in a hedged item's fair value attributable to changes in the benchmark interest rate for a specific period is determined as the difference between two present value calculations that use the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fd9c9010b4d3db16fc65f8578a529971e43d1cf2989d3f3539ff5e6fef191d85","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-56","para":"55-56","html":"
Both present value calculations are computed using the estimated future cash flows for the hedged item, which would be either its remaining contractual coupon cash flows or the LIBOR benchmark rate component of the remaining contractual coupon cash flows determined at hedge inception as illustrated by the following Cases:
  1. a
    Using the full contractual coupon cash flows (Case A)
  2. b
    Using the LIBOR benchmark rate component of the contractual coupon cash flows (Case B).
","snippet":"Both present value calculations are computed using the estimated future cash flows for the hedged item, which would be either its remaining contractual coupon cash flows or the LIBOR benchmark rate component of the remai…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3a26a834b7d2c5db7e02220843a1be455b0f780be73eae09abebc9a0d21e9f98","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-56A","para":"55-56A","html":"
This Example illustrates two approaches for computing the change in fair value of the hedged item attributable to changes in the benchmark interest rate. This Subtopic does not specify the discount rate that must be used to calculate the change in fair value of the hedged item.
","snippet":"This Example illustrates two approaches for computing the change in fair value of the hedged item attributable to changes in the benchmark interest rate. This Subtopic does not specify the discount rate that must be used…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c5d00624c19dc28eb10b83245b3dd9c9f1a95fe13e335152f3eb3297066fcd04","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-56B","para":"55-56B","html":"
In Cases A and B in this Example, Entity GHI presents the total change in the fair value of the hedging instrument (that is, the interest accruals and all other changes in fair value) in the same income statement line item (in this case, interest expense) that is used by Entity GHI to present the earnings effect of the hedged item before applying hedge accounting in accordance with paragraph 815-20-45-1A.
","snippet":"In Cases A and B in this Example, Entity GHI presents the total change in the fair value of the hedging instrument (that is, the interest accruals and all other changes in fair value) in the same income statement line it…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b732fcd6723d85e284f946371a9b630a4149d1acdcea82669362515c7489fa59","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-57","para":"55-57","html":"
In this Case, assume Entity GHI elected to calculate the change in the fair value of the hedged item attributable to interest rate risk on the basis of the full contractual coupon cash flows of the hedged item. Accordingly, both present value calculations in accordance with paragraph 815-25-55-55 are computed using the remaining contractual coupon cash flows as of the end of the period and the discount rate that reflects the change in the designated benchmark interest rate during the period. The method chosen by Entity GHI in this Case requires that the discount rate be based on the market interest rate for the hedged item at the inception of the hedging relationship. The discount rates used for those present value calculations would be, respectively:
  1. a
    The discount rate equal to the market interest rate for that hedged item at the inception of the hedge adjusted (up or down) for changes in the benchmark rate (designated as the interest rate risk being hedged) from the inception of the hedge to the beginning date of the period for which the change in fair value is being calculated
  2. b
    The discount rate equal to the market interest rate for that hedged item at the inception of the hedge adjusted (up or down) for changes in the designated benchmark rate from the inception of the hedge to the ending date of the period for which the change in fair value is being calculated.
","snippet":"In this Case, assume Entity GHI elected to calculate the change in the fair value of the hedged item attributable to interest rate risk on the basis of the full contractual coupon cash flows of the hedged item. According…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b65d91d28dc3fa5dfbc4a40d43fcdca2abed07d16b0799ea1631a5b5efc1997d","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-58","para":"55-58","html":"
Entity GHI elected to subsequently assess hedge effectiveness on a quantitative basis. In Entity GHI's quarterly assessments of hedge effectiveness for each of the first three quarters of year 20X0 in this Example, there was zero change in the hedged item's fair value attributable to changes in the benchmark interest rate because there was no change in the LIBOR swap rate. However, in the assessment for the fourth quarter 20X0, the discount rate for the beginning of the period is 10 percent (the hedged item's original market interest rate with an adjustment of zero), and the discount rate for the end of the period is 10.50 percent (the hedged item's original market interest rate adjusted for the change during the period in the LIBOR swap rate [+ 0.50 percent]).
","snippet":"Entity GHI elected to subsequently assess hedge effectiveness on a quantitative basis. In Entity GHI's quarterly assessments of hedge effectiveness for each of the first three quarters of year 20X0 in this Example, there…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8da97b77f271e44b3eda3d31e308c05f0a8f06f530ae641ed1f6c2f0a7c0103f","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-59","para":"55-59","html":"
Calculate the present value using the end-of-period discount rate of 10.50 percent (that is, the beginning-of-period discount rate adjusted for the change during the period in the LIBOR swap rate of 50 basis points).
","snippet":"Calculate the present value using the end-of-period discount rate of 10.50 percent (that is, the beginning-of-period discount rate adjusted for the change during the period in the LIBOR swap rate of 50 basis points).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:01f4dfb6feaf06c5be599e257eed7f5da656164238655fb6800260f6a0eb4fd3","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-60","para":"55-60","html":"
The change in fair value of the hedged item attributable to the change in the benchmark interest rate is $100,000 - $98,432 = $1,568 (the fair value decrease in the liability is a gain on debt).
","snippet":"The change in fair value of the hedged item attributable to the change in the benchmark interest rate is $100,000 - $98,432 = $1,568 (the fair value decrease in the liability is a gain on debt).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c5e0a50c450af41b30e4a7ed38275c6e6975566c3812b8e0ac061da831e9a3e0","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-61","para":"55-61","html":"
When the change in fair value of the hedged item ($1,568 gain) attributable to the risk being hedged is compared with the change in fair value of the hedging instrument ($1,675 loss), a mismatch of $107 results that will be reported in earnings, because both changes in fair value are recorded in earnings. The change in the fair value of the hedging instrument will be presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A.
","snippet":"When the change in fair value of the hedged item ($1,568 gain) attributable to the risk being hedged is compared with the change in fair value of the hedging instrument ($1,675 loss), a mismatch of $107 results that will…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:37c30022d4092c0a926f761a6f1bead883449fc5d5d54fd6356ebf2b2211e652","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-61A","para":"55-61A","html":"
In this Case, assume Entity GHI elected to calculate the change in the fair value of the hedged item attributable to interest rate risk on the basis of the benchmark rate component of the contractual coupon cash flows determined at hedge inception. Accordingly, both present value calculations in accordance with paragraph 815-25-55-55 are computed using the remaining benchmark rate component of contractual coupon cash flows as of the end period and the discount rate that reflects the change in the designated benchmark rate during the period. The discount rates used by Entity GHI in this Case would be, respectively:
  1. a
    The benchmark rate (designated as the interest rate risk being hedged) as of the beginning date of the period for which the change in fair value is being calculated
  2. b
    The designated benchmark rate as of the ending date of the period for which the change in fair value is being calculated.
","snippet":"In this Case, assume Entity GHI elected to calculate the change in the fair value of the hedged item attributable to interest rate risk on the basis of the benchmark rate component of the contractual coupon cash flows de…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:21c221c12a200a92599cfd03817330fbc096b8d790eeeedb5dba800244f9c248","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-61B","para":"55-61B","html":"
Entity GHI elected to subsequently assess hedge effectiveness on a quantitative basis. In Entity GHI's quarterly assessments of hedge effectiveness for each of the first three quarters of year 20X0, there was no change in the hedged item's fair value attributable to changes in the benchmark interest rate because there was no change in the LIBOR swap rate. However, in the assessment for the fourth quarter 20X0, the discount rate for the beginning of the period is 7 percent, and the discount rate for the end of the period is 7.50 percent reflecting the change during the period in the LIBOR swap rate. The change in fair value of the hedged item attributable to the change in the benchmark interest risk for the period January 1, 20X0, to December 31, 20X0, is a gain of $1,675, calculated as follows.
","snippet":"Entity GHI elected to subsequently assess hedge effectiveness on a quantitative basis. In Entity GHI's quarterly assessments of hedge effectiveness for each of the first three quarters of year 20X0, there was no change i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7504f52c497922e561a299a159193c76e7fc728e5bc23cf6e083a62f9ae142cf","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-61C","para":"55-61C","html":"
Because the change in fair value of the hedged item ($1,675 gain) attributable to the risk being hedged is the same as the change in fair value of the hedging instrument ($1,675 loss), there is perfect offset and, therefore, a zero net earnings effect.
","snippet":"Because the change in fair value of the hedged item ($1,675 gain) attributable to the risk being hedged is the same as the change in fair value of the hedging instrument ($1,675 loss), there is perfect offset and, theref…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2827663dd9a251587b01518ca1cdc2ec4205fc43158be32fe92df9b97a0516b4","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-62","para":"55-62","html":"
This Example illustrates application of the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 to a fair value hedge of a firm commitment to purchase an asset for a price denominated in a foreign currency. In this Example, the hedging instrument and the firm commitment are denominated in different foreign currencies. Consequently, although the hedge is highly effective at achieving offsetting changes in fair value, the hedge is not perfectly effective, and there will be an earnings effect. (The entity in the Example could have designed a perfectly effective hedge by using a hedging instrument denominated in the same foreign currency as the firm commitment with terms that match the appropriate terms in the firm commitment.)
","snippet":"This Example illustrates application of the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 to a fair value hedge of a firm commitment to purchase an asset for a price denominated in a foreign currency. In this …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:880a0860bd9bc1db22efea696bed7d4d0b8e9284a8f329d1f64a02b650bc65f3","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-63","para":"55-63","html":"
Entity MNO's functional currency is the U.S. dollar (USD). On February 3, 20X7, Entity MNO enters into a firm commitment to purchase a machine for delivery on May 1, 20X7. The price of the machine will be 270,000 Swiss francs (CHF 270,000). Also on February 3, 20X7, Entity MNO enters into a forward contract to purchase 240,000 Euros (EUR 240,000) on May 1, 20X7. Entity MNO will pay USD 0.6125 per EUR 1 (a total of USD 147,000), which is the current forward rate for an exchange on May 1, 20X7. Entity MNO designates the forward contract as a hedge of its risk of changes in the fair value of the firm commitment resulting from changes in the USD-CHF forward exchange rate.
","snippet":"Entity MNO's functional currency is the U.S. dollar (USD). On February 3, 20X7, Entity MNO enters into a firm commitment to purchase a machine for delivery on May 1, 20X7. The price of the machine will be 270,000 Swiss f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:785d74740e2233da916099595be82c04bd85114070854f7981b196cc852f8338","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-64","para":"55-64","html":"
Entity MNO will assess effectiveness by comparing the overall changes in the fair value of the forward contract to the changes in fair value in USD of the firm commitment due to changes in USD-CHF forward exchange rates. Entity MNO expects the forward contract to be highly effective as a hedge because all of the following conditions exist:
  1. a
    EUR 240,000 is approximately equal to CHF 270,000 at the May 1, 20X1, forward exchange rate in effect on February 3, 20X7.
  2. b
    Settlement of the forward contract and the firm commitment will occur on the same date.
  3. c
    In recent years, changes in the value in USD of EUR over three-month periods have been highly correlated with changes in the value in USD of CHF over those same periods.
","snippet":"Entity MNO will assess effectiveness by comparing the overall changes in the fair value of the forward contract to the changes in fair value in USD of the firm commitment due to changes in USD-CHF forward exchange rates.…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5da46837d08f55d6d09faef27d74e7f711edbdf5bdd5c9dcaa18bd7587d3c8de","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-65","para":"55-65","html":"
Although the hedging relationship has been determined to be highly effective at achieving offsetting changes in fair value, the hedge will not be perfectly effective and the difference between changes in the USD equivalent of EUR 240,000 (the notional amount of the forward contract) and changes in the USD equivalent of CHF 270,000 (the amount to be paid for the machine) will affect earnings. The difference between the spot rate and the forward exchange rate is not excluded from the assessment of hedge effectiveness because changes in the fair value of the firm commitment are being measured using forward exchange rates. Therefore, the entire change in the fair value of the hedging instrument will be presented in earnings in the same income statement line item as the earnings effect of the hedged item. If the hedged item were a foreign-currency-denominated available-for-sale debt security instead of a firm commitment, Topic 830 would have required its carrying value to be measured using the spot exchange rate. In that case, the spot-forward difference would have been recognized currently in earnings in the same income statement line item as the earnings effect of the hedged item if it was included in the assessment of effectiveness. The spot-forward difference also may be excluded from the assessment of effectiveness and accounted for through either an amortization approach or a mark-to-market approach in accordance with paragraph 815-20-25-83A or paragraph 815-20-25-83B.
","snippet":"Although the hedging relationship has been determined to be highly effective at achieving offsetting changes in fair value, the hedge will not be perfectly effective and the difference between changes in the USD equivale…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:150a15df7ee4ac8cd73383ef6c6b953e4724145ef37bc9ebf10dad8a60bafe04","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-66","para":"55-66","html":"
The forward exchange rates in effect on certain key dates are assumed to be as follows.
","snippet":"The forward exchange rates in effect on certain key dates are assumed to be as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:69686d72e34efc375c013a68a8cdcfda4dfe91d056ebb00f43242d521c02710e","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-67","para":"55-67","html":"
The USD equivalent and changes in the USD equivalent of the forward contract and the firm commitment, the changes in fair value of the forward contract and the firm commitment, and the earnings effect of the hedge on those same key dates are shown in the following table. A 6 percent discount rate is used in this Example.
","snippet":"The USD equivalent and changes in the USD equivalent of the forward contract and the firm commitment, the changes in fair value of the forward contract and the firm commitment, and the earnings effect of the hedge on tho…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:12e086cd64da65cb209cc8ec8151945afbb48f34ac4f902e9b6852d3e2d27853","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-68","para":"55-68","html":"
This Subtopic requires that Entity MNO recognize currently in earnings all changes in fair values of the forward contract. Because Entity MNO is hedging the risk of changes in fair value of the firm commitment attributable to changes in the forward exchange rates, this Subtopic also requires recognizing those changes currently in earnings. Section 815-20-45 requires that those changes be presented in earnings in the same income statement line item as the earnings effect of the hedged item.
","snippet":"This Subtopic requires that Entity MNO recognize currently in earnings all changes in fair values of the forward contract. Because Entity MNO is hedging the risk of changes in fair value of the firm commitment attributab…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:90cbdd782c26b4b16b3e7d76f5a1068c4fb54f03a7300849f80aedca2c3ca7a2","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-69","para":"55-69","html":"
On May 1, 20X7, Entity MNO fulfills the firm commitment to purchase the machine and settles the forward contract. The entries illustrating fair value hedge accounting for the hedging relationship and the purchase of the machine are summarized in the following table.
","snippet":"On May 1, 20X7, Entity MNO fulfills the firm commitment to purchase the machine and settles the forward contract. The entries illustrating fair value hedge accounting for the hedging relationship and the purchase of the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:191e1717b491a712aa40e08496ab03ef9bf48e4b239f13b3788d7dcf0376ffb5","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-70","para":"55-70","html":"
To simplify this Example and focus on the effects of the hedging relationship, other amounts that would be involved in the purchase of the machine by Entity MNO (for example, shipping costs and installation costs) have been ignored.
","snippet":"To simplify this Example and focus on the effects of the hedging relationship, other amounts that would be involved in the purchase of the machine by Entity MNO (for example, shipping costs and installation costs) have b…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9b3499114e123ff7de11880eb6fab042ddacbbe65cba38b6901c0f1e20806b33","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-71","para":"55-71","html":"
The effect of the hedge is to recognize the machine at its price in CHF (CHF 270,000) translated at the forward rate in effect at the inception of the hedge (USD 0.5454 per CHF 1).
","snippet":"The effect of the hedge is to recognize the machine at its price in CHF (CHF 270,000) translated at the forward rate in effect at the inception of the hedge (USD 0.5454 per CHF 1).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f77517bad586bc69619f6180440e769fe652cb402bc9ef9732c27db75f5185a4","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-72","para":"55-72","html":"
This Example illustrates application of the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 to a fair value hedge of the LIBOR swap rate in a $100 million A1-quality 5-year fixed-rate noncallable debt. Assume that an entity elected to calculate the change in the fair value of the hedged item attributable to LIBOR interest rate risk using the full contractual coupon cash flows of the hedged item.
","snippet":"This Example illustrates application of the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 to a fair value hedge of the LIBOR swap rate in a $100 million A1-quality 5-year fixed-rate noncallable debt. Assume th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d884d23c0a967cea08a4bda0c23164ba33062bb2f3d92d1839c30695ed341fc3","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-73","para":"55-73","html":"
On April 3, 20X0, Global Tech issues at par a $100 million A1-quality 5-year fixed-rate noncallable debt instrument with an annual 8 percent interest coupon payable semiannually. On that date, Global Tech enters into a 5-year interest rate swap based on the LIBOR swap rate and designates it as the hedging instrument in a fair value hedge of the $100 million liability. Under the terms of the interest rate swap, Global Tech will receive a fixed interest rate at 8 percent and pay variable interest at LIBOR plus 78.5 basis points (current LIBOR 6.29 percent) on a notional amount of $101,970,000 (semiannual settlement and interest reset dates). A duration-weighted hedge ratio was used to calculate the notional amount of the interest rate swap necessary to offset the debt's fair value changes attributable to changes in the LIBOR swap rate.
","snippet":"On April 3, 20X0, Global Tech issues at par a $100 million A1-quality 5-year fixed-rate noncallable debt instrument with an annual 8 percent interest coupon payable semiannually. On that date, Global Tech enters into a 5…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:49081208aee000f3595f1e47263787ef22e8900cce85cdbb72c7b4b18700afb0","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-74","para":"55-74","html":"
This Example has the following assumptions:
  1. a
    PV01 debt = 4.14
  2. b
    PV01 interest rate swap = 4.06
  3. c
    Hedge ratio = PV01 debt / PV01 interest rate swap = 4.14/4.06 = 1.0197
  4. d
    Interest rate swap notional = 1.0197 x $100 million = $101,970,000.
  5. e
    For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"This Example has the following assumptions:\n(a) PV01 debt = 4.14\n(b) PV01 interest rate swap = 4.06\n(c) Hedge ratio = PV01 debt / PV01 interest rate swap = 4.14/4.06 = 1.0197\n(d) Interest rate swap notional = 1.0197 x $1…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5bfb957d15c292607707ca9dcf30dfc6e6878208ce73285ffb9e72cd782669e4","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-75","para":"55-75","html":"
The Example assumes that the LIBOR swap rate increased 100 basis points to 7.29 percent on June 30, 20X0. The change in fair value of the interest rate swap for the period from April 3 to June 30, 20X0, is a loss of $4,016,000. The change in fair value of the debt attributable to changes in the benchmark interest rate for the period April 3 to June 30, 20X0, is calculated as follows.
","snippet":"The Example assumes that the LIBOR swap rate increased 100 basis points to 7.29 percent on June 30, 20X0. The change in fair value of the interest rate swap for the period from April 3 to June 30, 20X0, is a loss of $4,0…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:114e965c7271a9ea386159f832d6612ed62adf464ee158a53cf499427e242f47","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-76","para":"55-76","html":"
As of June 30, 20X0, 9.5 periods remain and the cash flows are discounted at 9 percent, determined as the initial 8-percent yield plus a 100 basis point increase attributable to the 100 basis point increase in the LIBOR swap rate. The accrual for the first quarter interest was excluded. The following journal entries illustrate the interest rate swap and debt fair value changes, attributable to changes in the LIBOR swap rate, excluding accruals.
","snippet":"As of June 30, 20X0, 9.5 periods remain and the cash flows are discounted at 9 percent, determined as the initial 8-percent yield plus a 100 basis point increase attributable to the 100 basis point increase in the LIBOR …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a3b90a52bcdbd14c4f4c347088a7697caee9ba54c4ac97b729e6d5958b3a1a41","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-77","para":"55-77","html":"
The net earnings effect of the hedging relationship was $240,380 because of the mismatch between the change in the fair value of the hedging instrument and the change in fair value of the hedged item. In accordance with paragraph 815-20-45-1A, Global Tech presents the entire change in the fair value of the hedging instrument (including interest accruals and all other changes in fair value) in the same income statement line item (in this case, interest expense) that is used by Global Tech to present the earnings effect of the hedged item before applying hedge accounting.
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Paragraph superseded by Accounting Standards Update No. 2017-12.
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Paragraph superseded by Accounting Standards Update No. 2017-12.
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This Example illustrates a circumstance in which statutory remedies for default constitute a disincentive for nonperformance in applying the definition of a firm commitment. Entity A enters into an agreement to purchase 4,000 barrels of a common solvent from a chemical entity at $200 per barrel on June 1, 2000. The provisions of the agreement do not include a specific disincentive for nonperformance that is sufficiently large to make performance probable. However, the laws of the legal jurisdiction to which the agreement is subject provide a disincentive for nonperformance if Entity A does not take delivery of the barrels pursuant to the agreement. The solvent is not readily convertible to cash. Therefore, because the governing legal jurisdiction provides statutory rights to pursue remedies for default equivalent to the damages suffered, the agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable for purposes of applying the definition of a firm commitment.
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This Example illustrates the application of paragraph 815-25-35-11 involving the interaction of hedge accounting and measurement of credit losses in Subtopic 326-20 on financial instruments measured at amortized cost. The following Cases also illustrate the effect of the two approaches to calculate the change in the fair value of the hedged item attributable to interest rate risk discussed in paragraph 815-25-35-13 on that interaction, as follows:
  1. a
    Using the full contractual coupon cash flows (Case A)
  2. b
    Using the benchmark rate component of the contractual coupon cash flows (Case B).
","snippet":"This Example illustrates the application of paragraph 815-25-35-11 involving the interaction of hedge accounting and measurement of credit losses in Subtopic 326-20 on financial instruments measured at amortized cost. Th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cac004d71955a05f4363ce36bab64cb7420a16461ee8ab7a37a5360214f35959","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-86","para":"55-86","html":"
Entity A formally documents a qualifying fair value hedge (for fair value changes attributable to changes in the designated benchmark interest rate) between a fixed-rate loan receivable from Entity B and an interest rate swap. The 5-year, fixed-rate loan to Entity B has a principal amount of $1,000,000 payable at maturity and interest payable annually at a 10 percent rate. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"Entity A formally documents a qualifying fair value hedge (for fair value changes attributable to changes in the designated benchmark interest rate) between a fixed-rate loan receivable from Entity B and an interest rate…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a2778ecbc5886b7d9f1b9c0e750549a1d1a2c3322096eadf5f76439a501336b","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-87","para":"55-87","html":"
One year after inception of the hedging relationship, the following conditions exist:
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  2. b
    There has been an adverse change to Entity B's creditworthiness.
  3. c
    The LIBOR swap rate (the designated benchmark interest rate) has decreased from 6 percent to 5.5 percent.
","snippet":"One year after inception of the hedging relationship, the following conditions exist:\n(a) Subparagraph superseded by Accounting Standards Update No. 2017-12.\n(b) There has been an adverse change to Entity B's creditworth…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e316f6a3924f8fc4abceaaa2ebd58b9d56662f57a408fa3d45e0bd8ef37c473f","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-88","para":"55-88","html":"
Assume that the repayment of the loan is not dependent on the underlying collateral. In applying the requirements of Subtopic 326-20 to the loan, Entity A evaluates the loan for credit losses on an individual basis because it does not have similar risk characteristics with other loans in the portfolio and uses a discounted cash flow approach. Entity A determines that the present value of expected future cash flows discounted at the loan's effective interest rate at inception of the loan is $930,000. (See row C in the table in paragraph 815-25-55-90, which presents calculations—at the end of the first year of the loan's term—of the net present value of current estimates of expected future cash flows based on the loan's original effective interest rate.)
","snippet":"Assume that the repayment of the loan is not dependent on the underlying collateral. In applying the requirements of Subtopic 326-20 to the loan, Entity A evaluates the loan for credit losses on an individual basis becau…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fea7c4a1983e9fda92033571fb73ea6b95610f551192c5e6408e4f397dc63942","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-88A","para":"55-88A","html":"
In this Case, assume that the entity elected to calculate fair value changes in the hedged item attributable to interest rate risk using the full contractual coupon cash flows of the hedged item. One year after inception of the hedging relationship, the change in the hedged item's fair value attributable to changes in the LIBOR swap rate (the designated benchmark interest rate) is a gain of $16,022. (See row B in the table in paragraph 815-25-55-90, which presents calculations—at the end of the first year of the loan's term—of the net present value of contractual cash flows based on the loan's original effective interest rate adjusted for a 50 basis point decrease in the LIBOR swap rate.)
","snippet":"In this Case, assume that the entity elected to calculate fair value changes in the hedged item attributable to interest rate risk using the full contractual coupon cash flows of the hedged item. One year after inception…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a61b0074085c83a497f8eceb7870a608bf984d8561a70659a13139bdd4405d2c","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-89","para":"55-89","html":"
After adjusting the amortized cost basis of the hedged loan by $16,022 (pursuant to paragraph 815-25-35-1(b)) for the increase in the hedged item's fair value attributable to changes in the benchmark interest rate, Entity A should apply the guidance in Subtopic 326-20 by doing both of the following:
  1. a
    Comparing the amortized cost basis of the loan after the effect of the fair value hedge, or $1,016,022, to the $944,901 present value of expected future cash flows discounted using the rate that reflects the rate of return implicit in the loan after adjusting the amortized cost basis of the hedged loan pursuant to paragraph 815-25-35-1(b) (that is, 9.5 percent)
  2. b
    Recording an allowance for credit losses (with the offsetting entry charged to expense) for the difference of $71,121 ($1,016,022 - $944,901).
","snippet":"After adjusting the amortized cost basis of the hedged loan by $16,022 (pursuant to paragraph 815-25-35-1(b)) for the increase in the hedged item's fair value attributable to changes in the benchmark interest rate, Entit…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7ddc9d77a733469d9e083481bfb5cdb10fc43c589bf0310457da2d61b1e499fc","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-90","para":"55-90","html":"
Following are calculations (at the end of the first year of the loan's term) of the net present value of the contractual cash flows and the creditor's best estimate of expected future cash flows based on the loan's original effective interest rate and the new implicit rate.
","snippet":"Following are calculations (at the end of the first year of the loan's term) of the net present value of the contractual cash flows and the creditor's best estimate of expected future cash flows based on the loan's origi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7fa1a6791c3b6a4fe5cea932550a89379bc8bf6b463703da5d0c76124d2ecee8","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-91","para":"55-91","html":"
In this Case, assume that Entity A elected to calculate fair value changes in the hedged item attributable to interest rate risk using the benchmark rate component of the contractual coupon cash flows of the hedged item determined at hedge inception. One year after inception of the hedging relationship, the change in the hedged item's fair value attributable to changes in the LIBOR swap rate (the designated benchmark interest rate) is a gain of $17,526, which is calculated as follows.
","snippet":"In this Case, assume that Entity A elected to calculate fair value changes in the hedged item attributable to interest rate risk using the benchmark rate component of the contractual coupon cash flows of the hedged item …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:76760883cac0f7ae0e7ece8395c7b237d14de7434d7b7fe8c77781c8ef9973cf","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-92","para":"55-92","html":"
After adjusting the amortized cost basis of the hedged loan by $17,526 (in accordance with paragraph 815-25-35-1(b)) for the increase in the hedged item's fair value attributable to changes in the benchmark interest rate, Entity A should apply the guidance in Subtopic 326-20 by doing both of the following:
  1. a
    Comparing the amortized cost basis of the loan after the effect of the fair value hedge, or $1,017,526, to the $946,299 present value of expected future cash flows discounted using the rate that reflects the rate of return implicit in the loan after adjusting the amortized cost basis of the hedged loan in accordance with paragraph 815-25-35-1(b) (that is, 9.45 percent that equates the adjusted amortized costs basis of the loan with the present value of the contractual cash flows of the loan)
  2. b
    Recognizing an allowance for credit losses (with the offsetting entry charged to expense) for the difference of $71,227 ($1,017,526 - $946,299).
","snippet":"After adjusting the amortized cost basis of the hedged loan by $17,526 (in accordance with paragraph 815-25-35-1(b)) for the increase in the hedged item's fair value attributable to changes in the benchmark interest rate…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f3bb0985c656fd04eeca7ca1c92cd0132f7c989d1797296e1b94f87f26acad83","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-93","para":"55-93","html":"
Following are calculations (at the end of the first year of the loan's term) of the net present value of the benchmark rate component of the contractual cash flows and the creditor's best estimate of expected future cash flows based on the loan's original effective interest rate and the new implicit rate. In row B, the net present value at the end of the first year is equal to the net present value of the benchmark rate component of the contractual coupon cash flows discounted at the 5.5 percent benchmark rate.
","snippet":"Following are calculations (at the end of the first year of the loan's term) of the net present value of the benchmark rate component of the contractual cash flows and the creditor's best estimate of expected future cash…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:91c01493f44e039787e6a677557fc467a773a43752923c329e300761a15cf4fc","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-94","para":"55-94","html":"
This Example illustrates the application of paragraphs 815-20-25-12(b)(2)(ii) and 815-25-35-13B to the designation and measurement of a hedged item as a portion of the term of a financial instrument in a hedge of interest rate risk. Assume that Entity S elected to calculate fair value changes in the hedged item attributable to interest rate risk on the basis of the benchmark rate component of the contractual coupon cash flows of the hedged item determined at hedge inception.
","snippet":"This Example illustrates the application of paragraphs 815-20-25-12(b)(2)(ii) and 815-25-35-13B to the designation and measurement of a hedged item as a portion of the term of a financial instrument in a hedge of interes…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a02d6877fd8aea34aed8d11423a194cb25ab7d4768ab1b91ec629ddcd97af214","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-95","para":"55-95","html":"
On January 1, 20X1, Entity S issues a noncallable, 5-year, $100 million debt instrument with a 3 percent semiannual interest coupon. On that date, the issuer also enters into a 2-year interest rate swap with a notional amount of $100 million. Entity S designates the swap as a fair value hedge of the fixed-rate debt attributable to interest rate risk for the first two years of its term in accordance with the guidance in paragraph 815-20-25-12(b)(2)(ii). The swap pays LIBOR and receives a fixed rate of 2 percent, with semiannual payments. The swap has a fair value of zero at inception. The designated benchmark interest rate is the LIBOR swap rate. For ease of calculation, the yield curve is assumed to be flat at the level of the current benchmark interest rate. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"On January 1, 20X1, Entity S issues a noncallable, 5-year, $100 million debt instrument with a 3 percent semiannual interest coupon. On that date, the issuer also enters into a 2-year interest rate swap with a notional a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ff8672b605cbb730e005499716c28b93b7ef6143f776d759f086638d5bd9f454","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-96","para":"55-96","html":"
This Example assumes that the LIBOR swap rate increased by 50 basis points to 2.5 percent on June 30, 20X1. The change in fair value of the interest rate swap for the period January 1, 20X1, to June 30, 20X1, is a loss in value of $731,633.
","snippet":"This Example assumes that the LIBOR swap rate increased by 50 basis points to 2.5 percent on June 30, 20X1. The change in fair value of the interest rate swap for the period January 1, 20X1, to June 30, 20X1, is a loss i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c61a2047642e31e8e260b425886b44e12c0c59fda621096267eb1833632cd13","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-97","para":"55-97","html":"
In calculating the change in fair value of the debt attributable to changes in the benchmark interest rate in accordance with paragraph 815-25-35-13B, Entity S determines that the assumed term of the hedged item is two years because it is hedging only the cash flows associated with the first two years of its debt issuance. The change in fair value of the debt attributable to changes in the benchmark interest rate for the period January 1, 20X1, to June 30, 20X1, is a gain of $731,633, calculated as follows.
","snippet":"In calculating the change in fair value of the debt attributable to changes in the benchmark interest rate in accordance with paragraph 815-25-35-13B, Entity S determines that the assumed term of the hedged item is two y…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2d5f0f654b372776d64ebdf2d6c97fe90d908d26f18e70afa8e933a7247c8351","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-98","para":"55-98","html":"
As of June 30, 20X1, the change in fair value of the debt attributable to the benchmark interest rate is calculated by discounting the benchmark rate component of the contractual coupon cash flows using the benchmark interest rate at June 30, 20X1 (2.5 percent annual rate and 1.25 percent for each semiannual period). The change in fair value of the debt and the change in fair value of the swap result in perfect offset in current-period earnings. In accordance with paragraph 815-20-45-1A, Entity S presents the total change in the fair value of the hedging instrument (that is, the interest accruals and all other changes in fair value) in the same income statement line item (in this case, interest expense) that is used by Entity S to present the earnings effect of the hedged item before applying hedge accounting.
","snippet":"As of June 30, 20X1, the change in fair value of the debt attributable to the benchmark interest rate is calculated by discounting the benchmark rate component of the contractual coupon cash flows using the benchmark int…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e32bd888f583bd37e2c055cce6833867d4b815939bafb2c19e745856578471ae","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-99","para":"55-99","html":"
Although this Example illustrates the hedged item as the first two years of interest payments associated with an existing debt instrument, paragraph 815-20-25-12(b)(2)(ii) permits one interest payment or any consecutive interest payments associated with an existing debt instrument to be designated as the hedged item. An entity also may have one or more separately designated partial-term hedging relationships outstanding at the same time for the same debt instrument. For example, an entity may have 2 outstanding hedging relationships for consecutive interest cash flows in Years 1 and 2 and consecutive interest cash flows in Years 4 and 5 of the 5-year debt instrument.
","snippet":"Although this Example illustrates the hedged item as the first two years of interest payments associated with an existing debt instrument, paragraph 815-20-25-12(b)(2)(ii) permits one interest payment or any consecutive …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eb4b54c45e850bb605d802a31d13f1e78a01d5a9fc46df696d0c5330dbce3b7f","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-100","para":"55-100","html":"
The following Cases illustrate application of the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 to a fair value hedge of the LIBOR swap rate in a $100 million A1-quality 5-year fixed-rate noncallable debt:
  1. a
    Using the full contractual coupon cash flows (Case A)
  2. b
    Using the benchmark rate component of the contractual coupon cash flows (Case B).
","snippet":"The following Cases illustrate application of the guidance in Sections 815-20-25, 815-20-35, and 815-25-35 to a fair value hedge of the LIBOR swap rate in a $100 million A1-quality 5-year fixed-rate noncallable debt:\n(a)…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:586ce810c71d1b9f096149eb17ce9cb5091619b63b5f9c7364b3d425ba209cb8","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-101","para":"55-101","html":"
On July 2, 20X0, Entity XYZ issues at par a $100 million A1-quality 5-year fixed-rate noncallable debt instrument with an annual 8 percent interest coupon payable semiannually. On that date, Entity XYZ enters into a 5-year interest rate swap based on the LIBOR swap rate and designates it as the hedging instrument in a fair value hedge of interest rate risk of the $100 million liability. Under the terms of the interest rate swap, Entity XYZ will receive a fixed interest rate at 8 percent and pay variable interest at LIBOR plus 200 basis points (current LIBOR 6 percent) on a notional amount of $100 million (semiannual settlement and interest reset dates). For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship. The Example also assumes that the yield curve is flat and that the LIBOR swap rate increased 100 basis points to 7 percent on December 31, 20X0. The change in fair value of the interest rate swap for the period from July 2, 20X0, to December 31, 20X0, is a loss of $3,803,843.
","snippet":"On July 2, 20X0, Entity XYZ issues at par a $100 million A1-quality 5-year fixed-rate noncallable debt instrument with an annual 8 percent interest coupon payable semiannually. On that date, Entity XYZ enters into a 5-ye…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e8e5a63df58361b04aa175e618e2441963caa0bef96b56de64d14eab865781a6","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-102","para":"55-102","html":"
In both Cases A and B in this Example, Entity XYZ presents the total change in the fair value of the hedging instrument (that is, the interest accruals and all other changes in fair value) in the same income statement line item (in this case, interest expense) that is used by Entity XYZ to present the earnings effect of the hedged item before applying hedge accounting in accordance with paragraph 815-20-45-1A.
","snippet":"In both Cases A and B in this Example, Entity XYZ presents the total change in the fair value of the hedging instrument (that is, the interest accruals and all other changes in fair value) in the same income statement li…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9b1182f42278f39191043d966a0fea2f60f6310b5cff0c6e2f7e82e7fbbe1f66","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-103","para":"55-103","html":"
In this Case, assume that Entity XYZ elected to calculate fair value changes in the hedged item attributable to interest rate risk using the full contractual coupon cash flows of the hedged item. The change in fair value of the debt attributable to changes in the benchmark interest rate for the period July 2, 20X0, to December 31, 20X0, is a gain of $3,634,395, calculated as follows.
","snippet":"In this Case, assume that Entity XYZ elected to calculate fair value changes in the hedged item attributable to interest rate risk using the full contractual coupon cash flows of the hedged item. The change in fair value…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7050adbb4eb0150f440f676b89651020371438e5b511c4557863e6d095d34e60","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-104","para":"55-104","html":"
As of December 31, 20X0, the fair value of the debt attributable to interest rate risk is calculated by discounting the full contractual coupon cash flows at the debt's original market rate with a 100 basis point adjustment related to the increase in the LIBOR swap rate (50 basis point adjustment on a semiannual basis). The following journal entries illustrate the interest rate swap and debt fair value changes attributable to changes in the LIBOR swap rate.
","snippet":"As of December 31, 20X0, the fair value of the debt attributable to interest rate risk is calculated by discounting the full contractual coupon cash flows at the debt's original market rate with a 100 basis point adjustm…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4737fa3244fb363ae6adcdc26eadd83c093139fabdfeeea097b871ad825ab007","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-105","para":"55-105","html":"
The net earnings effect of the hedge is $169,448 due to the mismatch between the changes in fair value of the hedging instrument and the hedged item attributable to the changes in the benchmark interest rate.
","snippet":"The net earnings effect of the hedge is $169,448 due to the mismatch between the changes in fair value of the hedging instrument and the hedged item attributable to the changes in the benchmark interest rate.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d44b21826d26a6cea556b624a4e385ef04d524a8bafaed6c329d1e9dea152927","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-106","para":"55-106","html":"
In this Case, assume that Entity XYZ elected to calculate fair value changes in the hedged item attributable to interest rate risk using the benchmark rate component of the contractual coupon cash flows of the hedged item determined at hedge inception. The change in fair value of the debt attributable to changes in the benchmark interest rate for the period July 2, 20X0, to December 31, 20X0, is a gain of $3,803,843, calculated as follows.
","snippet":"In this Case, assume that Entity XYZ elected to calculate fair value changes in the hedged item attributable to interest rate risk using the benchmark rate component of the contractual coupon cash flows of the hedged ite…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0562e64fde307d75d3ab88a64c2e454f54d6f85c449a6fd113a25fe647621ab4","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-107","para":"55-107","html":"
As of December 31, 20X0, the fair value of the debt attributable to interest rate risk is calculated by discounting the benchmark rate component of the contractual coupon cash flows using the benchmark interest rate at December 31, 20X0 (7 percent annual rate; 3.5 percent for each semiannual period). The following journal entries illustrate the interest rate swap and debt fair value changes attributable to changes in the LIBOR swap rate.
","snippet":"As of December 31, 20X0, the fair value of the debt attributable to interest rate risk is calculated by discounting the benchmark rate component of the contractual coupon cash flows using the benchmark interest rate at D…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a54d6dddc45b090bd0db9e5f26ee26050304020ef19ba1e91b4c24c2c61709d","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}},{"citation":"815-25-55-108","para":"55-108","html":"
The net earnings effect of the hedge is zero due to the perfect offset in fair value changes between the hedging instrument and the hedged item attributable to the changes in the benchmark interest rate.
","snippet":"The net earnings effect of the hedge is zero due to the perfect offset in fair value changes between the hedging instrument and the hedged item attributable to the changes in the benchmark interest rate.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b52f8b0678c13d3239d40ab0de7699572bcf6e3c0c2aefbfd9a7bde850d92eb7","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6b09eb46932b3d6ece33cae2c47ad2495063cdbf9a08c24bfdc52a9a0948a2a","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:08b14f80fa81801c0dbd84de5a681c014703ec5f9cc0ad8c6fc0a87f5ab7e688","downloaded_from":"2026-09-10T01:37:27.953Z","last_downloaded_at":"2026-09-10T01:37:27.953Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480207","source_sha256":"7641cabb756457a062adf84e7e7ff637691bae6dc39b32531132ad7f3a4293ec"}}],"enrichment":{"summary":"ASC 815-25 supplies the incremental accounting rules for fair value hedges that qualify under the designation criteria in ASC 815-20. The core mechanic (815-25-35-1) is that the gain or loss on the hedging instrument goes to current earnings, and the change in fair value of the hedged item attributable to the hedged risk adjusts the hedged item's carrying amount and also goes to current earnings, both presented in the same income statement line item as the hedged item's earnings effect; any mismatch therefore falls automatically into earnings. The Subtopic also governs basis adjustments and their amortization, portfolio layer method hedges of closed portfolios, interaction with impairment/credit loss rules, and mandatory or voluntary discontinuation of hedge accounting.","key_points":["Under 815-25-35-1, the hedging instrument's gain or loss is recognized currently in earnings (except excluded components amortized under 815-20-25-83A), and the hedged item's fair value change attributable to the hedged risk adjusts its carrying amount and is recognized currently in earnings, all in the same income statement line item as the earnings effect of the hedged item.","Hedge accounting need not produce perfect offset; any nonoffsetting amount is recognized in earnings in the same line item as the hedged item (815-25-35-4), and for an AFS debt security the hedged item's basis adjustment goes to earnings rather than OCI (815-25-35-6).","For portfolio layer method hedges under 815-20-25-12A, the basis adjustment is maintained on a closed-portfolio basis and does not adjust the carrying amount or amortized cost of individual assets or beneficial interests (815-25-35-1(c), 35-10, 35-11); the entity must document at each assessment date that the hedged layer(s) are still anticipated to be outstanding (815-25-35-7A).","Basis adjustments to hedged interest-bearing financial instruments are amortized to earnings beginning no later than when the hedged item ceases to be adjusted for hedged-risk fair value changes (815-25-35-9), with partial-term and portfolio layer adjustments fully amortized by the assumed maturity date (815-25-35-9A).","A hedged asset or liability remains subject to normal impairment/credit loss requirements, applied after the hedge accounting basis adjustment, and the hedging instrument's fair value is not considered in that assessment (815-25-35-10); the credit loss discount rate becomes the new effective rate based on the adjusted amortized cost basis (815-25-35-11).","Hedge accounting must be discontinued prospectively if any 815-20-25 criterion is no longer met, the derivative expires or is sold, terminated or exercised, or the entity removes the designation (815-25-40-1); a change in counterparty alone is not a termination (815-25-40-1A).","For portfolio layer method hedges, discontinuation is required when a breach is anticipated or has occurred (815-25-40-8); the basis adjustment for a voluntary or anticipated-breach dedesignation is allocated to remaining assets and amortized (815-25-40-9), while the portion associated with an actual breach is immediately recognized in interest income and disclosed (815-25-40-9A)."],"categories":["Derivatives and hedging","Subsequent measurement","Financial instruments","Fair value"],"audience_level":"advanced","student_note":"Fair value hedging is heavily tested because it is the one place GAAP lets you remeasure a hedged item (even an amortized-cost loan or inventory) for a single risk; the classic misunderstanding is thinking ineffectiveness is separately computed and reported — post-ASU 2017-12 the entire change in the hedging instrument goes to the same line item as the hedged item, so mismatch shows up automatically. Also remember that portfolio layer basis adjustments live at the portfolio level and are ignored when testing individual assets for impairment.","related_topics":["815-20","815-10","815-30","815-35","326-20","830-20"],"key_concepts":["fair value hedge","hedged item basis adjustment","portfolio layer method","closed portfolio breach","excluded components","benchmark interest rate","hedge dedesignation","firm commitment"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3363aad68aca3db2e60c9e97ed3e116382fb30f3f7a752512d04c145a305e212","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:31.976Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"815-30","title":"Cash Flow Hedges","topic_title":"Derivatives and Hedging","score":0.7888,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d323550838ac730452cd787539096dd26de0aa23a833a851d597411522849b9c","downloaded_from":"2026-09-10T01:37:35.233Z","last_downloaded_at":"2026-09-10T01:38:16.160Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-35","title":"Net Investment Hedges","topic_title":"Derivatives and Hedging","score":0.7633,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0952ba52ffe2dcb9f2e979b976a5df9a99d64be50e029d6b24500f001432bd6a","downloaded_from":"2026-09-10T01:38:18.840Z","last_downloaded_at":"2026-09-10T01:38:43.011Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not 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Equity","score":0.7365,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66f3a08452d185e8b240931b3535edfa90888398297006e3f085d1d5a230197e","downloaded_from":"2026-09-10T00:35:26.644Z","last_downloaded_at":"2026-09-10T00:36:28.293Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-40","title":"Contracts in Entity's Own Equity","topic_title":"Derivatives and Hedging","score":0.7345,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f8da6a043fe516844924523201593060912c80fdce9b81b4552173645b9e61ac","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-45","title":"Weather Derivatives","topic_title":"Derivatives and Hedging","score":0.7254,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f5a841f2c43d389d9ee9b91baa0ff5945a09b59f6bdcf2068ca0d259009d360f","downloaded_from":"2026-09-10T01:39:26.652Z","last_downloaded_at":"2026-09-10T01:39:52.581Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not 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Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6d3d4a40d6b4337df6e64cc043159e08079b96e99f675958fa08dc5615e83f68","downloaded_from":"2026-09-10T01:37:35.233Z","last_downloaded_at":"2026-09-10T01:38:16.160Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:df69f1fd2da509cf63416cdeceb19c2b1c2022be9f0ce245c429ba6123853184","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:31.976Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-30","topic":"815","title":"Cash Flow Hedges","area":"Broad Transactions","paragraphs":274,"summary":"ASC 815-30 provides the incremental accounting for cash flow hedges — derivatives designated as hedging the variability in expected future cash flows of a forecasted transaction or of a recognized variable-cash-flow asset/liability. The entire change in fair value of the hedging instrument that is included in the assessment of effectiveness is recorded in other comprehensive income and reclassified into earnings in the same period(s) the hedged forecasted transaction affects earnings, presented in the same income statement line item as the hedged item. The Subtopic also governs excluded components, quantitative effectiveness methods for interest rate hedges, and discontinuation/dedesignation (including immediate reclassification when the forecasted transaction is probable of not occurring).","concepts":["cash flow hedge","accumulated other comprehensive income","forecasted transaction","highly effective","excluded component","hypothetical-derivative method","dedesignation","reclassification into earnings"],"categories":["Derivatives and hedging","Subsequent measurement","Presentation","Disclosure"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-30-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Contractually Specified ComponentSupersededAccounting Standards Update No. 2025-0911/25/2025
Contractually Specified ComponentAddedAccounting Standards Update No. 2017-1208/28/2017
Credit RiskAmendedAccounting Standards Update No. 2017-1208/28/2017
Credit RiskAmendedAccounting Standards Update No. 2010-0802/02/2010
Financial InstrumentAmendedAccounting Standards Update No. 2024-0203/29/2024
Interest Rate RiskAmendedAccounting Standards Update No. 2017-1208/28/2017
Intrinsic ValueAddedAccounting Standards Update No. 2010-0802/02/2010
London Interbank Offered Rate (LIBOR) Swap RateAddedAccounting Standards Update No. 2018-1610/25/2018
London Interbank Offered Rate Swap RateSupersededAccounting Standards Update No. 2018-1610/25/2018
Spot RateAddedAccounting Standards Update No. 2014-0603/14/2014
Time ValueAddedAccounting Standards Update No. 2010-0802/02/2010
TransactionAmendedAccounting Standards Update No. 2024-0203/29/2024
815-30-05-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-2SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-35-3AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-3AmendedAccounting Standards Update No. 2010-0802/02/2010
815-30-35-4SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-35-5AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-7 through 35-14
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-8AmendedAccounting Standards Update No. 2025-0911/25/2025
815-30-35-15AAddedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-16AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-19AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-21SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-35-22AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-23AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-25 through 35-27
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-26AmendedAccounting Standards Update No. 2019-0404/25/2019
815-30-35-28SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-35-29AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-30SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-35-31AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-33AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-34AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-35 through 35-37
SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-35-37ASupersededAccounting Standards Update No. 2025-0911/25/2025
815-30-35-37AAddedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-37B through 35-37M
AddedAccounting Standards Update No. 2025-0911/25/2025
815-30-35-38AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-39AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-41AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-41A through 35-41C
AddedAccounting Standards Update No. 2017-1208/28/2017
815-30-35-42AmendedAccounting Standards Update No. 2016-1306/16/2016
815-30-35-43AmendedAccounting Standards Update No. 2016-1306/16/2016
815-30-35-44AmendedAccounting Standards Update No. 2015-0101/09/2015
815-30-40-1AAddedAccounting Standards Update No. 2016-0503/10/2016
815-30-40-2AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-40-5AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-40-6AAddedAccounting Standards Update No. 2017-1208/28/2017
815-30-45-1 through 45-3
SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-50-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-50-2AmendedAccounting Standards Update No. 2025-1112/08/2025
815-30-50-2AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-50-2AmendedAccounting Standards Update No. 2011-0506/16/2011
815-30-50-4AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-50-5AddedAccounting Standards Update No. 2017-1208/28/2017
815-30-50-6AddedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-1 through 55-4
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-2 through 55-4
AmendedAccounting Standards Update No. 2025-0911/25/2025
815-30-55-8 through 55-11
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-13 through 55-16
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-15AmendedAccounting Standards Update No. 2014-0603/14/2014
815-30-55-20 through 55-23
AmendedAccounting Standards Update No. 2025-0911/25/2025
815-30-55-20 through 55-22
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-24AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-25AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-28AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-29AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-32AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-34 through 55-39
SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-55-41AmendedAccounting Standards Update No. 2025-0911/25/2025
815-30-55-41 through 55-43
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-49AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-54 through 55-57
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-60AmendedAccounting Standards Update No. 2025-0911/25/2025
815-30-55-60AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-61AmendedAccounting Standards Update No. 2025-0911/25/2025
815-30-55-61AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-62SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-55-63AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-64AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-65SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-55-66AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-68 through 55-70
AmendedMaintenance Update 2014-07 (PDF)03/17/2014
815-30-55-70AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-71AmendedAccounting Standards Update No. 2014-0905/28/2014
815-30-55-72AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-72AmendedAccounting Standards Update No. 2014-0905/28/2014
815-30-55-74 through 55-76
AmendedMaintenance Update 2014-07 (PDF)03/17/2014
815-30-55-75AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-78AmendedMaintenance Update 2014-07 (PDF)03/17/2014
815-30-55-81 through 55-83
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-89AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-91AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-93SupersededAccounting Standards Update No. 2017-1208/28/2017
815-30-55-93AAddedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-95AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-97 through 55-99
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-98AAddedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-101AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-107AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-109AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-117AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-124AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-126AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-127AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-129AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-132AmendedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-134AmendedAccounting Standards Update No. 2025-0911/25/2025
815-30-55-134 through 55-148
AddedAccounting Standards Update No. 2017-1208/28/2017
815-30-55-138AmendedAccounting Standards Update No. 2025-0911/25/2025
815-30-55-146 through 55-148
AmendedAccounting Standards Update No. 2025-0911/25/2025
815-30-55-149 through 55-181
AddedAccounting Standards Update No. 2025-0911/25/2025
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nContractually Specified Component | Superseded | Accounting Standards Update No. 2025-09…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0d406b92f0e6bac419c6b96a0d8f3676861e0685e38597a30830cfb85c715491","downloaded_from":"2026-09-10T01:37:35.233Z","last_downloaded_at":"2026-09-10T01:37:35.233Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481111","source_sha256":"7c611f8a45795143baca8510d565af14bee8f204aa4e828e1d5b3f68b6e34130"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aedaeccfd6ff10ce06e4ad8e37382086818a909dbbe0aa7f954d058e7ad8c529","downloaded_from":"2026-09-10T01:37:35.233Z","last_downloaded_at":"2026-09-10T01:37:35.233Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481111","source_sha256":"7c611f8a45795143baca8510d565af14bee8f204aa4e828e1d5b3f68b6e34130"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:042e3f0eff97031150b15c9bd130c58850964e63846cda405f48357661de26d3","downloaded_from":"2026-09-10T01:37:35.233Z","last_downloaded_at":"2026-09-10T01:37:35.233Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481111","source_sha256":"7c611f8a45795143baca8510d565af14bee8f204aa4e828e1d5b3f68b6e34130"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-30-05-1","para":"05-1","html":"
This Subtopic provides incremental guidance on accounting for and financial reporting of cash flow hedges established under the criteria in Subtopic815-20such as subsequent measurement and dedesignation of a hedging relationship. Implementation guidance and examples specific to cash flow hedges are included in both Subtopic 815-20 and this Subtopic.
","snippet":"This Subtopic provides incremental guidance on accounting for and financial reporting of cash flow hedges established under the criteria in Subtopic815-20such as subsequent measurement and dedesignation of a hedging rela…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:81b1fe46529a98a9ff1e83aba02e1725a8c03ed3c6a8b4bf8c0b666b9af41068","downloaded_from":"2026-09-10T01:37:38.874Z","last_downloaded_at":"2026-09-10T01:37:38.874Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481077","source_sha256":"2f8aeb032d3e353337c0444d33759a813ac5be84671cbb59f7f5c4317652160f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9fac3c244d2d37d54821e08111ddf7de05997121601a7fa8fb44044ca135bfc","downloaded_from":"2026-09-10T01:37:38.874Z","last_downloaded_at":"2026-09-10T01:37:38.874Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481077","source_sha256":"2f8aeb032d3e353337c0444d33759a813ac5be84671cbb59f7f5c4317652160f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4327e1cac2a981b08428d97707bec73f19be5f0c23c8812455910e1bfcffc00e","downloaded_from":"2026-09-10T01:37:38.874Z","last_downloaded_at":"2026-09-10T01:37:38.874Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481077","source_sha256":"2f8aeb032d3e353337c0444d33759a813ac5be84671cbb59f7f5c4317652160f"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Overall Guidance","paragraphs":[{"citation":"815-30-15-1","para":"15-1","html":"
This Subtopic follows the same Scope and Scope Exceptions as outlined in Subtopic 815-20, see Section 815-20-15, with specific exceptions noted below.
","snippet":"This Subtopic follows the same Scope and Scope Exceptions as outlined in Subtopic 815-20, see Section 815-20-15, with specific exceptions noted below.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1fa6ab74bb6da109c1fb0a4d9740f29742652ae47d6862c062696825f75c3027","downloaded_from":"2026-09-10T01:37:42.153Z","last_downloaded_at":"2026-09-10T01:37:42.153Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481046","source_sha256":"ab262f821947a4b4d4c598cd2ca51aea6ffee0066bb6ebd1c17ad4317753e7a7"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e88f45f045bfb7bdb002b1b07a6d36242b3309725f98f04040b0cfd8127b38ac","downloaded_from":"2026-09-10T01:37:42.153Z","last_downloaded_at":"2026-09-10T01:37:42.153Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481046","source_sha256":"ab262f821947a4b4d4c598cd2ca51aea6ffee0066bb6ebd1c17ad4317753e7a7"}},{"block":null,"heading":"Entities","paragraphs":[{"citation":"815-30-15-2","para":"15-2","html":"
The guidance in this Subtopic does not apply to the following entities:
  1. a
    Entities that do not report earnings. Those entities are not permitted to use cash flow hedge accounting because they do not report earnings separately.
","snippet":"The guidance in this Subtopic does not apply to the following entities:\n(a) Entities that do not report earnings. Those entities are not permitted to use cash flow hedge accounting because they do not report earnings sep…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:89365537363f54d490b983de75782fa90a38848d789ce8491a7aad08336d74d9","downloaded_from":"2026-09-10T01:37:42.153Z","last_downloaded_at":"2026-09-10T01:37:42.153Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481046","source_sha256":"ab262f821947a4b4d4c598cd2ca51aea6ffee0066bb6ebd1c17ad4317753e7a7"}},{"citation":"815-30-15-3","para":"15-3","html":"
Consistent with the provisions of Topic 958, this Subtopic does not prescribe how a not-for-profit entity (NFP) should determine the components of an operating measure, if one is presented. For guidance on the application of this Subtopic by not-for-profit health care entities, see Subtopic 954-815.
","snippet":"Consistent with the provisions of Topic 958, this Subtopic does not prescribe how a not-for-profit entity (NFP) should determine the components of an operating measure, if one is presented. For guidance on the applicatio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dc6ff64490445722339b302dec09f2698b5e90684e3763d8db5d223935b97458","downloaded_from":"2026-09-10T01:37:42.153Z","last_downloaded_at":"2026-09-10T01:37:42.153Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481046","source_sha256":"ab262f821947a4b4d4c598cd2ca51aea6ffee0066bb6ebd1c17ad4317753e7a7"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2eea05c3b229790ebd270097fe44f52e8b52953b49bdff1347c26160aeda2a96","downloaded_from":"2026-09-10T01:37:42.153Z","last_downloaded_at":"2026-09-10T01:37:42.153Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481046","source_sha256":"ab262f821947a4b4d4c598cd2ca51aea6ffee0066bb6ebd1c17ad4317753e7a7"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0ee6f638a874d4d5b47ab223a87c20a8a52cb94990458ac6fa7658cb2d6517cc","downloaded_from":"2026-09-10T01:37:42.153Z","last_downloaded_at":"2026-09-10T01:37:42.153Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481046","source_sha256":"ab262f821947a4b4d4c598cd2ca51aea6ffee0066bb6ebd1c17ad4317753e7a7"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-30-25-1","para":"25-1","html":"
See Section 815-20-25 for the criteria under which an entity may designate a derivative instrument as hedging the exposure to variability in expected future cash flows that is attributable to a particular risk.
","snippet":"See Section 815-20-25 for the criteria under which an entity may designate a derivative instrument as hedging the exposure to variability in expected future cash flows that is attributable to a particular risk.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:daef3d0721b51173fd066779c29729a9d3765f6c7823e2bc284496bd53b71ab0","downloaded_from":"2026-09-10T01:37:49.127Z","last_downloaded_at":"2026-09-10T01:37:49.127Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480987","source_sha256":"e29d92b1836dced8e0ad4c72143c92b054ca1b985eb354b2d35de2f57af43de8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a8a4203a282cf028a71d2fb2c77ac606c2ff0b7cee30730bf1e41ea86e0f9f0","downloaded_from":"2026-09-10T01:37:49.127Z","last_downloaded_at":"2026-09-10T01:37:49.127Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480987","source_sha256":"e29d92b1836dced8e0ad4c72143c92b054ca1b985eb354b2d35de2f57af43de8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d2570e40e001e5e390f34ca7339bf8d1ff16a12e211c1b99eb242881364a7b78","downloaded_from":"2026-09-10T01:37:49.127Z","last_downloaded_at":"2026-09-10T01:37:49.127Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480987","source_sha256":"e29d92b1836dced8e0ad4c72143c92b054ca1b985eb354b2d35de2f57af43de8"}},{"number":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-30-35-1","para":"35-1","html":"
The guidance in this Section is organized as follows:
  1. a
    Subsequent recognition and measurement of gains and losses on hedging instrument
  2. b
    Reclassifications from accumulated other comprehensive income into earnings
  3. c
    Hedging relationship's timing that involves uncertainty within a range
  4. d
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"The guidance in this Section is organized as follows:\n(a) Subsequent recognition and measurement of gains and losses on hedging instrument\n(b) Reclassifications from accumulated other comprehensive income into earnings\n(…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9983abbf7adb9bb71ff147e5d8839d16245873314968fd5862b521cefba26bc8","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f957eaea7e3e89a03c411c7f192182be8985a21b41d6cd2e5bd2d256ea2a8f08","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"block":null,"heading":"Subsequent Recognition and Measurement of Gains and Losses on Hedging Instrument","paragraphs":[{"citation":"815-30-35-2","para":"35-2","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2f3c4549aea48aab9bddaf6f0085b5fce41ae4bf3009b0e4a55ebd55b84f4928","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-3","para":"35-3","html":"
When the relationship between the hedged item and hedging instrument is highly effective at achieving offsetting changes in cash flows attributable to the hedged risk, an entity shall record in other comprehensive income the entire change in the fair value of the designated hedging instrument that is included in the assessment of hedge effectiveness. More specifically, a qualifying cash flow hedge shall be accounted for as follows:
  1. a
    An entity's defined risk management strategy for a particular hedging relationship may exclude a specific component of the gain or loss, or related cash flows, on the hedging derivative from the assessment of hedge effectiveness (as discussed in paragraphs 815-20-25-81 through 25-83B). That excluded component of the gain or loss shall be recognized in earnings either through an amortization approach in accordance with paragraph 815-20-25-83A or through a mark-to-market approach in accordance with paragraph 815-20-25-83B. Under either approach, the amount recognized in earnings for an excluded component shall be presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A. For example, if the effectiveness of a hedging relationship with an option is assessed based on changes in the option's intrinsic value, the changes in the option's time value would be excluded from the assessment of hedge effectiveness and either may be recognized in earnings through an amortization approach in accordance with paragraph 815-20-25-83A or currently in earnings in accordance with paragraph 815-20-25-83B.
  2. b
    Amounts in accumulated other comprehensive income related to the derivative designated as a hedging instrument included in the assessment of hedge effectiveness are reclassified to earnings in the same period or periods during which the hedged forecasted transaction affects earnings in accordance with paragraphs
    815-30-35-38 through 35-41
    and presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A. The balance in accumulated     other comprehensive income associated with the hedged transaction shall be the cumulative gain or loss on the derivative instrument from inception of the hedge less all of the following:
    1. 1
      Subparagraph superseded by Accounting Standards Update No. 2017-12.
    2. 1a
      The derivative instrument's gains or losses previously reclassified from accumulated other comprehensive income into earnings pursuant to paragraphs
      815-30-35-38 through 35-41
      .
    3. 1b
      The cumulative amount amortized to earnings related to excluded components accounted for through an amortization approach in accordance with paragraph 815-20-25-83A.
    4. 1c
      The cumulative change in fair value of an excluded component for which changes in fair value are recorded currently in earnings in accordance with paragraph 815-20-25-83B.
    5. 2
      Subparagraph superseded by Accounting Standards Update No. 2017-12.
    If hedge accounting has not been applied to a cash flow hedging relationship in a previous effectiveness assessment period because the entity's retrospective evaluation indicated that the relationship had not been highly effective in achieving offsetting changes in cash flows in that period, the cumulative gain or loss on the derivative referenced in (b) would exclude the gains or losses occurring during that period. That situation may arise if the entity had previously determined, for example, under a regression analysis or other appropriate statistical analysis approach used for prospective assessments of hedge effectiveness, that there was an expectation in which the hedging relationship would be highly effective in future periods. Consequently, the hedging relationship continued even though hedge accounting was not permitted for a specific previous effectiveness assessment period.
  3. c
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  4. d
    If a non-option-based contract is the hedging instrument in a cash flow hedge of the variability of the functional-currency-equivalent cash flows for a recognized foreign-currency-denominated asset or liability that is remeasured at spot exchange rates under paragraph 830-20-35-1, an amount that will both offset the related transaction gain or loss arising from that remeasurement and adjust earnings for that period's allocable portion of the initial spot-forward difference associated with the hedging instrument (cost to the purchaser or income to the seller of the hedging instrument) shall be reclassified each period from other comprehensive income to earnings if the assessment of effectiveness is based on total changes in the non-option-based instrument's cash flows.If an option contract is used as the hedging instrument in a cash flow hedge of the variability of the functional-currency-equivalent cash flows for a recognized foreign-currency-denominated asset or liability that is remeasured at spot exchange rates under paragraph 830-20-35-1 to provide only one-sided offset against the hedged foreign exchange risk, an amount shall be reclassified each period to or from other comprehensive income with respect to the changes in the underlying that result in a change in the hedging option's intrinsic value. In addition, if the assessment of effectiveness is based on total changes in the option's cash flows (that is, the assessment will include the hedging instrument's entire change in fair value—its entire gain or loss), an amount that adjusts earnings for the amortization of the cost of the option on a rational basis shall be reclassified each period from other comprehensive income to earnings. This guidance is limited to foreign currency hedging relationships because of their unique attributes and is an exception for foreign currency hedging relationships.
  5. e
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  6. f
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
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Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6372a732bc3bf44fcb6b63b8ed3d3c7b40e39fb0409254563bae5a902c7f6824","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-5","para":"35-5","html":"
If an entity has designated and documented that it will assess effectiveness and measure hedge results of a cash flow hedge of foreign currency risk on an after-tax basis as permitted by paragraph 815-20-25-3(b)(2)(vi), the portion of the gain or loss on the hedging instrument that exceeded the loss or gain on the hedged item shall be included as an offset to the related tax effects in the period in which those tax effects are recognized.
","snippet":"If an entity has designated and documented that it will assess effectiveness and measure hedge results of a cash flow hedge of foreign currency risk on an after-tax basis as permitted by paragraph 815-20-25-3(b)(2)(vi), …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0fe04823665b43f8818d0f2d7947d26dee91cc8bab981bd21d84223f841ea47f","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-6","para":"35-6","html":"
Remeasurement of the hedged foreign-currency-denominated assets and liabilities is based on the guidance in Topic 830, which requires remeasurement based on spot exchange rates, regardless of whether a cash flow hedging relationship exists.
","snippet":"Remeasurement of the hedged foreign-currency-denominated assets and liabilities is based on the guidance in Topic 830, which requires remeasurement based on spot exchange rates, regardless of whether a cash flow hedging …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f915e5f9ebb8e06377b31865acf9b1bd73f2183a81bab451b6b5c6eff30394ab","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-7","para":"35-7","html":"
Examples 1 through 4 (see paragraphs
815-30-55-1A through 55-19
) illustrate assessing hedge effectiveness. Example 10 (see paragraph 815-30-55-63) illustrates the application of paragraph 815-30-35-3.
","snippet":"Examples 1 through 4 (see paragraphs 815-30-55-1A through 55-19) illustrate assessing hedge effectiveness. Example 10 (see paragraph 815-30-55-63) illustrates the application of paragraph 815-30-35-3.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0b3d7cf6fd408ee4251752d4fc0a1c1192feaab05b89c45efe7b673f64bc3534","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-8","para":"35-8","html":"
The remainder of this guidance addresses the following matters:
  1. a
    Application to single cash flow hedge of a forecasted sale or purchase on credit for foreign exchange risk
  2. b
    Assessing hedge effectiveness in certain cash flow hedges involving interest rate risk when effectiveness is assessed on a quantitative basis
  3. c
    Hedging relationship in which hedge effectiveness is based on an option's terminal value.
  4. d
    Change in the designated hedged risk.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7The remainder of this guidance addresses the following matters:
  1. a
    Application to single cash flow hedge of a forecasted sale or purchase on credit for foreign exchange risk
  2. b
    Assessing hedge effectiveness in certain cash flow hedges involving interest rate risk when effectiveness is assessed on a quantitative basis
  3. c
    Hedging relationship in which hedge effectiveness is based on an option's terminal value
  4. d
    Change in the contractually specified interest rate for forecasted interest payments on choose-your-rate debt.
","snippet":"The remainder of this guidance addresses the following matters:\n(a) Application to single cash flow hedge of a forecasted sale or purchase on credit for foreign exchange risk\n(b) Assessing hedge effectiveness in certain …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c9b8bbf9a625d8d35ea5fabcf51529e5ba66c4da93279719eab5a11dfd01e6c7","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-9","para":"35-9","html":"
For a single cash flow hedge that encompasses the variability of functional-currency-equivalent cash flows attributable to foreign exchange risk related to the settlement of a foreign-currency-denominated receivable or payable resulting from a forecasted sale or purchase on credit, the guidance in paragraph 815-30-35-3 is applied as follows:
  1. a
    The gain or loss on the derivative instrument that is included in the assessment of hedge effectiveness is reported in other comprehensive income during the period before the forecasted purchase or sale.
  2. b
    The functional currency interest rate implicit in the hedging relationship as a result of entering into the forward contract is used to determine the amount of cost or income to be ascribed to each period of the hedging relationship. The cash flow hedging model for recognized foreign-currency-denominated assets and liabilities requires use of the interest method at the inception of the hedging relationship to determine the amount of cost or income to be ascribed to each relevant period of the hedging relationship. However, for simplicity, in hedging relationships in which the hedged item is a short-term non-interest-bearing account receivable or account payable, the amount of cost or income to be ascribed each period can also be determined using a pro rata method based on the number of days or months of the hedging relationship. In addition, in a short-term single cash flow hedging relationship that encompasses the variability of functional-currency-equivalent cash flows attributable to foreign exchange risk related to the settlement of a foreign-currency-denominated receivable or payable resulting from a forecasted sale or purchase on credit, the amount of cost or income to be ascribed each period can also be determined using a pro rata method or a method that uses two foreign currency forward exchange rates. The first foreign currency forward exchange rate would be based on the maturity date of the forecasted purchase or sale transaction. The second foreign currency forward exchange rate would be based on the settlement date of the resulting account receivable or account payable.
  3. c
    For forecasted sales on credit, the amount of cost or income ascribed to each forecasted period is reclassified from other comprehensive income to earnings on the date of the sale. For forecasted purchases on credit, the amount of cost or income ascribed to each forecasted period is reclassified from other comprehensive income to earnings in the same period or periods during which the asset acquired affects earnings. The reclassification from other comprehensive income to earnings of the amount of cost or income ascribed to each forecasted period is based on the guidance in paragraphs
    815-30-35-38 through 35-41
    .
  4. d
    The income or cost ascribed to each period encompassed within the periods of the recognized foreign-currency-denominated receivable or payable is reclassified from other comprehensive income to earnings at the end of each reporting period.
Example 18 (see paragraph 815-30-55-106) illustrates such a transaction.
","snippet":"For a single cash flow hedge that encompasses the variability of functional-currency-equivalent cash flows attributable to foreign exchange risk related to the settlement of a foreign-currency-denominated receivable or p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4253a5f8a70f6ba48da05c79eb49b2cb81d14d3310046cb36e2f1b1e1391298b","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-10","para":"35-10","html":"
This guidance addresses the following three methods of assessing effectiveness of certain cash flow hedges when hedge effectiveness is assessed on a quantitative basis in accordance with paragraphs 815-20-25-3(b)(2)(iv)(01) and 815-20-35-2 through 35-2F:
  1. a
    Change-in-variable-cash-flows method
  2. b
    Hypothetical-derivative method
  3. c
    Change-in-fair-value method.
","snippet":"This guidance addresses the following three methods of assessing effectiveness of certain cash flow hedges when hedge effectiveness is assessed on a quantitative basis in accordance with paragraphs 815-20-25-3(b)(2)(iv)(…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:384ce33dc7e086437f1f281148cd110f1264a5a724033f00607c3a646068e855","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-11","para":"35-11","html":"
Those three methods relate to assessing the effectiveness of a cash flow hedge that involves any of the following:
  1. a
    A receive-variable, pay-fixed interest rate swap designated as a hedge of the variable interest payments on an existing floating-rate liability
  2. b
    A receive-fixed, pay-variable interest rate swap designated as a hedge of the variable interest receipts on an existing variable-rate asset
  3. c
    Cash flow hedges of the variability of future interest payments on interest-bearing assets to be acquired or interest-bearing liabilities to be incurred (such as the rollover of an entity's short-term debt as described in Example 9 [see paragraph 815-30-55-52]).
","snippet":"Those three methods relate to assessing the effectiveness of a cash flow hedge that involves any of the following:\n(a) A receive-variable, pay-fixed interest rate swap designated as a hedge of the variable interest payme…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9c857c8b6c5e5466945438581feb6d81178e8d307de807ffc30321e233d4f70","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-12","para":"35-12","html":"
The hedging relationships covered by this guidance encompass either of the following:
  1. a
    Hedges of interest rate risk (pursuant to paragraph 815-20-25-15(j)(2)) that do not qualify for the shortcut method
  2. b
    Hedges of the risk of overall changes in the hedged cash flows related to the asset or liability (pursuant to paragraph 815-20-25-15(j)(1)).
","snippet":"The hedging relationships covered by this guidance encompass either of the following:\n(a) Hedges of interest rate risk (pursuant to paragraph 815-20-25-15(j)(2)) that do not qualify for the shortcut method\n(b) Hedges of …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:52fba610958851273f3bc4376488a21d379f0898c6dceae6b198f66b3746dce4","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-13","para":"35-13","html":"
If, at the inception of the hedge, the fair value of the interest rate swap designated as the hedging instrument is zero or is somewhat near zero, any of the three methods in paragraph 815-30-35-10 may be applied to assess hedge effectiveness.
","snippet":"If, at the inception of the hedge, the fair value of the interest rate swap designated as the hedging instrument is zero or is somewhat near zero, any of the three methods in paragraph 815-30-35-10 may be applied to asse…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d3620664d3808ae99d4addde0afcfd6b2c6df75689ae5b46e1dd22ac6c4220bb","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-14","para":"35-14","html":"
In contrast, if, at the inception of the hedge, the fair value of the interest rate swap is not somewhat near zero, the change-in-variable-cash-flows method shall not be applied to assess hedge effectiveness because that method does not require entities to consider the interest element of the change in fair value of a hedging instrument that incorporates a financing element; instead, either the hypothetical-derivative method or the change-in-fair-value method shall be applied. Those latter two methods require entities to consider the interest element of the change in fair value of a hedging instrument that incorporates a financing element that is not somewhat near zero, such as if the interest rate swap has been structured to be significantly in the money at the inception of the hedging relationship.
","snippet":"In contrast, if, at the inception of the hedge, the fair value of the interest rate swap is not somewhat near zero, the change-in-variable-cash-flows method shall not be applied to assess hedge effectiveness because that…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:99069aa0567406f8d33bbcda01e039331e8b1aae4238bc16ea7e22fb741b6de4","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-15","para":"35-15","html":"
Under all three methods, an entity shall consider the risk of default by counterparties that are obligors with respect to the hedging instrument (the interest rate swap) or hedged transaction, pursuant to the guidance in paragraphs 815-20-25-122 and 815-20-25-16(a), respectively. An underlying assumption in this guidance is that the likelihood of the obligor not defaulting is assessed as being probable.
","snippet":"Under all three methods, an entity shall consider the risk of default by counterparties that are obligors with respect to the hedging instrument (the interest rate swap) or hedged transaction, pursuant to the guidance in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:040aeea1cda1389fbee4f176c955f2b1f854cb2af3007877da1362cf34f389fe","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-15A","para":"35-15A","html":"
When assessing hedge effectiveness using any of the three methods specified in paragraph 815-30-35-10, in addition to the guidance specific to each method, an entity also shall apply the general guidance in paragraph 815-20-25-79 on prospective considerations and retrospective evaluations of hedge effectiveness.
","snippet":"When assessing hedge effectiveness using any of the three methods specified in paragraph 815-30-35-10, in addition to the guidance specific to each method, an entity also shall apply the general guidance in paragraph 815…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dfcdba5fb6dad71a3a2ba0b8092dfe2504bedcb9da8f359e4152200e0f09cc28","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-16","para":"35-16","html":"
An entity shall assess hedge effectiveness under the change-in-variable-cash-flows method by comparing the following items:
  1. a
    The variable leg of the interest rate swap
  2. b
    The hedged variable-rate cash flows on the asset or liability.
","snippet":"An entity shall assess hedge effectiveness under the change-in-variable-cash-flows method by comparing the following items:\n(a) The variable leg of the interest rate swap\n(b) The hedged variable-rate cash flows on the as…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3884be336421ae947174307b772845f0ab1bced77a3e2fac846b3aeebd01b748","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-17","para":"35-17","html":"
As noted in paragraph 815-30-35-14, the change-in-variable-cash-flows method shall not be used in certain circumstances.
","snippet":"As noted in paragraph 815-30-35-14, the change-in-variable-cash-flows method shall not be used in certain circumstances.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f9301b570692d399bc11ec502b66702d9b389f03fe700efc1caaaada5433c5ce","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-18","para":"35-18","html":"
The change-in-variable-cash-flows method is consistent with the cash flow hedge objective of effectively offsetting the changes in the hedged cash flows attributable to the hedged risk. The method is based on the premise that only the floating-rate component of the interest rate swap provides the cash flow hedge, and any change in the interest rate swap's fair value attributable to the fixed-rate leg is not relevant to the variability of the hedged interest payments (receipts) on the floating-rate liability (asset).
","snippet":"The change-in-variable-cash-flows method is consistent with the cash flow hedge objective of effectively offsetting the changes in the hedged cash flows attributable to the hedged risk. The method is based on the premise…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7b2270fd48902a74d248ce8d1c1e55f4fb3c9c4d9df49101b28f1b86eb52e138","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-19","para":"35-19","html":"
An entity shall assess hedge effectiveness under this method by comparing the following amounts:
  1. a
    The present value of the cumulative change in the expected future cash flows on the variable leg of the interest rate swap
  2. b
    The present value of the cumulative change in the expected future interest cash flows on the variable-rate asset or liability.
","snippet":"An entity shall assess hedge effectiveness under this method by comparing the following amounts:\n(a) The present value of the cumulative change in the expected future cash flows on the variable leg of the interest rate s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5fe17649febfa0c867325a55657be15b1b4556e36915a6c9bfb7187bfe6c4add","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-20","para":"35-20","html":"
Because the focus of a cash flow hedge is on whether the hedging relationship achieves offsetting changes in cash flows, if the variability of the hedged cash flows of the variable-rate asset or liability is based solely on changes in a variable-rate index, the present value of the cumulative changes in expected future cash flows on both the variable-rate leg of the interest rate swap and the variable-rate asset or liability shall be calculated using the discount rates applicable to determining the fair value of the interest rate swap.
","snippet":"Because the focus of a cash flow hedge is on whether the hedging relationship achieves offsetting changes in cash flows, if the variability of the hedged cash flows of the variable-rate asset or liability is based solely…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5292f67b3bcaf65be20d78bcdfb5b5a60d539eee452bfa92013c78536fceedc7","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-21","para":"35-21","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5ffd6809abbf39bb0737e028a7794bdcfbb0a488a01b2a4894fc95d3e33449d4","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-22","para":"35-22","html":"
The change-in-variable-cash-flows method will result in a perfectly effective hedge if all of the following conditions are met:
  1. a
    The variable-rate leg of the interest rate swap and the hedged variable cash flows of the asset or liability are based on the same interest rate index (for example, three-month London Interbank Offered Rate (LIBOR) swap rate).
  2. b
    The interest rate reset dates applicable to the variable-rate leg of the interest rate swap and to the hedged variable cash flows of the asset or liability are the same.
  3. c
    The hedging relationship does not contain any other basis differences (for example, if the variable leg of the interest rate swap contains a cap and the variable-rate asset or liability does not).
  4. d
    The likelihood of the obligor not defaulting is assessed as being probable.
","snippet":"The change-in-variable-cash-flows method will result in a perfectly effective hedge if all of the following conditions are met:\n(a) The variable-rate leg of the interest rate swap and the hedged variable cash flows of th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:69f96154f86c6e3d09a043069114b5e00f26aed183238d817f116259ce105e2a","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-23","para":"35-23","html":"
However, a hedge would not be perfectly effective if any basis differences existed. For example, this would be expected to result from either of the following conditions, among others:
  1. a
    A difference in the indexes used to determine cash flows on the variable leg of the interest rate swap (for example, the three-month U.S. Treasury rate) and the hedged variable cash flows of the asset or liability (for example, three-month LIBOR)
  2. b
    A mismatch between the interest rate reset dates applicable to the variable leg of the interest rate swap and the hedged variable cash flows of the hedged asset or liability.
","snippet":"However, a hedge would not be perfectly effective if any basis differences existed. For example, this would be expected to result from either of the following conditions, among others:\n(a) A difference in the indexes use…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2512b2efa768125a964705e3fc82e1ea7ccd4e23111a9060d14989f0eaecf96f","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-24","para":"35-24","html":"
Example 15 (see paragraph 815-30-55-91) illustrates the application of the change-in-variable-cash-flows method.
","snippet":"Example 15 (see paragraph 815-30-55-91) illustrates the application of the change-in-variable-cash-flows method.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:87714afd2231e86e6e39741ab9414c407c86d52bfb467fd2f0d28fb5f6642ad8","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-25","para":"35-25","html":"
An entity shall assess hedge effectiveness under the hypothetical-derivative method by comparing the following amounts:
  1. a
    The change in fair value of the actual interest rate swap designated as the hedging instrument
  2. b
    The change in fair value of a hypothetical interest rate swap having terms that identically match the critical terms of the floating-rate asset or liability, including all of the following:
    1. 1
      The same notional amount
    2. 2
      The same repricing dates
    3. 3
      The same index (that is, the index on which the hypothetical interest rate swap's variable rate is based matches the index on which the asset or liability's variable rate is based)
    4. 4
      Mirror image caps and floors
    5. 5
      A zero fair value at the inception of the hedging relationship.
","snippet":"An entity shall assess hedge effectiveness under the hypothetical-derivative method by comparing the following amounts:\n(a) The change in fair value of the actual interest rate swap designated as the hedging instrument\n(…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1221fcc783e8771f628a5f7f86692f43910f252719082a3edb6ef70b7e8b9ac7","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-26","para":"35-26","html":"
Essentially, the hypothetical derivative would need to satisfy all of the applicable conditions in paragraphs 815-20-25-104 and 815-20-25-106 necessary to qualify for use of the shortcut method except the criterion in paragraph 815-20-25-104(e). Thus, the hypothetical interest rate swap would be expected to perfectly offset the hedged cash flows. Because the requirements of paragraph 815-20-25-104(e) were developed with an emphasis on fair value hedging relationships, they do not fit the more general principle that the hypothetical derivative in a cash flow hedging relationship should be expected to perfectly offset the hedged cash flows.
","snippet":"Essentially, the hypothetical derivative would need to satisfy all of the applicable conditions in paragraphs 815-20-25-104 and 815-20-25-106 necessary to qualify for use of the shortcut method except the criterion in pa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:95908a2cad344c73af10876cdb8a1567a25846a8da8922fe021a827a6af1b67e","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-27","para":"35-27","html":"
The change in the fair value of the perfect hypothetical interest rate swap can be regarded as a proxy for the present value of the cumulative change in expected future cash flows on the hedged transaction.
","snippet":"The change in the fair value of the perfect hypothetical interest rate swap can be regarded as a proxy for the present value of the cumulative change in expected future cash flows on the hedged transaction.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8b1a89c01497c936cce423880fdedba37334da9b40df124b7047a0874effcf95","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-28","para":"35-28","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dd981b9435977b3562129e6d3330d9ad83ec21f93b5e0b03f686834ac6b7422d","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-29","para":"35-29","html":"
The determination of the fair value of both the perfect hypothetical interest rate swap and the actual interest rate swap shall use discount rates based on the relevant interest rate swap curves.
","snippet":"The determination of the fair value of both the perfect hypothetical interest rate swap and the actual interest rate swap shall use discount rates based on the relevant interest rate swap curves.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:82ea5e80a2f269ea5e78853bdbd6373770fc72d11e495b4a327883798274174c","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-30","para":"35-30","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9d5574ed3b619ff574a4a521c2ba4df90e2d4215e2d6b9fc6dce45984f81f449","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-31","para":"35-31","html":"
An entity shall assess hedge effectiveness under the change-in-fair-value method by comparing the following amounts:
  1. a
    The present value of the cumulative change in expected variable future interest cash flows that are designated as the hedged transactions
  2. b
    The cumulative change in the fair value of the interest rate swap designated as the hedging instrument.
","snippet":"An entity shall assess hedge effectiveness under the change-in-fair-value method by comparing the following amounts:\n(a) The present value of the cumulative change in expected variable future interest cash flows that are…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:102fe0e766555907fadbef08517d658060897167fafb2fdf38d59e0a309095a4","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-32","para":"35-32","html":"
The discount rates applicable to determining the fair value of the interest rate swap designated as the hedging instrument shall also be applied to the computation of present values of the cumulative changes in the hedged cash flows.
","snippet":"The discount rates applicable to determining the fair value of the interest rate swap designated as the hedging instrument shall also be applied to the computation of present values of the cumulative changes in the hedge…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:88d5c028df1a76608257da918ae9039eda9ab22f742777fe3cc957f2359886b8","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-33","para":"35-33","html":"
If an entity concludes under paragraphs 815-20-25-129 through 25-129A that the hedging relationship may not be considered to be perfectly effective, the entity shall assess hedge effectiveness by comparing the following amounts:
  1. a
    The change in fair value of the actual hedging instrument
  2. b
    The change in fair value of a perfectly effective hypothetical hedging instrument. That hypothetical hedging instrument shall have terms that meet the four conditions listed in paragraphs 815-20-25-129 through 25-129A.
","snippet":"If an entity concludes under paragraphs 815-20-25-129 through 25-129A that the hedging relationship may not be considered to be perfectly effective, the entity shall assess hedge effectiveness by comparing the following …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3079db86d0b8555bb5eebbe38cccb4ad9427f3927f3cb03d53b331e7e25ae2ad","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-34","para":"35-34","html":"
The change in fair value of the hypothetical hedging instrument can be regarded as a proxy for the present value of the cumulative change in expected future cash flows on the hedged transaction(s).
","snippet":"The change in fair value of the hypothetical hedging instrument can be regarded as a proxy for the present value of the cumulative change in expected future cash flows on the hedged transaction(s).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6196a0e86c96685e0df85bd47cb49346b05143c5d58bfdae30fafec4821accbd","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-35","para":"35-35","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b4d83f8cbe5486a7c6e4870796524c9f22e10d12f7d91fdbc25cfcd437a25b5b","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-36","para":"35-36","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:21420291002b668a13de13fc856b43b1a5edbfe35e5a55d4b07c168c6f3496eb","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37","para":"35-37","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:562814e1958c9b93d743bdda16b6a87b5cf2e44a4adce3cc6a9ef6bb15b81fd9","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37A","para":"35-37A","html":"
If the designated hedged risk changes during the life of a hedging relationship, an entity may continue to apply hedge accounting if the hedging instrument is highly effective at achieving offsetting cash flows attributable to the revised hedged risk. The guidance in paragraph 815-20-55-56 does not apply to changes in the hedged risk for a cash flow hedge of a forecasted transaction.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7
Editor's Note: The heading that precedes paragraph 815-30-35-37A will be amended upon transition as shown below, and the content of the paragraph will be superseded.
• > Change in the Contractually Specified Interest Rate for Forecasted Interest Payments on Choose-Your-Rate Debt
Paragraph superseded by Accounting Standards Update No. 2025-09.
","snippet":"If the designated hedged risk changes during the life of a hedging relationship, an entity may continue to apply hedge accounting if the hedging instrument is highly effective at achieving offsetting cash flows attributa…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:055d560efc27257a6670915a373a81d9116419474d9e9db8fbdc0c0b2d9a5aa2","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37B","para":"35-37B","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7For a cash flow hedge of forecasted interest payments on choose-your-rate debt:
  1. a
    With respect to the forecasted issuance of a choose-your-rate debt instrument, an entity may choose to apply the guidance in paragraphs
    815-30-35-37C through 35-37H
    on a hedge-by-hedge basis if both of the following conditions are satisfied:
    1. 1
      The forecasted interest payments designated as being hedged relate to the forecasted issuance of a choose-your-rate debt instrument that will be classified as a liability.
    2. 2
      The entity designates the hedged risk as the variability in cash flows attributable to changes in a contractually specified interest rate in accordance with paragraph 815-20-25-19A(b).
  2. b
    With respect to an existing choose-your-rate debt instrument or replacement debt, an entity may choose to apply the guidance in paragraphs
    815-30-35-37I through 35-37M
    on a hedge-by-hedge basis if both of the following conditions are satisfied:
    1. 1
      The forecasted interest payments designated as being hedged have begun to accrue and relate to an existing choose-your-rate debt or replacement debt (see paragraph 815-30-35-37K for additional guidance on replacement debt) instrument classified as a liability.
    2. 2
      The entity designates the hedged risk as the variability in cash flows attributable to changes in a contractually specified interest rate.
The guidance in paragraphs
815-30-35-37C through 35-37M
shall not be applied by analogy, including to hedges designated under the first-payments-received technique (Example 4, Case A [paragraphs
815-20-55-91 through 55-96A
] illustrates this technique) or to hedges of a choose-your-rate debt instrument or group of choose-your-rate debt instruments classified as assets.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7For a cash flow hedge of forecasted interest payments on choose-your-rate debt:\n(a) With respect to the forecasted issuance of a …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d0d91bc63351a4ca227e5183ecfedf52b96d4672f0ff29bf389be485c4078fc6","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37C","para":"35-37C","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7In a cash flow hedge of forecasted interest payments that meets the conditions described in paragraph 815-30-35-37B(a), an entity shall designate the contractually specified interest rate (and interest rate tenor) as the entity’s best estimate of the interest rate index (and interest rate tenor) that it will initially select for the first interest period when the choose-your-rate debt instrument is issued. The currently designated best estimate of the interest rate index (and interest rate tenor) shall be considered the interest rate index (and interest rate tenor) upon which interest will accrue over the entire hedge period for purposes of assessing hedge effectiveness during the period before the debt is issued. The selection of an interest rate index (and interest rate tenor) in a subsequent period that alters the number and timing of the hedged forecasted interest payments within the hedge period shall not result in an automatic dedesignation of the hedging relationship.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7In a cash flow hedge of forecasted interest payments that meets the conditions described in paragraph 815-30-35-37B(a), an entity…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c2021c58ee9b7d9e986f36fc6a9b1db6fd7747b172631d8307f3c3da2ab0a248","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37D","para":"35-37D","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7When designating the hedged risk in a cash flow hedge of forecasted interest payments that meets the conditions described in paragraph 815-30-35-37B(a), an entity shall document the interest rate indexes (and interest rate tenors) that are included in choose-your-rate debt being offered in the market. If the entity determines that it is probable that it will issue choose-your-rate debt and initially select one of those documented interest rate indexes (and interest rate tenors) for the first interest period when the choose-your-rate debt instrument is issued, and if all of the other requirements of hedge accounting are met, hedge accounting may be applied.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7When designating the hedged risk in a cash flow hedge of forecasted interest payments that meets the conditions described in para…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:00d1e3d371d02217e9964514a23fe3ad61dae9e40d22eb164c9ffb988aee8aea","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37E","para":"35-37E","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If, during the forecast period, the entity’s best estimate of the interest rate index (and interest rate tenor) that it will initially select for the first interest period when the choose-your-rate debt instrument is issued changes to another rate that was documented at hedge inception, the entity shall apply the guidance in paragraphs
815-30-35-37F through 35-37G
to determine whether hedge accounting can continue. If the entity determines that it is probable that the interest rate index (and interest rate tenor) that it will initially select for the first interest period when the choose-your-rate debt instrument is issued will not be a rate that was documented at hedge inception or if the entity determines that it is probable that it will not issue choose-your-rate debt, the entity shall immediately reclassify the gain or loss on the hedging instrument reported in accumulated other comprehensive income into earnings in accordance with paragraph 815-30-40-5. The entity also shall consider whether it has demonstrated a pattern of determining that hedged forecasted transactions are probable of not occurring and the propriety of using hedge accounting in the future for similar forecasted transactions in accordance with paragraph 815-30-40-5.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7If, during the forecast period, the entity’s best estimate of the interest rate index (and interest rate tenor) that it will init…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:27a2f73d989508319e7af157f4c15692612b9d7f748e8e77b72553794c530a35","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37F","para":"35-37F","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If the best estimate of the interest rate index (and interest rate tenor) that the entity will select when the choose-your-rate debt instrument is issued changes to another rate that was documented in accordance with paragraph 815-30-35-37D during the forecast period, the entity shall perform a final retrospective assessment of hedge effectiveness on the basis of changes in cash flows attributable to the previous best estimate of the interest rate. If the entity concludes on the basis of that retrospective assessment that the hedging relationship was not highly effective in having achieved offsetting cash flows, hedge accounting may not be applied during that period (that is, the overall change in the fair value of the hedging instrument for that period shall be recognized in earnings). However, the hedging relationship may continue if there is an expectation that the relationship will be highly effective in achieving offsetting cash flows in future periods and all other hedge accounting requirements are met. In that circumstance, the entity shall begin prospectively assessing hedge effectiveness on the basis of changes in cash flows attributable to the new best estimate of the interest rate in the period in which the best estimate of the interest rate changes.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7If the best estimate of the interest rate index (and interest rate tenor) that the entity will select when the choose-your-rate d…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b0c7903ba8e42d06045d767264d5a6422597b49d182c3bcd50ce4f4684ea611c","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37G","para":"35-37G","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7In performing a prospective assessment with the new best estimate of the interest rate index (and interest rate tenor), the entity shall create the terms of the instrument used to estimate changes in the cash flows attributable to the new best estimate of the interest rate (under the originally designated method, for example, the hypothetical derivative method or another acceptable method in Subtopic 815-30) on the basis of market data as of the inception of the hedging relationship as if the new best estimate of the interest rate had been designated for the entire hedge period. If the best estimate of the interest rate does not change again, all subsequent retrospective and prospective assessments of hedge effectiveness shall be performed using the currently designated best estimate of the interest rate. With respect to the timing, an entity shall perform its assessments of effectiveness in a manner consistent with paragraph 815-20-25-3(b)(2)(iv)(02).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7In performing a prospective assessment with the new best estimate of the interest rate index (and interest rate tenor), the entit…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:25935912160af478a233cfef34345217b4a2188dc9be94affeb361d808fecac1","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37H","para":"35-37H","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7After the choose-your-rate debt instrument is issued and the entity chooses the first interest rate index (and interest rate tenor) upon which interest will accrue, the entity shall no longer apply the guidance in paragraphs
815-30-35-37C through 35-37G
. Instead, if the entity continues to apply hedge accounting, it shall apply the guidance on existing choose-your-rate debt and related replacement debt (if applicable) in accordance with paragraphs
815-30-35-37I through 35-37M
and update its hedge documentation without dedesignating the hedging relationship. Example 28 (paragraph 815-30-55-171) illustrates how an entity should transition from the guidance on the forecasted issuance of choose-your-rate debt to the guidance on choose-your-rate debt and related replacement debt.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7After the choose-your-rate debt instrument is issued and the entity chooses the first interest rate index (and interest rate teno…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b426d2815f13efbfae25b67b97e7512011191b0ac8e56e5168ddf3034e91ae59","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37I","para":"35-37I","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7In a cash flow hedge of forecasted interest payments that meets the conditions in paragraph 815-30-35-37B(b), an entity shall designate the contractually specified interest rate (and interest rate tenor) as the then-selected interest rate index (and interest rate tenor). The currently designated interest rate index (and interest rate tenor) shall be considered the interest rate index (and interest rate tenor) upon which interest will accrue over the entire hedge period for purposes of assessing hedge effectiveness. The selection of an interest rate index (and interest rate tenor) in a subsequent period that alters the number and timing of the hedged forecasted interest payments within the hedge period shall not result in an automatic dedesignation of the hedging relationship as long as the selected interest rate index (and interest rate tenor) is one of the options included in the original existing choose-your-rate debt instrument as documented in accordance with paragraph 815-30-35-37J.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7In a cash flow hedge of forecasted interest payments that meets the conditions in paragraph 815-30-35-37B(b), an entity shall des…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b94a296ba49b7c03b3fff8e6089b83ebe596dcf2cf289e99291f25851d5e965d","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37J","para":"35-37J","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7When designating the hedged risk in a cash flow hedge of forecasted interest payments that meets the conditions described in paragraph 815-30-35-37B(b), an entity shall document the interest rate indexes (and interest rate tenors) that are included in the existing choose-your-rate debt instrument. If the entity determines that it is probable that the forecasted interest payments related to the existing choose-your-rate debt instrument or replacement debt will occur at one of the documented interest rate indexes (and interest rate tenors) during the hedge period and all of the other requirements of hedge accounting are met, hedge accounting may be applied.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7When designating the hedged risk in a cash flow hedge of forecasted interest payments that meets the conditions described in para…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fddf218f2edeee062483dfed638ca8004b91de65f6c3b0749315afc191f24216","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37K","para":"35-37K","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7An entity may designate the forecasted interest payments in a manner that includes debt that is expected to replace existing choose-your-rate debt. If the contractually specified interest rate at which interest is accruing on the replacement debt matches one of the interest rate index (and interest rate tenor) options included in the original choose-your-rate debt instrument that was outstanding when the first hedged interest payment began to accrue, the forecasted interest payments on the replacement debt shall be considered the hedged forecasted transactions without dedesignating the hedging relationship. If it becomes probable that the interest rate index (and interest rate tenor) at which interest will accrue on the replacement debt will not match one of the interest rate index (and interest rate tenor) options included in the original choose-your-rate debt instrument that was outstanding when the hedging relationship was initially designated, or that the replacement debt will be fixed-rate debt, the entity shall discontinue the application of hedge accounting and immediately reclassify the gain or loss on the hedging instrument recognized in accumulated other comprehensive income into earnings in accordance with paragraph 815-30-40-5. The entity also shall consider whether it has demonstrated a pattern of determining that hedged forecasted transactions are probable of not occurring and the propriety of using hedge accounting in the future for similar forecasted transactions in accordance with paragraph 815-30-40-5.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7An entity may designate the forecasted interest payments in a manner that includes debt that is expected to replace existing choo…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ce8556eea47f9fc279da687b83f11d1b7fa8e9d68b227838fe294b11fb64041d","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37L","para":"35-37L","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If the contractually specified interest rate in the hedging relationship is changed in accordance with paragraph 815-30-35-37I, the entity shall perform a final retrospective assessment of hedge effectiveness that is based on changes in cash flows attributable to the previously selected contractually specified interest rate for the last period in which interest was accruing at that interest rate. If the entity concludes on the basis of that retrospective assessment that the hedging relationship was not highly effective in having achieved offsetting cash flows, hedge accounting may not be applied during that period (that is, the change in the fair value of the hedging instrument for that period is recognized in earnings). However, the hedging relationship may continue if there is an expectation that the relationship will be highly effective in achieving offsetting cash flows in future periods and all other hedge accounting requirements are met. The entity shall begin prospectively assessing hedge effectiveness on the basis of changes in cash flows attributable to the newly selected contractually specified interest rate in the period in which interest begins accruing at that newly selected interest rate.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7If the contractually specified interest rate in the hedging relationship is changed in accordance with paragraph 815-30-35-37I, t…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:709231dc0702a4408f87b0c39b1b8894dd86cd6e531b161e60210541a85f3014","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-37M","para":"35-37M","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7In performing a prospective assessment with the newly selected contractually specified interest rate, the entity shall create the terms of the instrument used to estimate changes in the cash flows attributable to the newly selected contractually specified interest rate (under the originally designated method, for example, the hypothetical derivative method or another acceptable method in Subtopic 815-30) on the basis of market data as of the inception of the hedging relationship as if the newly selected contractually specified interest rate had been designated for the entire hedge period. All subsequent retrospective and prospective assessments of hedge effectiveness shall be performed using the currently designated interest rate. With respect to the timing, an entity shall perform its assessments of effectiveness in a manner consistent with paragraph 815-20-25-3(b)(2)(iv)(02).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7In performing a prospective assessment with the newly selected contractually specified interest rate, the entity shall create the…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c234b3274af5dc51b7f1c9857f8836bf2f325ac07830efca3747db3d6a592de","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c56601cfab06bd5a8a3529398246fc44115999bb59d111ce0c0c6c8b95e4fb34","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"block":null,"heading":"Reclassifications from Accumulated Other Comprehensive Income into Earnings","paragraphs":[{"citation":"815-30-35-38","para":"35-38","html":"
Amounts in accumulated other comprehensive income that are included in the assessment of effectiveness shall be reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings (for example, when a forecasted sale actually occurs) and shall be presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A. If an entity excludes a component of a hedging instrument from the assessment of effectiveness, an entity shall apply the guidance in paragraphs
815-20-25-83A through 25-83B
.
","snippet":"Amounts in accumulated other comprehensive income that are included in the assessment of effectiveness shall be reclassified into earnings in the same period or periods during which the hedged forecasted transaction affe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:302bb7868603d11554512011ac75d2810980ad387bdf6e34627b63983ede9838","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-39","para":"35-39","html":"
If the hedged transaction results in the acquisition of an asset or the incurrence of a liability, the gains and losses in accumulated other comprehensive income that are included in the assessment of effectiveness shall be reclassified into earnings in the same period or periods during which the asset acquired or liability incurred affects earnings (such as in the periods that depreciation expense, interest expense, or cost of sales is recognized).
","snippet":"If the hedged transaction results in the acquisition of an asset or the incurrence of a liability, the gains and losses in accumulated other comprehensive income that are included in the assessment of effectiveness shall…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:40ec2592bc841893a5bcda808a03582169fde4b82401b24b252cd3dfdbc326f2","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-40","para":"35-40","html":"
However, if an entity expects at any time that continued reporting of a loss in accumulated other comprehensive income would lead to recognizing a net loss on the combination of the hedging instrument and the hedged transaction (and related asset acquired or liability incurred) in one or more future periods, a loss shall be reclassified immediately into earnings for the amount that is not expected to be recovered.
","snippet":"However, if an entity expects at any time that continued reporting of a loss in accumulated other comprehensive income would lead to recognizing a net loss on the combination of the hedging instrument and the hedged tran…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3449b94bdc27483ae3b2acf92d3baf28912917a4ccae9c386bdfccd5cf9cbc45","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-41","para":"35-41","html":"
For example, a loss shall be reported in earnings for a derivative instrument that is designated as hedging the forecasted purchase of inventory to the extent that the cost basis of the inventory plus the related amount reported in accumulated other comprehensive income exceeds the amount expected to be recovered through sales of that inventory. (Impairment guidance is provided in paragraphs
815-30-35-42 through 35-43
.)
","snippet":"For example, a loss shall be reported in earnings for a derivative instrument that is designated as hedging the forecasted purchase of inventory to the extent that the cost basis of the inventory plus the related amount …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:468be6804e6716389ca117458089b7a31554826f24b6c3eea883a59d810de071","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-41A","para":"35-41A","html":"
An entity may designate a hedging derivative with periodic cash settlements and a non-zero fair value at hedge inception as the hedging instrument in a qualifying cash flow hedging relationship. In this situation, amounts related to the initial fair value that are recorded in other comprehensive income during the hedging relationship shall be reclassified from accumulated other comprehensive income to earnings on a systematic and rational basis over the periods during which the hedged forecasted transactions affect earnings. Amounts reclassified to earnings shall be presented in the same income statement line item as the earnings effect of the hedged item. This guidance applies to both option-based and non-option-based derivatives designated as hedging instruments in a cash flow hedge.
","snippet":"An entity may designate a hedging derivative with periodic cash settlements and a non-zero fair value at hedge inception as the hedging instrument in a qualifying cash flow hedging relationship. In this situation, amount…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:216dec451be7d9e241f9caa5592871f5ce4624917b28e5e231fff90dd4bf1918","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-41B","para":"35-41B","html":"
This paragraph illustrates a method of reclassifying amounts from accumulated other comprehensive income to earnings when an option-based derivative is designated as a hedging instrument and the assessment of effectiveness is based on total changes in the derivative's cash flows. Those amounts include changes in fair value related to the derivative's initial intrinsic value in accordance with paragraph 815-30-35-41A. For example, the fair value of a single cap at the inception of a hedging relationship of interest rate risk on variable-rate debt with quarterly interest payments over the next two years should be allocated to the respective caplets within the single cap on a fair value basis at the inception of the hedging relationship. The change in each respective allocated fair value amount should be reclassified out of accumulated other comprehensive income into earnings when each of the hedged forecasted transactions (the eight interest payments) affects earnings. Because the amount in accumulated other comprehensive income is a net amount composed of both derivative instrument gains and derivative instrument losses, the change in the respective allocated fair value amount for an individual caplet that is reclassified out of accumulated other comprehensive income into earnings may possibly be greater than the net amount in accumulated other comprehensive income.
","snippet":"This paragraph illustrates a method of reclassifying amounts from accumulated other comprehensive income to earnings when an option-based derivative is designated as a hedging instrument and the assessment of effectivene…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e7152f3246122afd3e71184d45577756cc30de9062c074f1112befec57c1a748","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-41C","para":"35-41C","html":"
This guidance has no effect on the accounting for fair value hedging relationships. In addition, in determining the accounting for seemingly similar cash flow hedging relationships, it would be inappropriate to analogize to this guidance.
","snippet":"This guidance has no effect on the accounting for fair value hedging relationships. In addition, in determining the accounting for seemingly similar cash flow hedging relationships, it would be inappropriate to analogize…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:35cfb21d217ae113fc388cc025cdf3b88fedfdecc2933506feb7271732cedd11","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-42","para":"35-42","html":"
Existing requirements in generally accepted accounting principles (GAAP) for assessing asset impairment or credit losses or recognizing an increased obligation apply to an asset or liability that gives rise to variable cash flows (such as a variable-rate financial instrument) for which the variable cash flows (the forecasted transactions) have been designated as being hedged and accounted for pursuant to paragraphs 815-30-35-3 and
815-30-35-38 through 35-41
. Those impairment or credit loss requirements shall be applied each period after hedge accounting has been applied for the period, pursuant to those paragraphs. The fair value or expected cash flows of a hedging instrument shall not be considered in applying those requirements. The gain or loss on the hedging instrument in accumulated other comprehensive income shall, however, be accounted for as discussed in paragraphs
815-30-35-38 through 35-41
.
","snippet":"Existing requirements in generally accepted accounting principles (GAAP) for assessing asset impairment or credit losses or recognizing an increased obligation apply to an asset or liability that gives rise to variable c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eb942126889ad69706fd5f963cd9a2dbcb03fb838b58cbe261063f222f3e1e04","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-43","para":"35-43","html":"
If, under existing requirements in GAAP, an asset impairment loss or writeoff due to credit losses is recognized on an asset or an additional obligation is recognized on a liability to which a hedged forecasted transaction relates, any offsetting or corresponding net gain related to that transaction in accumulated other comprehensive income shall be reclassified immediately into earnings. Similarly, if a recovery is recognized on the asset or liability to which the forecasted transaction relates, any offsetting net loss that has been accumulated in other comprehensive income shall be reclassified immediately into earnings.
","snippet":"If, under existing requirements in GAAP, an asset impairment loss or writeoff due to credit losses is recognized on an asset or an additional obligation is recognized on a liability to which a hedged forecasted transacti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3387c51bd36e5d852a907e5fbc13ae80cb7e8137ef8ecb924fc4ef7381318049","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-44","para":"35-44","html":"
If the reclassification to earnings of the amount in accumulated comprehensive income resulting from a cash flow hedge of debt is required under this Subsection when that debt is extinguished, the amount reclassified from accumulated comprehensive income to earnings shall be excluded from extinguishment gain or loss.
","snippet":"If the reclassification to earnings of the amount in accumulated comprehensive income resulting from a cash flow hedge of debt is required under this Subsection when that debt is extinguished, the amount reclassified fro…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ee97282d99ecbf86c85884437bf9c6d2704ca20e584e52601b425a8f1781a0a1","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-45","para":"35-45","html":"
If the variable-rate interest on a specific borrowing is associated with an asset under construction and capitalized as a cost of that asset, the amounts in accumulated other comprehensive income related to a cash flow hedge of the variability of that interest shall be reclassified into earnings over the depreciable life of the constructed asset, because that depreciable life coincides with the amortization period for the capitalized interest cost on the debt.
","snippet":"If the variable-rate interest on a specific borrowing is associated with an asset under construction and capitalized as a cost of that asset, the amounts in accumulated other comprehensive income related to a cash flow h…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:24ef836ea86ac1b07577a399820e1df0d28a18b14c375d02645aa08ec383046c","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d4c637bcfd916bae150c882c085bfbac91f2290a650e19c63b0276caf23d95fb","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"block":null,"heading":"Hedging Relationship's Timing Involves Uncertainty within a Range","paragraphs":[{"citation":"815-30-35-46","para":"35-46","html":"
For forecasted transactions whose timing involves some uncertainty within a range, paragraph 815-20-25-16(c) states that, as long as it remains probable that the forecasted transaction will occur by the end of the originally specified time period, cash flow hedge accounting for that hedging relationship shall continue.
","snippet":"For forecasted transactions whose timing involves some uncertainty within a range, paragraph 815-20-25-16(c) states that, as long as it remains probable that the forecasted transaction will occur by the end of the origin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:37c9cf60d8e3bf6c087067f5f79d9f9c024c1c917bd7d6d42304efc8bebbdd7f","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"citation":"815-30-35-47","para":"35-47","html":"
Paragraph not used.
","snippet":"Paragraph not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8df7eeeb9b9b80be49cb740f2d168e27d0b6e03e133707e906159b7e38ff76ef","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:de72d6e60ac54df6a250d7940b0800b992af6c882838050668f1a267f230bbad","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c31b10cb91ae9daa146ba72fa3fc7010120280b6aff4969fe68dd5db4003a5b","downloaded_from":"2026-09-10T01:37:51.899Z","last_downloaded_at":"2026-09-10T01:37:51.899Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480965","source_sha256":"9c0e87d2d411f93625dc8348680cfdae9146e4717a5287b48cdbb116560bb1c3"}},{"number":"40","label":"40 Derecognition","anchor":"40-derecognition","is_sec":false,"groups":[{"block":null,"heading":"Discontinuing Hedge Accounting","paragraphs":[{"citation":"815-30-40-1","para":"40-1","html":"
An entity shall discontinue prospectively the accounting specified in paragraphs 815-30-35-3 and
815-30-35-38 through 35-41
for an existing hedge if any one of the following occurs:
  1. a
    Any criterion in Section 815-30-25 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 cash flow hedge.
","snippet":"An entity shall discontinue prospectively the accounting specified in paragraphs 815-30-35-3 and 815-30-35-38 through 35-41 for an existing hedge if any one of the following occurs:\n(a) Any criterion in Section 815-30-25…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:653ed19a13d605607788e55bc42ab6e28aa3eded301ee7d008eac350b18e4a47","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}},{"citation":"815-30-40-1A","para":"40-1A","html":"
For the purposes of applying the guidance in paragraph 815-30-40-1, 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 815-30-40-1, 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":"sha256:8b4a0980084dfc3c2172a0f390e95153fc017b1e051653148e44a344b884c514","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}},{"citation":"815-30-40-2","para":"40-2","html":"
In the circumstances discussed in paragraph 815-30-40-1, the net gain or loss shall remain in accumulated other comprehensive income and be reclassified into earnings as specified in paragraphs 
815-30-35-38 through 35-41
. Example 16 (see paragraph 815-30-55-94) illustrates the application of paragraph 815-30-35-3 if a hedging relationship is terminated.
","snippet":"In the circumstances discussed in paragraph 815-30-40-1, the net gain or loss shall remain in accumulated other comprehensive income and be reclassified into earnings as specified in paragraphs 815-30-35-38 through 35-41…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6c8e88291ae7057d6fc474fd809b4f4ae839e386808a156be4fd294a2bfda488","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}},{"citation":"815-30-40-3","para":"40-3","html":"
Furthermore, the entity may elect to designate prospectively a new hedging relationship with a different hedging instrument or, in the circumstances described in paragraph 815-30-40-1(a) and 815-30-40-1(c), a different hedged transaction or a hedged item if the hedging relationship meets the applicable criteria for a cash flow hedge or a fair value hedge.
","snippet":"Furthermore, the entity may elect to designate prospectively a new hedging relationship with a different hedging instrument or, in the circumstances described in paragraph 815-30-40-1(a) and 815-30-40-1(c), a different h…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:44b6b8605764c87975bcfd34ccb8d145b81fa52006f0e01e01521ac3dc7745db","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}},{"citation":"815-30-40-4","para":"40-4","html":"
The net derivative instrument gain or loss related to a discontinued cash flow hedge shall continue to be reported in accumulated other comprehensive income unless it is probable that the forecasted transaction will not occur by the end of the originally specified time period (as documented at the inception of the hedging relationship) or within an additional two-month period of time thereafter, except as indicated in the following sentence. In rare cases, the existence of extenuating circumstances that are related to the nature of the forecasted transaction and are outside the control or influence of the reporting entity may cause the forecasted transaction to be probable of occurring on a date that is beyond the additional two-month period of time, in which case the net derivative instrument gain or loss related to the discontinued cash flow hedge shall continue to be reported in accumulated other comprehensive income until it is reclassified into earnings pursuant to paragraphs
815-30-35-38 through 35-41
.
","snippet":"The net derivative instrument gain or loss related to a discontinued cash flow hedge shall continue to be reported in accumulated other comprehensive income unless it is probable that the forecasted transaction will not …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c229d95cdda1414b3264a736e132d8f2e697c40df411ab22e34561a3175b972f","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}},{"citation":"815-30-40-5","para":"40-5","html":"
If it is probable that the hedged forecasted transaction will not occur either by the end of the originally specified time period or within the additional two-month period of time and the hedged forecasted transaction also does not qualify for the exception described in the preceding paragraph, that derivative instrument gain or loss reported in accumulated other comprehensive income shall be reclassified into earnings immediately. A pattern of determining that hedged forecasted transactions are probable of not occurring would call into question both an entity's ability to accurately predict forecasted transactions and the propriety of using hedge accounting in the future for similar forecasted transactions.
","snippet":"If it is probable that the hedged forecasted transaction will not occur either by the end of the originally specified time period or within the additional two-month period of time and the hedged forecasted transaction al…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bae6d7ef6720e15301262c5e5ae0233d6a3e5c293078634aa611d908ad36a1bf","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}},{"citation":"815-30-40-6","para":"40-6","html":"
Derivative instrument gains and losses that had initially been reported in other comprehensive income as a result of a cash flow hedge and then reclassified to earnings (because the entity subsequently concluded that it was probable that the forecasted transaction would not occur within the originally specified time period or the additional period of time described in paragraph 815-30-40-4) shall not later be reclassified out of earnings and back into accumulated other comprehensive income due to a reassessment of probabilities.
","snippet":"Derivative instrument gains and losses that had initially been reported in other comprehensive income as a result of a cash flow hedge and then reclassified to earnings (because the entity subsequently concluded that it …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:464e4fa47cfc19e2e9c20d0be6d36f53a5e76bbdb4437bdbd6b02c201f919d1b","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}},{"citation":"815-30-40-6A","para":"40-6A","html":"
When applying the guidance in paragraph 815-20-25-83A, if the hedged forecasted transaction is probable of not occurring, any amounts remaining in accumulated other comprehensive income related to amounts excluded from the assessment of effectiveness shall be recorded in earnings in the current period. For all other discontinued cash flow hedges, any amounts associated with the excluded component remaining in accumulated other comprehensive income shall be recorded in earnings when the hedged forecasted transaction affects earnings.
","snippet":"When applying the guidance in paragraph 815-20-25-83A, if the hedged forecasted transaction is probable of not occurring, any amounts remaining in accumulated other comprehensive income related to amounts excluded from t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d830b4d4cc0292398856d550d3d598748cd461e4396f3ec85965fb154a31963e","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7e929b99fd7ee3557c2303fecf862f62a18a781259cebf2908179dad8549a614","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}},{"block":null,"heading":"Alterations or Terminations of Offsetting Third-Party Derivative Instruments","paragraphs":[{"citation":"815-30-40-7","para":"40-7","html":"
Paragraph 815-20-25-62 provides guidance on internal derivatives as hedging instruments in cash flow hedges of foreign exchange risk. Paragraph 815-20-25-63 states that, if an issuing affiliate alters or terminates any offsetting third-party derivative instrument (which should be rare), the hedging affiliate prospectively shall cease hedge accounting for the internal derivatives that are offset by that third-party derivative instrument.
","snippet":"Paragraph 815-20-25-62 provides guidance on internal derivatives as hedging instruments in cash flow hedges of foreign exchange risk. Paragraph 815-20-25-63 states that, if an issuing affiliate alters or terminates any o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ae92bee364a7726813e76f5a23b81a5bbeffa590b699be69e86778bf2bbb3235","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f1ba8c999cd9812c565f9a30ad1a986bdc2a96c1aa26c1c6ec546bafeb2e653d","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:039b5efa84d01c424fd62f742ba8dad32f82ea5dd92846c2f2cb29ace9037056","downloaded_from":"2026-09-10T01:37:54.373Z","last_downloaded_at":"2026-09-10T01:37:54.373Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480933","source_sha256":"830ccb0ed3b66f21cb1e827349c1006ceaad3d3345d50f100cb2999c13adc7c1"}},{"number":"45","label":"45 Other Presentation Matters","anchor":"45-other-presentation-matters","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-30-45-1","para":"45-1","html":"
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Paragraph superseded by Accounting Standards Update No. 2017-12.
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Paragraph superseded by Accounting Standards Update No. 2017-12.
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See Section 815-10-50 for overall guidance on disclosures. An entity's disclosures for every annual and interim reporting period for which a statement of financial position and a statement of financial performance is presented shall include all of the following for derivative instruments that have been designated and have qualified as cash flow hedging instruments and for the related hedged transactions:
  1. a
    Subparagraph not used.
  2. b
    A description of the transactions or other events that will result in the reclassification into earnings of gains and losses that are reported in accumulated other comprehensive income
  3. c
    The estimated net amount of the existing gains or losses that are reported in accumulated other comprehensive income at the reporting date that is expected to be reclassified into earnings within the next 12 months
  4. d
    The maximum length of time over which the entity is hedging its exposure to the variability in future cash flows for forecasted transactions excluding those forecasted transactions related to the payment of variable interest on existing financial instruments
  5. e
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"See Section 815-10-50 for overall guidance on disclosures. An entity's disclosures for every annual and interim reporting period for which a statement of financial position and a statement of financial performance is pre…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:914e6e06ae17670241a480b0bdcd0843ccf40b37a6100423a7905e4dde184d2d","downloaded_from":"2026-09-10T01:38:00.587Z","last_downloaded_at":"2026-09-10T01:38:00.587Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480870","source_sha256":"afbd8d18a581fe647f4eb7b2553ad24fb94d4bb8b4c4ff71f7d48b41c0036fcd"}},{"citation":"815-30-50-2","para":"50-2","html":"
As part of the disclosures of accumulated other comprehensive income, pursuant to paragraphs 220-10-45-14 through 45-14A, an entity shall separately disclose all of the following:
  1. a
    The beginning and ending accumulated derivative instrument gain or loss
  2. b
    The related net change associated with current period hedging transactions
  3. c
    The net amount of any reclassification into earnings
  4. d
    The difference between the change in fair value of an excluded component and the initial value of that excluded component recognized in earnings under a systematic and rational method in accordance with paragraph 815-20-25-83A.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1As part of the disclosures of accumulated other comprehensive income, pursuant to paragraphs 220-10-45-14 through 45-14A, an entity shall separately disclose all of the following in interim and annual reporting periods:
  1. a
    The beginning and ending accumulated derivative instrument gain or loss
  2. b
    The related net change associated with current period hedging transactions
  3. c
    The net amount of any reclassification into earnings
  4. d
    The difference between the change in fair value of an excluded component and the initial value of that excluded component recognized in earnings under a systematic and rational method in accordance with paragraph 815-20-25-83A.
","snippet":"As part of the disclosures of accumulated other comprehensive income, pursuant to paragraphs 220-10-45-14 through 45-14A, an entity shall separately disclose all of the following:\n(a) The beginning and ending accumulated…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0ea7c7a56056b29b9f1ac100881081a291c8989262e0794df94e316dfe62c2e6","downloaded_from":"2026-09-10T01:38:00.587Z","last_downloaded_at":"2026-09-10T01:38:00.587Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480870","source_sha256":"afbd8d18a581fe647f4eb7b2553ad24fb94d4bb8b4c4ff71f7d48b41c0036fcd"}},{"citation":"815-30-50-3","para":"50-3","html":"
For guidance on qualitative disclosures, see paragraph 815-10-50-5.
","snippet":"For guidance on qualitative disclosures, see paragraph 815-10-50-5.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb646e87eea1976ac20a0f08c2f3a62b6ab8dd9e9fc93c356280d1a8f9060471","downloaded_from":"2026-09-10T01:38:00.587Z","last_downloaded_at":"2026-09-10T01:38:00.587Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480870","source_sha256":"afbd8d18a581fe647f4eb7b2553ad24fb94d4bb8b4c4ff71f7d48b41c0036fcd"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dbbd95489e743dba55e86d5c901ed548362a55c87ee6944001d0bdf10b998361","downloaded_from":"2026-09-10T01:38:00.587Z","last_downloaded_at":"2026-09-10T01:38:00.587Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480870","source_sha256":"afbd8d18a581fe647f4eb7b2553ad24fb94d4bb8b4c4ff71f7d48b41c0036fcd"}},{"block":null,"heading":"Disclosed Amount to Be Reclassified into Earnings","paragraphs":[{"citation":"815-30-50-4","para":"50-4","html":"
The amount required to be disclosed under paragraph 815-30-50-1(c) (the estimated net amount of the existing gains or losses that are reported in accumulated other comprehensive income at the reporting date that is expected to be reclassified into earnings within the next 12 months) could be greater than or less than the net amount reported in accumulated other comprehensive income.
","snippet":"The amount required to be disclosed under paragraph 815-30-50-1(c) (the estimated net amount of the existing gains or losses that are reported in accumulated other comprehensive income at the reporting date that is expec…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:abee34c51a2714c1b1458957d40b9ff4c9ec02ea60def3d7fde608c2b78ed514","downloaded_from":"2026-09-10T01:38:00.587Z","last_downloaded_at":"2026-09-10T01:38:00.587Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480870","source_sha256":"afbd8d18a581fe647f4eb7b2553ad24fb94d4bb8b4c4ff71f7d48b41c0036fcd"}},{"citation":"815-30-50-5","para":"50-5","html":"
To measure the amount of other comprehensive income to be reclassified into earnings in the coming 12 months if multiple cash flow exposures are designated as the hedged items for a single derivative instrument, the total amount reported in other comprehensive income (as determined in accordance with paragraph 815-30-35-3(b)) for the hedging relationship first shall be allocated to each of the forecasted transactions (hedged items) within the hedging relationship.
","snippet":"To measure the amount of other comprehensive income to be reclassified into earnings in the coming 12 months if multiple cash flow exposures are designated as the hedged items for a single derivative instrument, the tota…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3420adc7566fce3bb827f44925ddd32f98874c8e97e6f9f1b77307a334d2362f","downloaded_from":"2026-09-10T01:38:00.587Z","last_downloaded_at":"2026-09-10T01:38:00.587Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480870","source_sha256":"afbd8d18a581fe647f4eb7b2553ad24fb94d4bb8b4c4ff71f7d48b41c0036fcd"}},{"citation":"815-30-50-6","para":"50-6","html":"
The allocation method used shallbe applied consistently. After the amount reported in other comprehensive income has been allocated to each of the forecasted transactions within the hedging relationship, the entity shall sum those estimated amounts to be reclassified into earnings in the coming 12 months.
","snippet":"The allocation method used shallbe applied consistently. After the amount reported in other comprehensive income has been allocated to each of the forecasted transactions within the hedging relationship, the entity shall…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:14211345d7e21936d64f032d57180d362e4948350f354c17cce6ca504a4904fe","downloaded_from":"2026-09-10T01:38:00.587Z","last_downloaded_at":"2026-09-10T01:38:00.587Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480870","source_sha256":"afbd8d18a581fe647f4eb7b2553ad24fb94d4bb8b4c4ff71f7d48b41c0036fcd"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a91e082730f03f96285d135657d97e7779f0e431fe65a6163cf3e776bc4fbee8","downloaded_from":"2026-09-10T01:38:00.587Z","last_downloaded_at":"2026-09-10T01:38:00.587Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480870","source_sha256":"afbd8d18a581fe647f4eb7b2553ad24fb94d4bb8b4c4ff71f7d48b41c0036fcd"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7d73a1fa95d05d0decda540ffda6fa1994dd72277a1e5d71be694299f4ad81e2","downloaded_from":"2026-09-10T01:38:00.587Z","last_downloaded_at":"2026-09-10T01:38:00.587Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480870","source_sha256":"afbd8d18a581fe647f4eb7b2553ad24fb94d4bb8b4c4ff71f7d48b41c0036fcd"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Implementation Guidance","paragraphs":[{"citation":"815-30-55-1","para":"55-1","html":"
Paragraph 815-30-50-5 provides guidance on measuring the amount of other comprehensive income to be reclassified into earnings in the coming 12 months if multiple cash flow exposures are designated as the hedged items for a single derivative instrument. If interest rate or commodity swaps are used for cash flow hedges, in effect a single derivative is being used to hedge multiple hedged forecasted transactions because a swap involves multiple cash flows (like a series of forward contracts). For instance, a five-year interest rate swap may be designated as the hedging instrument to hedge the variability in cash flows for each of the resets in a five-year variable-rate borrowing. The fair value of a swap may be the net of both positive discounted cash flows (that is, the right to receive future payments) and negative discounted cash flows (that is, the obligation to make future payments). This could happen, for example, if nearby forward rates were below the fixed rate on the swap and far-term forward rates were above the fixed rate on the swap, in which case an entity could have an expectation of having to make cash outflows on the swap for nearby exposures and to receive cash inflows on the swap for the far-term exposures.
","snippet":"Paragraph 815-30-50-5 provides guidance on measuring the amount of other comprehensive income to be reclassified into earnings in the coming 12 months if multiple cash flow exposures are designated as the hedged items fo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:841d0e61bbe85871bd41f5d2f5e66c2e8027a852bc0b3407bdd34464fc71aa57","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:31e2f0dddca38d0bd722c6f06f01901607add9d76ccd0e7a434884a6b701685f","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"815-30-55-1A","para":"55-1A","html":"
This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to assessing effectiveness for a cash flow hedge of a forecasted purchase of inventory with a forward contract in which the forward contract index differs from the index of the underlying hedged transaction. Assume that the entity elected to perform subsequent quarterly hedge effectiveness assessments on a quantitative basis and that all hedge documentation requirements were satisfied at inception.
","snippet":"This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to assessing effectiveness for a cash flow hedge of a forecasted purchase of inventory with a forward contract in which the fo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e10b51fb1c2188da7d66646bc4372a316c9751728a5a98d294ff897baf0068e8","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-2","para":"55-2","html":"
Entity G forecasts the purchase of 500,000 pounds of Brazilian coffee for U.S. dollars in 6 months. The agreement outlining purchase terms between Entity G and its supplier contains a contractually specified component referencing a Brazilian coffee index denominated in U.S. dollars. Entity G designates the variability in cash flows related to its forecasted purchase of Brazilian coffee attributable to changes in the contractually specified component (Brazilian coffee index) as the hedged risk. Rather than acquire a derivative instrument based on Brazilian coffee, Entity G enters into a 6-month forward contract to purchase 500,000 pounds of Colombian coffee for U.S. dollars and designates the forward contract as a hedging instrument in a cash flow hedge of the variability in cash flows attributable to changes in the contractually specified Brazilian coffee index component of its forecasted purchase of Brazilian coffee.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity G forecasts the purchase of 500,000 pounds of Brazilian coffee for U.S. dollars in 6 months. The agreement outlining purchase terms between Entity G and its supplier contains a pricing formula that explicitly references the Brazilian coffee index denominated in U.S. dollars. Thus, the purchase price will be based on that coffee index as of the delivery date (that is, in six months). Entity G designates the variability in cash flows related to its forecasted purchase of Brazilian coffee attributable to changes in the Brazilian coffee index as the hedged risk. Entity G determines that the Brazilian coffee index explicitly referenced in the agreement’s pricing formula is clearly and closely related to the forecasted purchase of 500,000 pounds of Brazilian coffee and therefore meets the conditions in paragraph 815-20-25-22C(b)(1). Rather than acquire a derivative instrument based on Brazilian coffee, Entity G enters into a 6-month forward contract to purchase 500,000 pounds of Colombian coffee for U.S. dollars and designates the forward contract as a hedging instrument in a cash flow hedge of the variability in cash flows attributable to changes in the explicitly referenced Brazilian coffee index component of its forecasted purchase of Brazilian coffee.
","snippet":"Entity G forecasts the purchase of 500,000 pounds of Brazilian coffee for U.S. dollars in 6 months. The agreement outlining purchase terms between Entity G and its supplier contains a contractually specified component re…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:609622a0df4572f2805a5319bb38f3cb1fa357b6d2d5ce4ee4f8fcf8fa9061b3","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-3","para":"55-3","html":"
Entity G bases its assessment of hedge effectiveness on changes in forward prices, with the resulting gain or loss discounted to reflect the time value of money. Both at inception and on an ongoing basis, Entity G could assess the effectiveness of the hedge by comparing changes in the expected cash flows from the Colombian coffee forward contract with the expected net change in cash outflows attributable to changes in the contractually specified component for purchasing the Brazilian coffee for different market prices. (A simpler method that should produce the same results would consider the expected future correlation of the prices of Brazilian and Colombian coffee, based on the correlation of those prices over past six-month periods.)
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity G bases its assessment of hedge effectiveness on changes in forward prices, with the resulting gain or loss discounted to reflect the time value of money. Both at inception and on an ongoing basis, Entity G could assess the effectiveness of the hedge by comparing changes in the expected cash flows from the Colombian coffee forward contract with the expected net change in cash outflows attributable to changes in the price index explicitly referenced in the agreement for purchasing the Brazilian coffee for different market prices. (A simpler method that should produce the same results would consider the expected future correlation of the prices of Brazilian and Colombian coffee, based on the correlation of those prices over past six-month periods.)
","snippet":"Entity G bases its assessment of hedge effectiveness on changes in forward prices, with the resulting gain or loss discounted to reflect the time value of money. Both at inception and on an ongoing basis, Entity G could …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a15e394b4b74b6022a8f55fe4dcbbc102278b5c778910524205bb145e5bf919c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-4","para":"55-4","html":"
In assessing hedge effectiveness on an ongoing basis, Entity G also must consider the extent of offset between the change in expected cash flows on its Colombian coffee forward contract and the expected net change in expected cash flows for the forecasted purchase of Brazilian coffee attributable to changes in the contractually specified component. Both changes would be measured on a cumulative basis for actual changes in the forward price of the respective coffees during the hedge period.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7In assessing hedge effectiveness on an ongoing basis, Entity G also must consider the extent of offset between the change in expected cash flows on its Colombian coffee forward contract and the expected net change in expected cash flows for the forecasted purchase of Brazilian coffee attributable to changes in the designated price component (Brazilian coffee index).Both changes would be measured on a cumulative basis for actual changes in the forward price of the respective coffees during the hedge period.
","snippet":"In assessing hedge effectiveness on an ongoing basis, Entity G also must consider the extent of offset between the change in expected cash flows on its Colombian coffee forward contract and the expected net change in exp…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:42dadd29de3bace6a2dd14402a4599ca062b662a31b13b59b2cb6317f92e1eea","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-5","para":"55-5","html":"
See Topic 820 (including paragraph 820-10-55-13) for a discussion of expected cash flows.
","snippet":"See Topic 820 (including paragraph 820-10-55-13) for a discussion of expected cash flows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:df7cd2af71d0a4c889873f39221b7e6a735244e86dbb8f8cc50742fbc5f5128c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-6","para":"55-6","html":"
Because the only difference between the forward contract and forecasted purchase relates to the type of coffee (Colombian versus Brazilian), Entity G could consider the changes in the cash flows on a forward contract for Brazilian coffee to be a measure of perfectly offsetting changes in cash flows for its forecasted purchase of Brazilian coffee. For example, for given changes in the U.S. dollar prices of six-month and three-month Brazilian and Colombian contracts, Entity G could compute the effect of a change in the price of coffee on the expected cash flows of its forward contract on Colombian coffee and of a forward contract for Brazilian coffee as follows.
","snippet":"Because the only difference between the forward contract and forecasted purchase relates to the type of coffee (Colombian versus Brazilian), Entity G could consider the changes in the cash flows on a forward contract for…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a7d9a96e2fd640cc24c933b242fecaffff103c18d0d00a6570c7ebbd4f960c0c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-7","para":"55-7","html":"
See Topic 820 (including paragraph 820-10-55-13) for a discussion of expected cash flows.
","snippet":"See Topic 820 (including paragraph 820-10-55-13) for a discussion of expected cash flows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fc2e09a6a2a9b44fe2d65101b4a70e4d7de970806fb1b054a84bceb59e1c38e8","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-8","para":"55-8","html":"
Using the amounts in paragraph 815-30-55-6, Entity G could evaluate effectiveness 3 months into the hedge on its first subsequent quarterly effectiveness assessment testing date by comparing the $45,000 change on its Colombian coffee contract with what would have been a perfectly offsetting change in cash flow for its forecasted purchase—the $50,000 change on an otherwise identical forward contract for Brazilian coffee. Entity G concludes that the hedging relationship would be highly effective, and it would record the $45,000 change in the fair value of the forward contract on Colombian coffee in other comprehensive income.
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
  2. b
    Subparagraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Using the amounts in paragraph 815-30-55-6, Entity G could evaluate effectiveness 3 months into the hedge on its first subsequent quarterly effectiveness assessment testing date by comparing the $45,000 change on its Col…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:05be6c49b1fbd8c5c5ec9b1b0829de70cc97e04fd790200b57f3bd9978ffaea3","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-9","para":"55-9","html":"
This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to assessing effectiveness for a cash flow hedge with a basis swap. Assume that the entity elects to perform subsequent hedge effectiveness assessments on a quantitative basis and that all hedge documentation requirements were satisfied at inception.
","snippet":"This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to assessing effectiveness for a cash flow hedge with a basis swap. Assume that the entity elects to perform subsequent hedge …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:08ebd3ade4cbc5a4d82e1d74628be6d69b405e7a48fc4b42c7b75d48fef5db2c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-10","para":"55-10","html":"
Entity H has a 5-year, $100,000 variable-rate asset and a 7-year, $150,000 variable-rate liability. The interest on the asset is payable by the counterparty at the end of each month based on the prime rate as of the first of the month. The interest on the liability is payable by Entity H at the end of each month based on London Interbank Offered Rate (LIBOR) as of the tenth day of the month (the liability's anniversary date). The reference rates for both the asset and the liability are contractually specified. Entity H enters into a 5-year interest rate swap to pay interest at the prime rate and receive interest at LIBOR at the end of each month based on a notional amount of $100,000. Both rates are determined as of the first of the month. Entity H designates the interest rate swap as a hedge of 5 years of interest receipts on the $100,000 variable-rate asset and the first 5 years of interest payments on $100,000 of the variable-rate liability. The hedged risk is the variability in the contractually specified interest payments received on the asset and paid on the liability. Assume the likelihood of credit default and the likelihood of principal prepayments each is remote.
","snippet":"Entity H has a 5-year, $100,000 variable-rate asset and a 7-year, $150,000 variable-rate liability. The interest on the asset is payable by the counterparty at the end of each month based on the prime rate as of the firs…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c4752b783efa44ef47e3fbec15a34626990ba9b0c87807413cdbfaa506d31f2","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-11","para":"55-11","html":"
Entity H may not automatically assume that the hedge always will be highly effective at achieving offsetting changes in cash flows because the reset date on the receive leg of the interest rate swap differs from the reset date on the corresponding variable-rate liability. Both at hedge inception and on an ongoing basis, Entity H's assessment of expected effectiveness could be based on the extent to which changes in LIBOR have occurred during comparable 10-day periods in the past. Entity H's ongoing assessment of effectiveness would be on a cumulative basis and would incorporate the actual interest rate changes to date. There will be no perfect offset to the extent that the cumulative change in cash flows on the prime leg of the interest rate swap did not offset the cumulative change in expected cash flows on the asset, and the cumulative change in cash flows on the LIBOR leg of the interest rate swap did not offset the change in expected cash flows on the hedged portion of the liability. The terms of the interest rate swap, the asset, and the portion of the liability that is hedged are the same, with the exception of the reset dates on the liability and the receive leg of the interest rate swap. Thus, there will be no perfect offset in the hedging relationship if LIBOR has changed between the first of the month (the reset date for the interest rate swap) and the tenth of the month (the reset date for the liability).
","snippet":"Entity H may not automatically assume that the hedge always will be highly effective at achieving offsetting changes in cash flows because the reset date on the receive leg of the interest rate swap differs from the rese…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:14600801a58c6649e69a70768f8f6f743a43ad611f11ce1f149586f372348d76","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-12","para":"55-12","html":"
See Topic 820 (including paragraph 820-10-55-13) for a discussion of expected cash flows.
","snippet":"See Topic 820 (including paragraph 820-10-55-13) for a discussion of expected cash flows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:740f50c6bd13aa76803fba1963215e03613e901fd2468517756c890641df1d76","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-13","para":"55-13","html":"
This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to assessing effectiveness for a cash flow hedge of a forecasted sale with a forward contract. Assume that the hedge satisfied all of the criteria for hedge accounting at inception.
","snippet":"This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to assessing effectiveness for a cash flow hedge of a forecasted sale with a forward contract. Assume that the hedge satisfied…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c146c49a062006bd9a6566257f2687be7ab8be2497b279a75284c9a10a3ebe54","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-14","para":"55-14","html":"
Entity I, a U.S. dollar (USD) functional currency entity, forecasts the sale of 10,000 units in Euros (EUR) of its principal product in 6 months to French customers for EUR 500,000. Entity I wants to hedge the cash flow exposure of the EUR sale related to changes in the USD-EUR exchange rate. It enters into a 6-month forward contract to exchange the EUR 500,000 it expects to receive in the forecasted sale for the USD equivalent specified in the forward contract and designates the forward contract as a cash flow hedge of the forecasted sale.
","snippet":"Entity I, a U.S. dollar (USD) functional currency entity, forecasts the sale of 10,000 units in Euros (EUR) of its principal product in 6 months to French customers for EUR 500,000. Entity I wants to hedge the cash flow …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5b2d8493d427eac486efe7661a501771eedbf0e00c956c5153df671c24715ebd","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-15","para":"55-15","html":"
Entity I chooses to assess hedge effectiveness at inception and during the term of the hedge based on the following amounts:
  1. a
    Changes in the fair value of the forward contract attributable to changes in the USD-EUR spot rate
  2. b
    Changes in the present value of the current USD equivalent of the forecasted receipt of EUR 500,000.
","snippet":"Entity I chooses to assess hedge effectiveness at inception and during the term of the hedge based on the following amounts:\n(a) Changes in the fair value of the forward contract attributable to changes in the USD-EUR sp…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:219d9db261140b23cbe89ea9d0ba4b28c5dc4c1d5618a558fdb06844a6f0f9a6","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-16","para":"55-16","html":"
Because the critical terms of the forward contract and the forecasted transaction are the same, presumably there would be perfect offset unless there is a reduction in the expected sales proceeds from the forecasted sales. Because Entity I is assessing effectiveness based on spot rates, it would exclude the change in the fair value of the forward contract attributable to changes in the difference between the forward rate and spot rate from the assessment of effectiveness and account for it through an amortization approach in accordance with paragraph 815-20-25-83A or a mark-to-market approach in accordance with paragraph 815-20-25-83B. Under either approach, the portion of the excluded component recognized in earnings should be presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A.
","snippet":"Because the critical terms of the forward contract and the forecasted transaction are the same, presumably there would be perfect offset unless there is a reduction in the expected sales proceeds from the forecasted sale…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0991db90a3bac0ee80805fbb0ce871d80c2f8b058301ccdcbcd25b206a26f535","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-17","para":"55-17","html":"
This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to an attempted hedge of a forecasted sale with a written call option.
","snippet":"This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to an attempted hedge of a forecasted sale with a written call option.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cc80646f17cbdb8e8ae67032ab5e9e0271fe4583ce1b605376d747cb70d9eb32","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-18","para":"55-18","html":"
Entity J forecasts the sale in 9 months of 100 units of product with a current market price of $95 per unit. Entity J's objective is to sell the upside potential associated with the forecasted sale by writing a call option for a premium. Entity J plans to use the premium from the call option as an offset to decreases in future cash inflows from the forecasted sale that will occur if the market price of the product decreases below $95. Accordingly, Entity J sells an at-the-money call option on 100 units of product with a strike price of $95 for a premium. The premium represents only the time value of the option. The option is exercisable at any time within nine months.
","snippet":"Entity J forecasts the sale in 9 months of 100 units of product with a current market price of $95 per unit. Entity J's objective is to sell the upside potential associated with the forecasted sale by writing a call opti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f94247b6f1537fe204333aee12d0403ccde3ac985310c57c58a6caf91cc6bebd","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-19","para":"55-19","html":"
Entity J's objective of using the premium from the written call option as an offset to any decrease in future cash inflows does not meet the notion of effectiveness in this Subtopic. Future changes in the market price of the entity's product will not affect the premium that Entity J received, which is all related to time value in this example and thus is the maximum amount by which Entity J can benefit. That is, Entity J cannot expect the cash flows on the option to increase so that, at different price levels, a decrease in cash flows from the forecasted sale would be offset by an increase in cash flows on the option.
","snippet":"Entity J's objective of using the premium from the written call option as an offset to any decrease in future cash inflows does not meet the notion of effectiveness in this Subtopic. Future changes in the market price of…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:021e0115de9561ea42e87685a76d85b09cabc0c5a917b122aed654a5d4e7fbeb","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-20","para":"55-20","html":"
This Example illustrates the application of the guidance in paragraphs
815-20-25-84 through 25-85
and this Subtopic to the accounting for a cash flow hedge of a forecasted sale of a commodity. The terms of the hedging derivative have been negotiated to match the terms of the forecasted transaction. Assume that there is no time value in the derivative instrument. Entity ABC has chosen to hedge the variability of the cash flows from the forecasted sale of the commodity instead of the changes in its fair value. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7This Example illustrates the application of the guidance in paragraphs
815-20-25-84 through 25-85
and this Subtopic to the accounting for a cash flow hedge of a forecasted sale of a commodity. The terms of the hedging derivative have been negotiated to match the terms of the designated price component of the forecasted transaction. Entity ABC has chosen to hedge the variability of the cash flows from the forecasted sale of the commodity instead of the changes in its fair value. For simplicity, the time value in the derivative instrument and commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"This Example illustrates the application of the guidance in paragraphs 815-20-25-84 through 25-85 and this Subtopic to the accounting for a cash flow hedge of a forecasted sale of a commodity. The terms of the hedging de…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7adadcc2db8b047784182da8f19cc70345aa0aeb5dffecd8dc0379f1dc7fbacf","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-21","para":"55-21","html":"
Because there is no contractually specified component, Entity ABC hedges the risk of changes in its cash flows relating to changes in the sales price of a forecasted sale of 100,000 bushels of Commodity A by entering into a derivative instrument, Derivative Z. Entity ABC expects to sell the 100,000 bushels of Commodity A on the last day of Period 1. On the first day of Period 1, Entity ABC enters into Derivative Z and designates it as a cash flow hedge of the forecasted sale. Entity ABC neither pays nor receives a premium on Derivative Z (that is, its fair value is zero). Entity ABC expects that there will be perfect offset between the hedging instrument and the hedged item because all of the following conditions exist:
  1. a
    The notional amount of Derivative Z is 100,000 bushels and the forecasted sale is for 100,000 bushels.
  2. b
    The underlying of Derivative Z is the price of the same variety and grade of Commodity A that Entity ABC expects to sell (assuming delivery to Entity ABC's selling point).
  3. c
    The settlement date of Derivative Z is the last day of Period 1 and the forecasted sale is expected to occur on the last day of Period 1.
The entity need not perform an initial quantitative assessment of hedge effectiveness in accordance with paragraph 815-20-25-3(b)(2)(iv)(01) because the conditions in paragraphs
815-20-25-84 through 25-85
are met.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity ABC seeks to hedge the variability of cash flows from the forecasted sale of Commodity A in the spot market at a future date. Accordingly, Entity ABC hedges the risk of changes in its cash flows relating to changes in the sales price of a forecasted sale of 100,000 bushels of Commodity A in the spot market by entering into a derivative instrument, Derivative DEF. Entity ABC expects to sell the 100,000 bushels of Commodity A on the last day of Period 1. On the first day of Period 1, Entity ABC enters into Derivative DEF and designates it as a cash flow hedge of changes in the DEF index component of the forecasted sales price. Entity ABC determines that the DEF index is clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to Commodity A in the pertinent spot market and concludes that the conditions in paragraph 815-20-25-22C(a) are met. Entity ABC expects that there will be perfect offset between the hedging instrument and the hedged item because all of the following conditions exist:
  1. a
    The notional amount of Derivative DEF is 100,000 bushels and the forecasted sale is for 100,000 bushels.
  2. b
    The underlying of Derivative DEF is the same as the designated price component of Commodity A that Entity ABC expects to sell.
  3. c
    The settlement date of Derivative DEF is the last day of Period 1 and the forecasted sale is expected to occur on the last day of Period 1.
  4. d
    Entity ABC neither pays nor receives a premium on Derivative DEF (that is, its fair value is zero).
The entity need not perform an initial quantitative assessment of hedge effectiveness in accordance with paragraph 815-20-25-3(b)(2)(iv)(01) because the conditions in paragraphs
815-20-25-84 through 25-85
are met.
","snippet":"Because there is no contractually specified component, Entity ABC hedges the risk of changes in its cash flows relating to changes in the sales price of a forecasted sale of 100,000 bushels of Commodity A by entering int…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3eb70027b4a2d9ecb6823ceb23dfd2fe1e2ee8038351a91e43d56cc9a5506dea","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-22","para":"55-22","html":"
At inception of the hedge, the expected sales price of 100,000 bushels of Commodity A is $1,100,000. On the last day of Period 1, the fair value of Derivative Z has increased by $25,000, and the expected sales price of 100,000 bushels of Commodity A has decreased by $25,000. Both the sale of 100,000 bushels of Commodity A and the settlement of Derivative Z occur on the last day of Period 1. The following table illustrates the accounting, including the net effect on earnings and other comprehensive income, for the situation described.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7At inception of the hedge, the expected sales price of 100,000 bushels of Commodity A is $1,100,000. On the last day of Period 1, the fair value of Derivative DEF has increased by $25,000, and the expected sales price of 100,000 bushels of Commodity A has decreased by $25,000 because of changes attributable to the DEF index. Both the sale of 100,000 bushels of Commodity A and the settlement of Derivative DEF occur on the last day of Period 1. The following table illustrates the accounting, including the net effect on earnings and other comprehensive income, for the situation described.
","snippet":"At inception of the hedge, the expected sales price of 100,000 bushels of Commodity A is $1,100,000. On the last day of Period 1, the fair value of Derivative Z has increased by $25,000, and the expected sales price of 1…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e02d5786cfde4412df26a6dc432b9a4e1dbeda87a28cbf1a68286ca5cbc6805a","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-23","para":"55-23","html":"
At the inception of the hedge, Entity ABC anticipated that it would receive $1,100,000 from the sale of 100,000 bushels of Commodity A. This Example illustrates that by hedging the risk of changes in its cash flows relating to the forecasted sale of 100,000 bushels of Commodity A, Entity ABC still received a total of $1,100,000 in cash flows even though the sales price of Commodity A declined during the period.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7At inception of the hedge, Entity ABC anticipated that it would receive $1,100,000 from the sale of 100,000 bushels of Commodity A. This Example illustrates that by hedging the risk of cash flow variability attributable to changes in the DEF index component of the forecasted sale of 100,000 bushels of Commodity A, Entity ABC still received a total of $1,100,000 in cash flows even though the sales price of Commodity A declined during the period.
","snippet":"At the inception of the hedge, Entity ABC anticipated that it would receive $1,100,000 from the sale of 100,000 bushels of Commodity A. This Example illustrates that by hedging the risk of changes in its cash flows relat…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:581df8f12f7c0bcc827a5a559f3dfadaab1cc7e33a1fac351cc97546315d3611","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-24","para":"55-24","html":"
This Example demonstrates the mechanics of accounting for an interest rate swap used as a cash flow hedge of variable interest receipts in accordance with the guidance in Subtopic 815-20 and this Subtopic. It is not intended to demonstrate how to compute the fair value of an interest rate swap. As in Example 8 (see paragraph 815-25-55-40), the zero-coupon method is used to determine the fair values. (Unlike in that Example, the yield curve in this Example is assumed to be upward sloping, that is, interest rates are higher for payments due further into the future.) In this Example, the term, notional amount, and repricing date of the interest rate swap match the term, repricing date, and principal amount of the interest-bearing asset on which the hedged interest receipts are due. The swap terms are at the market (as described in paragraphs 815-20-25-104, 815-20-25-106, and 815-20-25-109), so it has a zero value at inception. Thus, the reporting entity is permitted to assume that the hedging relationship will achieve perfect offset in the variability of cash flows of the hedged item.
","snippet":"This Example demonstrates the mechanics of accounting for an interest rate swap used as a cash flow hedge of variable interest receipts in accordance with the guidance in Subtopic 815-20 and this Subtopic. It is not inte…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9075a79cbb93a48f17b197493c808eeeb4545f183fdd4fe9256d00f7234e4b7c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-25","para":"55-25","html":"
As discussed beginning in paragraph 815-20-25-102, a shortcut method can be used to produce the same reporting results as the method illustrated in this Example. This shortcut is appropriate only if the assumption of perfect offset applies for an interest rate swap used as a cash flow hedge of interest receipts on a variable-rate asset (or interest payments on a variable-rate liability). The steps in the shortcut method are as follows:
  1. a
    Determine the difference between the variable rate to be paid on the interest rate swap and the variable rate to be received on the bonds.
  2. b
    Combine that difference with the fixed rate to be received on the interest rate swap.
  3. c
    Compute and recognize interest income using that combined rate and the variable-rate asset's principal amount. (Amortization of any purchase premium or discount on the asset must also be considered, although that complication is not incorporated in this Example.)
  4. d
    Determine the fair value of the interest rate swap.
  5. e
    Adjust the carrying amount of the interest rate swap to its fair value and adjust other comprehensive income by an offsetting amount.
A slightly different shortcut method for interest rate swaps used as fair value hedges is illustrated in Example 8 (see paragraph 815-25-55-40).
","snippet":"As discussed beginning in paragraph 815-20-25-102, a shortcut method can be used to produce the same reporting results as the method illustrated in this Example. This shortcut is appropriate only if the assumption of per…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:33527bd463906471953be805061bae895d571861c30e2d57de56b6bf951792f9","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-26","para":"55-26","html":"
For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7ac4a63aeb03326b3a5110244c2bf0a692a7a50405eaa2b3b6dd54b940f71ca6","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-27","para":"55-27","html":"
On July 1, 20X1, Entity XYZ invests $10,000,000 in variable-rate corporate bonds that pay interest quarterly at a rate equal to the 3-month USD LIBOR rate plus 2.25 percent. The $10,000,000 principal will be repaid on June 30, 20X3.
","snippet":"On July 1, 20X1, Entity XYZ invests $10,000,000 in variable-rate corporate bonds that pay interest quarterly at a rate equal to the 3-month USD LIBOR rate plus 2.25 percent. The $10,000,000 principal will be repaid on Ju…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0d396fa45120f5881595b0e2858d64f008878dc001ec74d604866e2ee1c1db0d","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-28","para":"55-28","html":"
Also on July 1, 20X1, Entity XYZ enters into a two-year receive-fixed, pay-variable interest rate swap and designates it as hedging instrument in a cash flow hedge of the variable-rate interest receipts on the corporate bonds. The risk designated as being hedged is the risk of variability in cash flows received attributable to changes in the contractually specified interest rate. The terms of the interest rate swap and the corporate bonds are shown in the following table.
","snippet":"Also on July 1, 20X1, Entity XYZ enters into a two-year receive-fixed, pay-variable interest rate swap and designates it as hedging instrument in a cash flow hedge of the variable-rate interest receipts on the corporate …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6511d7b0b4035c32ff94f0906db550b9b69a02ca7eb6ad31a06bb2942d011c89","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-29","para":"55-29","html":"
Because the conditions described in paragraphs 815-20-25-104 and 815-20-25-106 are met, Entity XYZ is permitted to assume that there is perfect offset in the hedging relationship and to recognize in other comprehensive income the entire change in the fair value of the interest rate swap.
","snippet":"Because the conditions described in paragraphs 815-20-25-104 and 815-20-25-106 are met, Entity XYZ is permitted to assume that there is perfect offset in the hedging relationship and to recognize in other comprehensive i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:63569d590b9e8ab508385563fd28018cffe332ade01b527e9c4bf1aceef7ea2c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-30","para":"55-30","html":"
The three-month USD LIBOR rates in effect at the inception of the hedging relationship and at each of the quarterly reset dates are assumed to be as follows.
","snippet":"The three-month USD LIBOR rates in effect at the inception of the hedging relationship and at each of the quarterly reset dates are assumed to be as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:975b1fdb0ddda03a3e4ca19e4464d00c751c9c9613d8f8df5ef2cc33bdf68d59","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-31","para":"55-31","html":"
Entity XYZ must reclassify to earnings the amount in accumulated other comprehensive income as each interest receipt affects earnings. In determining the amounts to reclassify each quarter, it is important to recognize that the interest rate swap does not hedge the bonds. Instead, it hedges the eight variable interest payments to be received. That is, each of the eight quarterly settlements on the swap is associated with an interest payment to be received on the bonds. Under the zero-coupon method discussed in paragraph 815-30-55-24, the present value of each quarterly settlement is computed separately. Because each payment occurs at a different point on the yield curve, a different interest rate must be used to determine its present value. As each individual interest receipt on the bonds is recognized in earnings, the fair value of the related quarterly settlement on the swap is reclassified to earnings. The fair values and changes in fair values of the interest rate swap and the effects on earnings and other comprehensive income for each quarter are as follows.
","snippet":"Entity XYZ must reclassify to earnings the amount in accumulated other comprehensive income as each interest receipt affects earnings. In determining the amounts to reclassify each quarter, it is important to recognize t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:16d494f54b5634bf7e67c7a1a02cb3dd59615c9039e87e2db2737a505b7df541","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-32","para":"55-32","html":"
The preceding table shows that, in each quarter, the net cash receipt or payment on the swap equals the income or expense to be recorded. The net effect on earnings of the interest on the bonds and the reclassification of gains or losses on the interest rate swap are presented in the same income statement line item as the earnings effect of the hedged item. The net earnings effect is shown in the following table.
","snippet":"The preceding table shows that, in each quarter, the net cash receipt or payment on the swap equals the income or expense to be recorded. The net effect on earnings of the interest on the bonds and the reclassification o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:272ae3fe9a77022565f5e5d393f451466b191fdf5afa8b5c20169738fe7ab0cc","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-33","para":"55-33","html":"
In this Example, the shortcut method described in paragraph 815-30-55-25 works as follows. The difference between the variable rate on the interest rate swap and the variable rate on the asset is a net receipt of 2.25 percent. That rate combined with the 6.65 percent fixed rate received on the interest rate swap is 8.9 percent. The computed interest income is $890,000 per year or $222,500 per quarter, which is the same as the amount in the table in the preceding paragraph.
","snippet":"In this Example, the shortcut method described in paragraph 815-30-55-25 works as follows. The difference between the variable rate on the interest rate swap and the variable rate on the asset is a net receipt of 2.25 pe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:992dc7ce593ff0b5cc584482e0ec56bba5a8e827692e71debdc9c88d55523b1b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-34","para":"55-34","html":"
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This Example illustrates the effect on earnings and other comprehensive income of discontinuing a cash flow hedge by dedesignating the hedging derivative under paragraph 815-30-40-1(c) before the variability of the cash flows from the hedged forecasted transaction has been eliminated. It also discusses the effect that the location of a physical asset has on the effectiveness of a hedging relationship. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"This Example illustrates the effect on earnings and other comprehensive income of discontinuing a cash flow hedge by dedesignating the hedging derivative under paragraph 815-30-40-1(c) before the variability of the cash …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c1fb0f60e5f589d2e43190a89ecc78aa0a984dbc8514a4a1acf25f97cb9445ae","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-41","para":"55-41","html":"
On February 3, 20X1, Entity JKL forecasts the purchase of 100,000 bushels of corn on May 20, 20X1. The contract does not contain a contractually specified component, and Entity JKL designates changes in cash flows related to the forecasted transaction attributable to all changes in the purchase price as the hedged risk. It expects to sell finished products produced from the corn on May 31, 20X1. On February 3, 20X1, Entity JKL enters into 20 futures contracts, each for the purchase of 5,000 bushels of corn on May 20, 20X1 (100,000 in total), and designates those contracts as a hedging instrument in a cash flow hedge of the forecasted purchase of corn.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On February 3, 20X1, Entity JKL forecasts the purchase of 100,000 bushels of corn on May 20, 20X1. Entity JKL designates changes in cash flows related to the forecasted transaction attributable to all changes in the purchase price as the hedged risk. It expects to sell finished products produced from the corn on May 31, 20X1. On February 3, 20X1, Entity JKL enters into 20 futures contracts, each for the purchase of 5,000 bushels of corn on May 20, 20X1 (100,000 in total), and designates those contracts as a hedging instrument in a cash flow hedge of the forecasted purchase of corn.
","snippet":"On February 3, 20X1, Entity JKL forecasts the purchase of 100,000 bushels of corn on May 20, 20X1. The contract does not contain a contractually specified component, and Entity JKL designates changes in cash flows relate…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e3bdb4f3e700d7a96255c15ac3d3d1e751dd45285ab7157781d9738c78d694f","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-42","para":"55-42","html":"
Entity JKL chooses to assess effectiveness by comparing the entire change in fair value of the futures contracts to changes in the expected cash flows on the forecasted transaction. Entity JKL estimates its expected cash flows on the forecasted transaction based on the futures price of corn adjusted for the difference between the cost of corn delivered to Chicago and the cost of corn delivered to Minneapolis. Entity JKL does not choose to use a tailing strategy (as described in paragraph 815-20-25-121). Entity JKL expects changes in fair value of the futures contracts to be highly effective at offsetting changes in the expected cash outflows for the forecasted purchase of corn because both of the following conditions exist:
  1. a
    The futures contracts are for the same variety and grade of corn that Entity JKL plans to purchase.
  2. b
    On May 20, 20X1, the futures price for delivery on May 20, 20X1 will be equal to the spot price (because futures prices and spot prices converge as the delivery date approaches).
However, the hedge may not achieve perfect offset between the hedged item and hedging instrument because of the difference in the delivery location between the hedging instrument and forecasted transaction.
","snippet":"Entity JKL chooses to assess effectiveness by comparing the entire change in fair value of the futures contracts to changes in the expected cash flows on the forecasted transaction. Entity JKL estimates its expected cash…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c30aa91146f086dd6fad9898422e1a8a61fb96ac5b90b66d671c0a8a72425e79","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-43","para":"55-43","html":"
Entity JKL will purchase corn for delivery to its production facilities in Minneapolis, but the price of the futures contracts is based on delivery of corn to Chicago. Changes in the difference between the price of corn delivered to Chicago and the price of corn delivered to Minneapolis would result in not achieving perfect offset between the hedged item and hedging instrument and, if of significant magnitude, may preclude the hedging relationship from achieving highly effective offset.
","snippet":"Entity JKL will purchase corn for delivery to its production facilities in Minneapolis, but the price of the futures contracts is based on delivery of corn to Chicago. Changes in the difference between the price of corn …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e6a24430b86ad7871289fefc73df4df912fae90a078033d2edbc10c0d5d75755","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-44","para":"55-44","html":"
On February 3, 20X1, the futures price of corn for delivery to Chicago on May 20, 20X1, is $2.6875 per bushel resulting in a total price of $268,750 for 100,000 bushels.
","snippet":"On February 3, 20X1, the futures price of corn for delivery to Chicago on May 20, 20X1, is $2.6875 per bushel resulting in a total price of $268,750 for 100,000 bushels.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7906c8d08385e6d25ad9a5a1987a390440f313bb87dab5fe5bfa719a61ba1864","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-45","para":"55-45","html":"
On May 1, 20X1, Entity JKL dedesignates the related futures contracts and closes them out by entering into offsetting contracts on the same exchange. As of that date, Entity JKL had recognized in accumulated other comprehensive income gains on the futures contracts of $26,250. Entity JKL still plans to purchase 100,000 bushels of corn on May 20, 20X1. Consequently, the gains that occurred before dedesignation will remain in other comprehensive income until the finished product is sold. If Entity JKL had not closed out the futures contracts when it dedesignated them, any further gains or losses would have been recognized in earnings.
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On May 20, 20X1, Entity JKL purchases 100,000 bushels of corn, and on May 31, 20X1, Entity JKL sells the finished product.
","snippet":"On May 20, 20X1, Entity JKL purchases 100,000 bushels of corn, and on May 31, 20X1, Entity JKL sells the finished product.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0446f409510bcf3f2aa008297724c67c4d0f9be9d1dde9021afec12e283b5ec4","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-47","para":"55-47","html":"
The futures prices of corn that are in effect on key dates are assumed to be as follows.
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The changes in fair value of the futures contracts between inception (February 3, 20X1) and discontinuation (May 1, 20X1) of the hedge are as follows.
","snippet":"The changes in fair value of the futures contracts between inception (February 3, 20X1) and discontinuation (May 1, 20X1) of the hedge are as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:172421641aeb73c58bd3778fcf833de96b1404c248d6fa51d354f243ba1787bc","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-49","para":"55-49","html":"
The following table displays the entries to recognize the effects of all of the following:
  1. a
    Entering into futures contracts as a hedge of the forecasted purchase of corn
  2. b
    Dedesignating and closing out the futures contracts
  3. c
    Completing the forecasted purchase of corn
  4. d
    Selling the finished products produced from the corn.
Because the difference in prices between corn delivered to Chicago and corn delivered to Minneapolis ($.05 per bushel, as illustrated in paragraph 815-30-55-47) did not change during the period of the hedge, the hedging relationship achieved perfect offset between the hedged item and the hedging instrument. If that difference had changed, the entire change in fair value of the futures contracts would still have been recorded in accumulated other comprehensive income until the discontinuation date assuming the hedging relationship remained highly effective at offsetting variability in cash flows and the hedged forecasted transaction was still probable of occurring.
","snippet":"The following table displays the entries to recognize the effects of all of the following:\n(a) Entering into futures contracts as a hedge of the forecasted purchase of corn\n(b) Dedesignating and closing out the futures c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9c1cdcd399d7ce50f54be10fc795e2699ecf00a9dc950759637ec15809e4ffa","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-50","para":"55-50","html":"
To simplify this Example and focus on the effects of the hedging relationship, the margin account with the clearinghouse and certain amounts that would be involved in a sale of Entity JKL's inventory (for example, additional costs of production, selling costs, and sales revenue) have been ignored.
","snippet":"To simplify this Example and focus on the effects of the hedging relationship, the margin account with the clearinghouse and certain amounts that would be involved in a sale of Entity JKL's inventory (for example, additi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:035ccc2d8ff2acfa8f24fcfab705279c96e630eaa299af52a1c1f1691d34a0fa","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-51","para":"55-51","html":"
The effect of the hedging strategy is that the cost of the corn recognized in earnings when the finished product was sold was $263,750. If the hedging relationship had not been discontinued early, the cost recognized in earnings would have been $273,750, which was the futures price of the corn, adjusted for delivery to Minneapolis, at the inception of the hedge. Without the strategy, Entity JKL would have recognized $290,000, which was the price of corn delivered to Minneapolis at the time it was purchased.
","snippet":"The effect of the hedging strategy is that the cost of the corn recognized in earnings when the finished product was sold was $263,750. If the hedging relationship had not been discontinued early, the cost recognized in …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:68cb85d020be797a2959d6ce589996c19960883528375433991d207acfd73ac4","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-52","para":"55-52","html":"
The following Cases describe the effects on earnings and other comprehensive income of certain changes in a cash flow hedging relationship:
  1. a
    The variability of the hedged interest payments is eliminated before the hedging derivative expires (Case A).
  2. b
    The interest rate index that is the basis for the hedged interest payments is changed to a different index before the hedging derivative expires (Case B).
","snippet":"The following Cases describe the effects on earnings and other comprehensive income of certain changes in a cash flow hedging relationship:\n(a) The variability of the hedged interest payments is eliminated before the hed…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:13010c24c3e84f230a11066a5fb3d038910478b476f19be01ea686db6bef8dcd","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-53","para":"55-53","html":"
Cases A and B share the following assumptions. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"Cases A and B share the following assumptions. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in credi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a5b124344c8b88f77bccfdc9ee687e160dab6a155ef588d08af78b7b3563e6b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-54","para":"55-54","html":"
Entity MNO enters into an interest rate swap (Swap 1) and designates it as a hedge of the variable quarterly interest payments on Entity MNO's 5-year $5 million borrowing program, initially expected to be accomplished by a series of $5 million notes with 90-day terms. Entity MNO plans to continue issuing new 90-day notes over the next 5 years as each outstanding note matures. The interest on each note will be determined based on the contractually specified LIBOR rate at the time each note is issued. Swap 1 requires a settlement every 90 days, and the variable interest rate is reset immediately following each payment. Entity MNO pays a fixed rate of interest (6.5 percent) and receives interest at LIBOR. Entity MNO neither pays nor receives a premium at the inception of Swap 1. The notional amount of the contract is $5 million, and it expires in 5 years.
","snippet":"Entity MNO enters into an interest rate swap (Swap 1) and designates it as a hedge of the variable quarterly interest payments on Entity MNO's 5-year $5 million borrowing program, initially expected to be accomplished by…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:57f3c2f4cc9123c6840769e2895cd4d5f00efe2a7533cb15b8a712559f8dcf21","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-55","para":"55-55","html":"
Because Swap 1 and the hedged forecasted interest payments are based on the same notional amount, have the same reset dates, and are based on the same contractually specified interest rate (that is, the LIBOR rate) designated under paragraph 815-20-25-15(j)(2), Entity MNO may conclude that the hedging relationship will perfectly offset changes in cash flows of the hedged item attributable to the hedged risk and the hedging instrument (absent a default by the interest rate swap counterparty).
","snippet":"Because Swap 1 and the hedged forecasted interest payments are based on the same notional amount, have the same reset dates, and are based on the same contractually specified interest rate (that is, the LIBOR rate) desig…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a54ea89d2f997edc202fcab50ebf47b08f2e9f1d60143c7b515576358f9bebc1","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-56","para":"55-56","html":"
This paragraph explains why the guidance in Example 4, Case B (see paragraph 815-20-55-97) does not conflict with the guidance in this Example. In the cash flow hedge in this Example, had the hedged forecasted transaction been narrowly limited to the interest payments on specific future debt issuances rather than on the five-year borrowing program, the failure to engage in future debt issuances would cause the related derivative instrument net gain or loss in other comprehensive income to be immediately reclassified into earnings pursuant to paragraphs
815-30-40-4 through 40-5
because it would have been probable that the hedged forecasted transactions would not occur. Furthermore, if that failure is part of a pattern of hedged forecasted transactions being probable of not occurring, it would call into question both an entity's ability to accurately predict forecasted transactions and the propriety of using hedge accounting in the future for similar forecasted transactions, pursuant to paragraph 815-30-40-5. In contrast, in Example 4, Case B (see paragraph 815-20-55-97), the hedged quarterly interest payments were directly linked to Entity B's existing LIBOR-indexed floating-rate assets. When those existing assets are later prepaid or sold, the future quarterly interest payments on those specific assets are no longer probable of occurring (that is, no longer probable of being received by Entity B). Consequently, the hedging relationships for those future quarterly interest payments fail to meet the criterion in paragraph 815-20-25-15(b) and must be discontinued under paragraph 815-30-40-1. Because it is probable that the hedged quarterly interest payments that were directly linked to assets that were prepaid or sold will not occur, the related derivative instrument net gain or loss in other comprehensive income must be immediately reclassified into earnings pursuant to paragraphs
815-30-40-4 through 40-5
.
","snippet":"This paragraph explains why the guidance in Example 4, Case B (see paragraph 815-20-55-97) does not conflict with the guidance in this Example. In the cash flow hedge in this Example, had the hedged forecasted transactio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9bbe73b199340980d902f07245a32329e1783ebb62ba0a38ba7b58ed6849d3d7","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-57","para":"55-57","html":"
At the end of the second year of the 5-year hedging relationship, Entity MNO discontinues its practice of issuing 90-day notes. Instead, Entity MNO issues a 3-year, $5 million note with a fixed rate of interest (7.25 percent). Because the interest rate on the three-year note is fixed, the variability of the future interest payments has been eliminated. Thus, Swap 1 no longer qualifies for cash flow hedge accounting. However, the net gain or loss on Swap 1 in accumulated other comprehensive income is not reclassified to earnings immediately. Immediate reclassification is required (and permitted) only if it becomes probable that the hedged transactions (future interest payments) will not occur. The variability of the payments has been eliminated, but it still is probable that they will occur. Thus, those gains or losses will continue to be reclassified from accumulated other comprehensive income to earnings as the interest payments affect earnings (as required by paragraphs
815-30-35-38 through 35-41
) and presented in the same income statement line item as the earnings effect of the hedged item. If the term of the fixed rate note had been longer than three years, the amounts in accumulated other comprehensive income still would have been reclassified into earnings over the next three years, which was the term of the designated hedging relationship.
","snippet":"At the end of the second year of the 5-year hedging relationship, Entity MNO discontinues its practice of issuing 90-day notes. Instead, Entity MNO issues a 3-year, $5 million note with a fixed rate of interest (7.25 per…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2e91dffb3879f231102b55758e96212f5ca02d7b6a18ae0e61b6ef70214579c7","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-58","para":"55-58","html":"
Rather than liquidate the pay-fixed, receive-variable Swap 1, Entity MNO enters into a pay-floating, receive-fixed interest rate swap (Swap 2) with a 3-year term and a notional amount of $5 million. Entity MNO neither pays nor receives a premium. Like Swap 1, Swap 2 requires a settlement every 90 days and reprices immediately following each settlement. The relationship between 90-day interest rates and longer term rates has changed since Entity MNO entered into Swap 1 (that is, the shape of the yield curve is different). As a result, Swap 2 has different terms and its settlements do not exactly offset the settlements on Swap 1. Under the terms of Swap 2, Entity MNO will receive a fixed rate of 7.25 percent and pay interest at LIBOR.
","snippet":"Rather than liquidate the pay-fixed, receive-variable Swap 1, Entity MNO enters into a pay-floating, receive-fixed interest rate swap (Swap 2) with a 3-year term and a notional amount of $5 million. Entity MNO neither pa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ec97742363a59f0bfcafa704cbe940f44a861bd305f4745a3172e76759257c3b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-59","para":"55-59","html":"
The two swaps are not designated as hedging instruments and are reported at fair value. The changes in fair value are reported immediately in earnings and offset each other to a significant degree.
","snippet":"The two swaps are not designated as hedging instruments and are reported at fair value. The changes in fair value are reported immediately in earnings and offset each other to a significant degree.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1aede091de35e7272d1f7026b08ac405a57ad4b68d22d76fe5e1920039d557d7","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-60","para":"55-60","html":"
At the end of the second year of the 5-year hedging relationship, Entity MNO discontinues its practice of issuing 90-day notes and issues a 3-year, $5 million note with a different contractually specified interest rate (that is, an interest rate that is not LIBOR) that adjusts every 90 days. As of this date, Entity MNO must begin performing assessments of effectiveness for the hedging relationship by comparing changes in fair value of the hedging instrument (indexed to LIBOR) with changes in the value of the hedged item based on the revised contractually specified interest rate. Because the hedged forecasted transactions (future interest payments) are still probable of occurring, Entity MNO may continue to apply hedge accounting in accordance with paragraph 815-30-35-37A if the hedging instrument (indexed to LIBOR) is highly effective at achieving offsetting cash flows attributable to the revised contractually specified interest rate.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7At the end of the second year of the 5-year hedging relationship, Entity MNO discontinues its practice of issuing 90-day notes and issues a 3-year, $5 million note with a different contractually specified interest rate (that is, an interest rate that is not LIBOR) that adjusts every 90 days. As of this date, Entity MNO must begin performing assessments of effectiveness for the hedging relationship by comparing changes in fair value of the hedging instrument (indexed to LIBOR) with changes in the value of the hedged item based on the different contractually specified interest rate. Because the hedged forecasted transactions (future interest payments) are still probable of occurring, Entity MNO may continue to apply hedge accounting if the hedging instrument (indexed to LIBOR) is highly effective at achieving offsetting cash flows attributable to the different contractually specified interest rate.
","snippet":"At the end of the second year of the 5-year hedging relationship, Entity MNO discontinues its practice of issuing 90-day notes and issues a 3-year, $5 million note with a different contractually specified interest rate (…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:15f129426e734d13352e8ae06ddcbd8c0c3108de0e483d9e19eedd0180804c14","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-61","para":"55-61","html":"
If the revised hedging relationship is not determined to be highly effective, the hedging relationship must be discontinued. However, the net gain or loss on Swap 1 in accumulated other comprehensive income as of the date Entity MNO issues the three-year note is not reclassified into earnings immediately. Immediate reclassification would be required only if, as part of its normal process of assessing whether it remains probable that the hedged forecasted transaction will occur, Entity MNO determines that it is probable that the hedged transactions (future interest payments) will not occur. In this case, the expected amounts of those payments have changed (because they will be based on a revised contractually specified interest rate instead of LIBOR, as originally expected), but it still is probable that the payments will occur. Thus, those gains or losses will continue to be reclassified to earnings as the interest payments affect earnings and presented in the same income statement line item as the earnings effect of the hedged item.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7If the hedging relationship is not determined to be highly effective, the hedging relationship must be discontinued. However, the net gain or loss on Swap 1 in accumulated other comprehensive income as of the date Entity MNO issues the three-year note is not reclassified into earnings immediately. Immediate reclassification would be required only if, as part of its normal process of assessing whether it remains probable that the hedged forecasted transaction will occur, Entity MNO determines that it is probable that the hedged transactions (future interest payments) will not occur. In this case, the expected amounts of those payments have changed (because they will be based on a different contractually specified interest rate instead of LIBOR, as originally expected), but it still is probable that the payments will occur. Thus, those gains or losses will continue to be reclassified to earnings as the interest payments affect earnings and presented in the same income statement line item as the earnings effect of the hedged item.
","snippet":"If the revised hedging relationship is not determined to be highly effective, the hedging relationship must be discontinued. However, the net gain or loss on Swap 1 in accumulated other comprehensive income as of the dat…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:afe4bbf0e30dfe32eed38efe9d541953e6a86ee47033584078c8f9a34243a7ad","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-62","para":"55-62","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e7bf57437366ab835c34aaa11fc244dc2e2b13d410ee99d2d3a3048f8240564a","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-63","para":"55-63","html":"
This Example illustrates application of the accounting guidance for cash flow hedges described in paragraph 815-30-35-3. At the beginning of Period 1, Entity XYZ purchases for $9.25 an at-the-money call option on 1 unit of Commodity X with a strike price of $125.00 to hedge a forecasted purchase of 1 unit of that commodity projected to occur early in Period 5. Entity XYZ's documented policy is to assess hedge effectiveness by comparing changes in expected cash flows on the hedged transaction (based on changes in the Commodity X spot price) with changes in the option contract's intrinsic value. Because the hedging instrument is a purchased call option, its intrinsic value cannot be less than zero. If the price of the commodity is less than the option's strike price, the option is out-of-the-money. Its intrinsic value cannot decrease further regardless of how far the commodity price falls, and the intrinsic value will not increase until the commodity price increases to exceed the strike price. Thus, changes in cash flows from the option due to changes in its intrinsic value will offset changes in cash flows on the forecasted purchase only when the option is in the money or at the money. That phenomenon is demonstrated in Period 3 in the following table when the commodity price declines by $1.25. Because the commodity price is $.75 below the option's strike price, the option's intrinsic value declines by only $.50 (to zero). The effect reverses in Period 4 when the commodity index price increases by $6.50 and the option's intrinsic value increases by $5.75.
","snippet":"This Example illustrates application of the accounting guidance for cash flow hedges described in paragraph 815-30-35-3. At the beginning of Period 1, Entity XYZ purchases for $9.25 an at-the-money call option on 1 unit …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9cfdb0a7f4f8e9c5e104ddb891d789ee5356fc0db155090bec5c4c43d9315e7c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-64","para":"55-64","html":"
The following are the entries required to account for the cash flow hedge. Note that consistent with paragraph 815-20-35-1(c), the change in fair value of the hedging instrument that is included in the assessment of hedge effectiveness is recorded in other comprehensive income for qualifying hedging relationships. For this type of hedging relationship, Entity XYZ elects to record changes in the option's time value excluded from the assessment of hedge effectiveness currently in earnings in accordance with paragraph 815-20-25-83B. Amounts recorded in earnings should be presented in the same income statement line item as the earnings effect of the hedged item in accordance with paragraph 815-20-45-1A.
","snippet":"The following are the entries required to account for the cash flow hedge. Note that consistent with paragraph 815-20-35-1(c), the change in fair value of the hedging instrument that is included in the assessment of hedg…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:64950276fe428b456f853a32a5a9324e1e0e984fca64bed3cb154607945d87ff","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-65","para":"55-65","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1d4b960916d49f84c9ebae0c2ea2e331ad91c8c861d43de0939c79dd0081b22e","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-66","para":"55-66","html":"
The amount reflected in earnings relates to the component excluded from the effectiveness test, that is, the time value component. The change in cash flows from the hedged transaction was not fully offset in Period 3. However, as described in paragraph 815-20-25-76, a purchased call option is considered effective if it provides one-sided offset.
","snippet":"The amount reflected in earnings relates to the component excluded from the effectiveness test, that is, the time value component. The change in cash flows from the hedged transaction was not fully offset in Period 3. Ho…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:319dfb3a6d2a1efde0017dd057063cdec60590c0cb9b42b32af8fed32c397bff","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-67","para":"55-67","html":"
This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to a hedging relationship involving a single hedging derivative and three separate forecasted transactions. The three transactions occur on three separate dates, but the payment on receivables related to all three occurs on the same date. The settlement of the hedging derivative will occur on the date the receivable is paid. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to a hedging relationship involving a single hedging derivative and three separate forecasted transactions. The three transact…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:edb58acfb921e5c785dbb8fd2934e4e17c1486037749e2cc387836e195ccc45b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-68","para":"55-68","html":"
Entity DEF's functional currency is the U.S. dollar (USD). Entity ZYX's functional currency is the euro (EUR). Effective January 1, 20X1, Entity DEF enters into a royalty agreement with Entity ZYX that gives Entity ZYX the right to use Entity DEF's technology in manufacturing Product X. On April 30, 20X1, Entity ZYX will pay Entity DEF a royalty of EUR 1 million for each unit of Product X sold by that date. Entity DEF expects Entity ZYX to sell one unit of Product X on January 31, one on February 28, and one on March 31. The forecasted royalty is probable because Entity ZYX has identified a demand for Product X and no other supplier has the capacity to fill that demand.
","snippet":"Entity DEF's functional currency is the U.S. dollar (USD). Entity ZYX's functional currency is the euro (EUR). Effective January 1, 20X1, Entity DEF enters into a royalty agreement with Entity ZYX that gives Entity ZYX t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:95bcccf5a8a8427f97b31007967e8360b696ab15549a4d8cb3ddd27f3c263e0e","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-69","para":"55-69","html":"
Also on January 1, 20X1, Entity DEF enters into a forward contract to sell EUR 3 million on April 30, 20X1, for a price equal to the forward price of USD 0.6057 per EUR. Entity DEF designates the forward contract as a hedge of the risk of changes in its functional-currency-equivalent cash flows attributable to changes in the EUR-USD exchange rates related to the forecasted receipt of EUR 3 million from the royalty agreement. The spot price and forward price of EUR at January 1, 20X1, and the USD equivalent of EUR 3 million at those prices are assumed to be as follows.
","snippet":"Also on January 1, 20X1, Entity DEF enters into a forward contract to sell EUR 3 million on April 30, 20X1, for a price equal to the forward price of USD 0.6057 per EUR. Entity DEF designates the forward contract as a he…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:07a05b87e1d9e5fcc3006568509a5522b2412ab174ee13a4accfed24d1d99a38","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-70","para":"55-70","html":"
Entity DEF will exclude from its assessment of effectiveness the portion of the fair value of the forward contract attributable to the spot-forward difference (the difference between the spot exchange rate and the forward exchange rate). Entity DEF elects to recognize changes in that portion of the derivative instrument's fair value currently in earnings in accordance with paragraph 815-20-25-83B. Entity DEF will estimate the cash flows on the forecasted transactions based on the current spot exchange rate and will discount that amount. Thus, Entity DEF will assess effectiveness by comparing the following amounts:
  1. a
    Changes in the fair value of the forward contract attributable to changes in the USD spot price of EUR
  2. b
    Changes in the present value of the forecasted cash flows based on the current spot exchange rate.
","snippet":"Entity DEF will exclude from its assessment of effectiveness the portion of the fair value of the forward contract attributable to the spot-forward difference (the difference between the spot exchange rate and the forwar…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e124f477fe34059b7c32716d56a49d6db88dd27adc727b2e18b0549f7bcc799b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-71","para":"55-71","html":"
Those two changes will exactly offset because the currency and the notional amount of the forward contract match the currency and the total of the expected foreign currency amounts of the forecasted transactions. Thus, if Entity DEF dedesignates a proportion of the forward contract each time a royalty is recognized (as described in the following paragraph), the hedging relationship will meet the highly effective criterion.
","snippet":"Those two changes will exactly offset because the currency and the notional amount of the forward contract match the currency and the total of the expected foreign currency amounts of the forecasted transactions. Thus, i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:835cba01d4bec6a31ca27d21d7f45190bb1fb33a0f4ec8632b90935fddefa696","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-72","para":"55-72","html":"
As each royalty is recognized, Entity DEF recognizes a receivable and royalty income. The forecasted transaction (the recognition of royalty income) has occurred. The receivable is an asset, not a forecasted transaction, and would separately be eligible to be designated as a fair value hedge of foreign exchange risk or continue to be eligible as a cash flow hedge of foreign exchange risk. Consequently, if the variability of the functional currency cash flows related to the royalty receivable is not being hedged, Entity DEF will dedesignate a proportion of the hedging instrument in the original hedging relationship with respect to the proportion of the forward contract corresponding to the recognized royalty. As the royalty is recognized in earnings and each proportion of the derivative instrument is dedesignated, the related derivative instrument gain or loss in accumulated other comprehensive income is reclassified into earnings and presented in the same income statement line item as the earnings effect of the hedged item. After that date, any gain or loss on the dedesignated proportion of the derivative instrument and any transaction loss or gain on the royalty receivable will be recognized in earnings and may substantially offset each other.
","snippet":"As each royalty is recognized, Entity DEF recognizes a receivable and royalty income. The forecasted transaction (the recognition of royalty income) has occurred. The receivable is an asset, not a forecasted transaction,…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6849b1bf1dc66fd5f84c6e0115de72fb1a09936ef16e259b6da7292d48d3827c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-73","para":"55-73","html":"
Subtopic 830-20 requires immediate recognition in earnings of any foreign currency transaction gain or loss on a foreign-currency-denominated receivable that is not designated as a hedging instrument. Therefore, the effect of changes in spot prices on the royalty receivable must be recognized immediately in earnings.
","snippet":"Subtopic 830-20 requires immediate recognition in earnings of any foreign currency transaction gain or loss on a foreign-currency-denominated receivable that is not designated as a hedging instrument. Therefore, the effe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a4d52582fc3794bddf59b9946764a00700260b4ff8fd9c1292b40908805c7d2b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-74","para":"55-74","html":"
The spot prices and forward prices for settlement on April 30, 20X1, in effect at inception of the hedge (January 1, 20X1) and at the end of each month between inception and April 30, 20X1, are assumed to be as follows.
","snippet":"The spot prices and forward prices for settlement on April 30, 20X1, in effect at inception of the hedge (January 1, 20X1) and at the end of each month between inception and April 30, 20X1, are assumed to be as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8afe2304088829447ebc8acddcd0d545780cd71bb167962aa7c88343d37a24c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-75","para":"55-75","html":"
The changes in fair value of the forward contract that are recognized each month in earnings and other comprehensive income are shown in the following table. Amounts reclassified from accumulated other comprehensive income to earnings and amounts excluded from the assessment of hedge effectiveness are presented in the same income statement line item as the earnings effect of the hedged item. The fair value of the forward is the present value of the difference between the USD to be received on the forward (USD 1,817,100) and the USD equivalent of EUR 3 million based on the current forward rate. A 6 percent discount rate is used in this Example.
","snippet":"The changes in fair value of the forward contract that are recognized each month in earnings and other comprehensive income are shown in the following table. Amounts reclassified from accumulated other comprehensive inco…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:18d4708a9d570eab4daf527ce89b6c3f1543ced557f1cc8871172479d9a5ce16","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-76","para":"55-76","html":"
The effect on earnings of the royalty agreement and hedging relationship illustrated in this Example is summarized by month in the following table.
","snippet":"The effect on earnings of the royalty agreement and hedging relationship illustrated in this Example is summarized by month in the following table.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:16f97f5937bb74a88860f4b61ee0411a9b846bf487a963d51ce01887ce171e5e","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-77","para":"55-77","html":"
This Example illustrates application of the guidance in this Subtopic to reporting cash flow hedges in comprehensive income and accumulated other comprehensive income. For simplicity, commissions and most other transaction costs, initial margin, and income taxes are ignored unless otherwise stated. Assume that there are no changes in creditworthiness that would alter the effectiveness of the hedging relationship.
","snippet":"This Example illustrates application of the guidance in this Subtopic to reporting cash flow hedges in comprehensive income and accumulated other comprehensive income. For simplicity, commissions and most other transacti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:15ca2869cf0273591715371fc1539fde2948417ef27421660ead00521a1b4c95","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-78","para":"55-78","html":"
Entity TUV's cash flow hedge transactions through the end of 20X4 include all of the following:
  1. a
    It continually purchases pork belly futures contracts to hedge its anticipated purchases of pork belly inventory.
  2. b
    In 20X2, it entered into a Euro (EUR) forward exchange contract to hedge the foreign currency risk associated with the expected purchase of a pork belly processing machine with a five-year life that it bought from a vendor in Germany at the end of 20X2.
  3. c
    In 20X2, it entered into a 10-year interest rate swap concurrent with the issuance of 10-year variable rate debt (cash flow hedge of future variable interest payments).
  4. d
    In January 20X4, it entered into a two-year Swiss franc (CHF) forward exchange contract to hedge a forecasted export sale (denominated in CHF, expected to occur in December 20X5) of hot dogs to a large customer in Switzerland. In June 20X4, it closed the forward contract, but the forecasted transaction is still expected to occur.
","snippet":"Entity TUV's cash flow hedge transactions through the end of 20X4 include all of the following:\n(a) It continually purchases pork belly futures contracts to hedge its anticipated purchases of pork belly inventory.\n(b) In…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:22547772cb17eb5eb5a22fe70306db169cc32a935333bde0b9118f56f2e49be6","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-79","para":"55-79","html":"
The following table reconciles the beginning and ending accumulated other comprehensive income balances for 20X4. It supports the comprehensive income display and disclosures that are required under Topic 220. It is assumed that there are no other amounts in accumulated other comprehensive income. The after-tax amounts assume a 30 percent effective tax rate.
","snippet":"The following table reconciles the beginning and ending accumulated other comprehensive income balances for 20X4. It supports the comprehensive income display and disclosures that are required under Topic 220. It is assu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6afbc564d7c2646eadb9a473cb77a58a54c14d42fc1b09bd68ed9272d94ccb00","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-80","para":"55-80","html":"
The following tables illustrate an acceptable method, under the provisions of Topic 220, of reporting the transactions described by this Example in earnings, comprehensive income, and shareholders' equity.
","snippet":"The following tables illustrate an acceptable method, under the provisions of Topic 220, of reporting the transactions described by this Example in earnings, comprehensive income, and shareholders' equity.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5835b789c56acfe33d71d1ab04d6c29edac2cda4d6ec1c2cc5c5bb723be235a6","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-81","para":"55-81","html":"
This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to accounting for a cash flow hedge of a fixed-rate foreign-currency-denominated debt in which all of the variability in the functional-currency-equivalent cash flows are eliminated by the effect of the hedge.
","snippet":"This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to accounting for a cash flow hedge of a fixed-rate foreign-currency-denominated debt in which all of the variability in the f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5b7b6f79ede8fd9213613c5a1a68be1092350ec0bb6bf23118d62781ea092721","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-82","para":"55-82","html":"
On July 1, 20X1, Entity DEF, a U.S. dollar (USD) functional currency entity, issues a zero-coupon debt instrument with a notional amount of FC 154,766.79 for FC 96,098.00. The interest rate implicit in the debt is 10 percent. The debt will mature on June 30, 20X6. Entity DEF enters into a forward contract to buy FC 154,766.79 in 5 years at the forward rate of 1.090148194 (USD 168,718.74) and designates the forward contract as a hedge of the variability of the USD functional currency equivalent cash flows on the debt. Because the currency, notional amount, and maturity of the debt and the forward contract match, the entity concludes that the hedging relationship will achieve perfect offset. The USD interest rate implicit in the forward contract is 11.028 percent. The market data, period end balances, and journal entries from cash flow hedge accounting are as follows.
","snippet":"On July 1, 20X1, Entity DEF, a U.S. dollar (USD) functional currency entity, issues a zero-coupon debt instrument with a notional amount of FC 154,766.79 for FC 96,098.00. The interest rate implicit in the debt is 10 per…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1610ca1a18bdbca17fed8c62df9a0f42f1659008bade3a53f596a59ecd166ae6","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-83","para":"55-83","html":"
Following are journal entries at inception of the loan and at the end of the first year.
","snippet":"Following are journal entries at inception of the loan and at the end of the first year.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:957d031dc98cb077a9ae032f9aec1a4191e0129cb3a50882d464dd4f5a3a81d7","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-84","para":"55-84","html":"
Journal entries for the remaining four years are not displayed.
","snippet":"Journal entries for the remaining four years are not displayed.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2536c2536ee3c34624142e32b6d913d63703d4cc8f36331332917ac0a52822e8","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-85","para":"55-85","html":"
This Example would also be relevant for a non-interest-bearing foreign-currency-denominated receivable or payable instrument. An amount based on the rate implicit in the forward contract would be reported in earnings each period. Given the short maturities of many receivables and payables, the amount reported in earnings each period may be small.
","snippet":"This Example would also be relevant for a non-interest-bearing foreign-currency-denominated receivable or payable instrument. An amount based on the rate implicit in the forward contract would be reported in earnings eac…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:88f40836eb47f04da86ad1e405b8d6aa6905873d7526cba1b723b55c5a6135aa","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-86","para":"55-86","html":"
This Example illustrates the application of paragraphs 815-20-25-30 and
815-20-25-39 through 25-41
. This Example has the following assumptions:
  1. a
    Parent A is a multinational corporation that has the U.S. dollar (USD) as its functional currency.
  2. b
    Parent A has the following two subsidiaries:
    1. 1
      Subsidiary B, which has the Euro (EUR) as its functional currency
    2. 2
      Subsidiary C, which has the Japanese yen (JPY) as its functional currency.
  3. c
    Subsidiary B manufactures a product and has a forecasted sale of the product to Subsidiary C that will be transacted in JPY.
","snippet":"This Example illustrates the application of paragraphs 815-20-25-30 and 815-20-25-39 through 25-41. This Example has the following assumptions:\n(a) Parent A is a multinational corporation that has the U.S. dollar (USD) a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2872e6e0b0abc4526ec6be581ad3bfdbaea66ffe00c1ed27f3b3ff6d10343fe3","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-87","para":"55-87","html":"
Eventually, Subsidiary C will sell the product to an unrelated third party in JPY. Subsidiary B enters into a forward contract with an unrelated third party to hedge the cash flow exposure of its forecasted intra-entity sale in JPY to changes in the EUR-JPY exchange rate.
","snippet":"Eventually, Subsidiary C will sell the product to an unrelated third party in JPY. Subsidiary B enters into a forward contract with an unrelated third party to hedge the cash flow exposure of its forecasted intra-entity …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30b722e993d0ee2dd3017b11b10ac201b0a6e46c6eb71983fe44f4face1825f4","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-88","para":"55-88","html":"
The transaction in this Example meets the hedge criteria of paragraphs 815-20-25-30 and
815-20-25-39 through 25-41
, which permits a derivative instrument to be designated as a hedge of the foreign currency exposure of variability in the functional-currency-equivalent cash flows associated with a forecasted intra-entity foreign-currency-denominated transaction if certain criteria are met. Specifically, the operating unit having the foreign currency exposure (Subsidiary B) is a party to the hedging instrument; the hedged transaction is denominated in JPY, which is a currency other than Subsidiary B's functional currency; and all other applicable criteria in Section 815-20-25 are satisfied.
","snippet":"The transaction in this Example meets the hedge criteria of paragraphs 815-20-25-30 and 815-20-25-39 through 25-41, which permits a derivative instrument to be designated as a hedge of the foreign currency exposure of va…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4ee6688800370ec4d4b440303405bfcf0e1b890ad016a432b5a13c1549acbb6c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-89","para":"55-89","html":"
Subsidiary B measures the derivative instrument at fair value and records the gain or loss on the derivative instrument in accumulated other comprehensive income. In the consolidated financial statements, the amount in other comprehensive income representing the gain or loss on a derivative instrument designated in a cash flow hedge of a forecasted foreign-currency-denominated intra-entity sale should be reclassified into earnings in the period that the revenue from the sale of the manufactured product to an unrelated third party is recognized and presented in earnings in the same income statement line item as the earnings effect of the hedged item. The reclassification into earnings in the consolidated financial statements should occur when the forecasted sale affects the earnings of Parent A. Because the consolidated earnings of Parent A will not be affected until the sale of the product by Subsidiary C to the unrelated third party occurs, the reclassification of the amount of derivative gain or loss from other comprehensive income into earnings in the consolidated financial statements should occur upon the sale by Subsidiary C to an unrelated third party.
","snippet":"Subsidiary B measures the derivative instrument at fair value and records the gain or loss on the derivative instrument in accumulated other comprehensive income. In the consolidated financial statements, the amount in o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e0e84fd0b7ccf51b6126f5d63d686e9892ddefa34db1fed19c61d6099eff9e14","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-90","para":"55-90","html":"
This guidance is relevant only with respect to the consolidated financial statements. In Subsidiary B's separate entity financial statements, the reclassification of the amount of the derivative instrument gain or loss from other comprehensive income into earnings should occur in the period the forecasted intra-entity sale is recorded because Subsidiary B's earnings are affected by the change in the EUR-JPY exchange rate when the sale to Subsidiary C occurs.
","snippet":"This guidance is relevant only with respect to the consolidated financial statements. In Subsidiary B's separate entity financial statements, the reclassification of the amount of the derivative instrument gain or loss f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8417f52ad3ed2c5b558700b0a09bb60eaad1afe64c473c0aa1357556f2e598a3","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-91","para":"55-91","html":"
This Example demonstrates the application of the change-in-variable-cash-flows method discussed in paragraph 815-30-35-16to assess hedge effectiveness.
","snippet":"This Example demonstrates the application of the change-in-variable-cash-flows method discussed in paragraph 815-30-35-16to assess hedge effectiveness.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:966d2c332886b4e1876a875da455e7536e278aee4c697725d578b6700315159d","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-92","para":"55-92","html":"
An entity designates a receive-variable, pay-fixed interest rate swap with a zero fair value as a hedge of variable interest rate payments on a debt instrument. The variable leg of the interest rate swap is based on the three-month U.S. Treasury rate, and the variable cash flows of the debt are based on three-month LIBOR. Assume that the overall change in fair value of the interest rate swap from inception of the hedge is $16,300, the present value of the cumulative change in the cash flow on the variable leg of the interest rate swap is a gain (increased cash inflow) of $16,596, and the present value of the cumulative change in the expected future interest cash flows on the variable-rate liability due to changes in the cash flows expected for the remainder of the hedge term is a loss (increased cash outflow) of $16,396. (The cumulative changes in expected future cash flows on both the variable leg of the interest rate swap and the variable-rate debt are discounted using the rates applicable to determining the fair value of the derivative instrument.)
","snippet":"An entity designates a receive-variable, pay-fixed interest rate swap with a zero fair value as a hedge of variable interest rate payments on a debt instrument. The variable leg of the interest rate swap is based on the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:32cf1f9ef97ac144cd2638c51d175ac8f8f2ce030f2b28e1df1ad677d8a39ee4","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-93","para":"55-93","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5daab031a933958da9101d654f30220d6090b8187f023bedade22cf06680049d","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-93A","para":"55-93A","html":"
The entity assesses effectiveness by comparing the present value of the cumulative change in the cash flow on the variable leg of the interest rate swap of $16,596 with the present value of the cumulative change in the expected future interest cash flows on the variable-rate liability of $16,396 and concludes that the hedging relationship is highly effective. As a result, the balance in accumulated other comprehensive income would reflect the cumulative change in the fair value of the swap since hedge inception ($16,300).
","snippet":"The entity assesses effectiveness by comparing the present value of the cumulative change in the cash flow on the variable leg of the interest rate swap of $16,596 with the present value of the cumulative change in the e…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bb4970ddd95eac6bb687a19a6feb1c260e81668119c16073cdebf1b763943052","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-94","para":"55-94","html":"
This Example illustrates the effect on accumulated other comprehensive income of issuing debt with a term that is shorter than originally forecasted.
","snippet":"This Example illustrates the effect on accumulated other comprehensive income of issuing debt with a term that is shorter than originally forecasted.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6bcaf68a07a6e48d2e0c1bdc7f41e8f932fc6f7c37b782e9c6b3b17eb5e7b24","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-95","para":"55-95","html":"
Entity A expects to borrow $100 million over a 10-year period beginning in 6 months. Entity A initially plans to issue $100 million of 10-year fixed-rate debt at or near par at the then-current market interest rate; consequently, Entity A will be exposed to variability in cash flows in the future quarterly interest payments on the debt due to changes in credit risk and interest rate risk that occur during this 6-month period before issuance. To hedge the risk of changes in these 40 quarterly interest payments attributable to changes in the benchmark interest rate for the 6-month period, Entity A does all of the following:
  1. a
    It enters into a derivative instrument (for example, a forward-starting interest rate swap).
  2. b
    It documents that it is hedging the variability in the 40 future quarterly interest payments, attributable to changes in the benchmark interest rate, over the next 10 years related to its 10-year $100 million borrowing program that begins in 6 months.
  3. c
    It documents that it will assess the effectiveness of the hedging relationship semimonthly on a quantitative basis.
","snippet":"Entity A expects to borrow $100 million over a 10-year period beginning in 6 months. Entity A initially plans to issue $100 million of 10-year fixed-rate debt at or near par at the then-current market interest rate; cons…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:56addc50a36456294314fd093295e68ca86fb508a3258a603745ff53c37a4c23","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-96","para":"55-96","html":"
Six months after inception of the hedging relationship, Entity A issues debt. However, due to market conditions, Entity A decides in the week before issuance that it will issue $100 million of fixed-rate debt with a 5-year maturity and quarterly interest payments.
","snippet":"Six months after inception of the hedging relationship, Entity A issues debt. However, due to market conditions, Entity A decides in the week before issuance that it will issue $100 million of fixed-rate debt with a 5-ye…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:68bab273c21e65ad77c7e9092c75fd702f6f03bc5b22604965c0554fc14334df","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-97","para":"55-97","html":"
When Entity A decides that the term of the debt to be issued will differ from the term of the debt originally expected to be issued, Entity A should not immediately reclassify into earnings the entire net gain or loss in accumulated other comprehensive income related to the derivative instrument. Instead, Entity A must first apply the requirements of paragraph 815-30-35-3 using its originally documented hedging strategy and the newly revised best estimate of the cash flows. That is, the assessment of hedge effectiveness should be based on the most recent best estimate of the hedged forecasted transaction as of the date that a cash flow hedge is discontinued prospectively.
","snippet":"When Entity A decides that the term of the debt to be issued will differ from the term of the debt originally expected to be issued, Entity A should not immediately reclassify into earnings the entire net gain or loss in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a8c4714086f8bc22d424e6f29a0dbfb09b81a4f4b2940b78603edde809464753","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-98","para":"55-98","html":"
Entity A's strategy is a cash flow hedge of 40 individual probable quarterly interest payments. A cash flow hedge of future interest payments is a hedge of a series of forecasted transactions; consequently, Entity A must first determine the likelihood of whether and when each forecasted transaction in the series will occur. If at any time during the hedging relationship Entity A determines that it is no longer probable that any of the forecasted transactions in the series will occur by the date (or within the time period) originally specified, it must terminate the original hedging relationship for each of those specific nonprobable forecasted transactions (even if the forecasted transaction will occur within an additional two-month period of time after that originally specified date).
","snippet":"Entity A's strategy is a cash flow hedge of 40 individual probable quarterly interest payments. A cash flow hedge of future interest payments is a hedge of a series of forecasted transactions; consequently, Entity A must…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4577f0f2bd83a676c8b9513b3a51af852c85200de0f2474323c7b53e7040c036","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-98A","para":"55-98A","html":"
When Entity A performs its semimonthly assessment of effectiveness for the half-month period immediately preceding the issuance of the debt, it could also possibly conclude that the hedging relationship is no longer considered highly effective under paragraph 815-20-25-75 because the actual variability in the hedged interest payments for Years 1-5 is now based on the 5-year borrowing rate—not on 10-year rates as expected at the inception of the hedge when the entity selected the hedging derivative. In that circumstance, the hedging relationship is terminated. After the hedging relationship is terminated, Entity A must determine whether it is probable that any or all of those specific nonprobable forecasted transactions will not occur by the date (or within the time period) originally specified or within an additional two-month period of time thereafter (see paragraphs
815-30-40-4 through 40-5
).
","snippet":"When Entity A performs its semimonthly assessment of effectiveness for the half-month period immediately preceding the issuance of the debt, it could also possibly conclude that the hedging relationship is no longer cons…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fdae88f86db7f2a70a6c846f45230042f354d3473ecc5529c1b822ba9b479967","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-99","para":"55-99","html":"
When Entity A originally documented the hedging relationship, it was hedging 40 forecasted transactions (forecasted quarterly interest payments) that would begin in 6 months' time and continue over a 10-year period. In this Example, Entity A terminates the hedging relationship no later than on the date it issues the 5-year debt (because the variability of the first 20 hedged payments ceases on that date) and must determine the amount, if any, to be reclassified into earnings from accumulated other comprehensive income related to the net derivative gain or loss of the terminated cash flow hedge. Because Entity A issued a 5-year debt instrument, Entity A would determine that it is probable that the first 20 forecasted transactions would occur because they are now contractual obligations. Entity A must determine that it is not probable that any of the last 20 forecasted transactions will not occur to continue reporting the net derivative gain or loss related to these forecasted transactions in accumulated other comprehensive income. At issue is whether it is probable that the five-year debt will not be replaced by new borrowings that will involve the quarterly payment of interest. Provided that the entity determines that it is not probable that any of the original 40 forecasted transactions will not occur, Entity A must apply paragraph 815-30-35-3 and continue to report an amount in accumulated other comprehensive income based on the most recent best estimate of the hedged forecasted transactions related to all 40 forecasted transactions and reclassify an appropriate amount into earnings when each hedged forecasted transaction affects earnings and present those amounts in the same income statement line item as the earnings effect of the hedged item. If Entity A determines that it is probable that any of those forecasted transactions will not occur either by the end of the date (or within the time period) originally specified or within an additional two-month period of time thereafter (see paragraphs
815-30-40-4 through 40-5
), Entity A should reclassify into earnings from accumulated other comprehensive income the amount of the net derivative instrument gain or loss related to those specific nonoccurring forecasted transactions. That amount should be equivalent to the portion of the present value of the derivative instrument's cash flows intended to offset the changes in the original forecasted transactions for which Entity A has determined it is probable that they will not occur by the date (or within the time period) originally specified or within an additional two-month period of time thereafter. Thus, the nonoccurrence of one of the hedged forecasted transactions described in this Example could potentially jeopardize Entity A's ability to use cash flow hedge accounting in the future for the situation described.
","snippet":"When Entity A originally documented the hedging relationship, it was hedging 40 forecasted transactions (forecasted quarterly interest payments) that would begin in 6 months' time and continue over a 10-year period. In t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e6767506bf55323f402f38b7074d0ee2e512de0e5bd336cbfa661f0c426384e5","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-100","para":"55-100","html":"
The following Cases illustrate the application of paragraphs
815-30-40-4 through 40-5
to changes in timing of a forecasted transaction in relation to an originally specified time period:
  1. a
    Transactions to occur within two months of end of originally specified time period (Case A)
  2. b
    Transactions not to occur within two months of end of originally specified time period (Case B).
","snippet":"The following Cases illustrate the application of paragraphs 815-30-40-4 through 40-5 to changes in timing of a forecasted transaction in relation to an originally specified time period:\n(a) Transactions to occur within …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ac5c83f31ede07104ad21553f096846485de54e1523c6ac9a6508a7d8be6913","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-101","para":"55-101","html":"
On January 1, an entity enters into a hedge of the variability in the total cash flows of a forecasted sale of the first 100 units of a specified product during the 3-month period from February 1 to April 30. Gains and losses on the hedging instrument are accumulated in other comprehensive income and reclassified into earnings as sales occur and are presented in the same income statement line item as the earnings effect of the hedged item. However, as of March 10, only 60 units of the product have been sold and the entity determines that it is probable that the sale of the remaining 40 units will not occur by April 30. As a result, the entity must discontinue cash flow hedge accounting under the originally designated hedging relationship as of March 10 (pursuant to paragraph 815-30-40-1(a)).
","snippet":"On January 1, an entity enters into a hedge of the variability in the total cash flows of a forecasted sale of the first 100 units of a specified product during the 3-month period from February 1 to April 30. Gains and l…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c4194e1c2adbe631e3560a17d0c58abb7eff358e446885475040ead121d7c52b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-102","para":"55-102","html":"
In this Case, the entity determines that it is probable that the sale of the remaining 40 units will occur by June 20. Based on this new information, the entity is permitted to designate a new cash flow hedge under which subsequent derivative instrument gains and losses would receive cash flow hedge accounting. This Example focuses on the derivative instrument gains and losses that have been accumulated in other comprehensive income at March 10 with respect to the remaining 40 unsold units. The derivative instrument gains or losses accumulated in other comprehensive income related to the sale of the remaining 40 units should not be reclassified into earnings as of March 10 because the entity determined on that date that it is at least reasonably possible that the forecasted transactions will occur within the two-month period following April 30 (the end of the originally specified time period).
","snippet":"In this Case, the entity determines that it is probable that the sale of the remaining 40 units will occur by June 20. Based on this new information, the entity is permitted to designate a new cash flow hedge under which…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c48418706cecbc2b53164522ca9ba891cfebe19dfd2dd6d2a4e339c985a87ca2","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-103","para":"55-103","html":"
In this Case, the entity determined on March 10 that it is probable that the sale of the remaining 40 units will not occur by June 30 but it was reasonably possible that the sale would occur in July or August.
","snippet":"In this Case, the entity determined on March 10 that it is probable that the sale of the remaining 40 units will not occur by June 30 but it was reasonably possible that the sale would occur in July or August.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2a50e3c3edcf42a218826a52de844973af229f55c70cbc3ada8b2e9da9379a5d","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-104","para":"55-104","html":"
In that circumstance, the derivative instrument gains or losses accumulated in other comprehensive income related to the sale of the remaining 40 units must be reclassified into earnings as of March 10 because the entity would have determined on that date that it is probable that the forecasted transactions will neither occur by the end of the originally specified time period (that is, April 30) nor within the allowable additional two-month period of time (ending on June 30).
","snippet":"In that circumstance, the derivative instrument gains or losses accumulated in other comprehensive income related to the sale of the remaining 40 units must be reclassified into earnings as of March 10 because the entity…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c0e1ba9a2f0a27569c440cc607a8e0d1f1cacda1ce4edd1f3e1678f44ac73a05","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-105","para":"55-105","html":"
Furthermore, the example indicates no extenuating circumstances that could justify applying the exception related to a forecasted transaction that is probable of occurring on a date beyond the additional two-month period of time.
","snippet":"Furthermore, the example indicates no extenuating circumstances that could justify applying the exception related to a forecasted transaction that is probable of occurring on a date beyond the additional two-month period…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b5f83f0724157d590e2d4dddca533507aa9128b246a5dc80c1e635e3b22117d2","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-106","para":"55-106","html":"
This Example illustrates the application of paragraphs 815-30-35-9 and
815-20-25-34 through 25-36
, which permit an entity to designate a single cash flow hedge that encompasses the variability of functional-currency-equivalent cash flows attributable to foreign exchange risk related to the settlement of a foreign-currency-denominated receivable or payable resulting from a forecasted sale or purchase on credit.
","snippet":"This Example illustrates the application of paragraphs 815-30-35-9 and 815-20-25-34 through 25-36, which permit an entity to designate a single cash flow hedge that encompasses the variability of functional-currency-equi…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e099d61c2e72596717fab2dae45f20d69fa93681bbbf8dc17837402fd5d412ae","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-107","para":"55-107","html":"
  1. a
    Entity A, a U.S. dollar (USD) functional currency entity, forecasts the purchase of inventory on credit for FC 100,000 in 182 days with settlement of the payable in 227 days. The purchase will occur July 15 on credit; the resulting payable will settle August 29.
  2. b
    Entity A enters into a forward contract to purchase FC 100,000 in 227 days at the forward rate of USD .6614 = FC 1.
  3. c
    Entity A designates a single cash flow hedge that encompasses the variability of functional-currency-equivalent cash flows attributable to foreign exchange risk related to the settlement of the foreign-currency-denominated payable resulting from the forecasted purchase on credit.
  4. d
    After the initial quantitative effectiveness test, Entity A elects to assess effectiveness on a quantitative basis based on forward rates.
","snippet":"(a) Entity A, a U.S. dollar (USD) functional currency entity, forecasts the purchase of inventory on credit for FC 100,000 in 182 days with settlement of the payable in 227 days. The purchase will occur July 15 on credit…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e65f177b4c8a7e57cbdde60d0068e65ab025c89e3a95c0897c0656252e5a2ab1","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-108","para":"55-108","html":"
Exchange rates are as follows.
","snippet":"Exchange rates are as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e9e86e61112ed8838f24e4d7d02d9f43e3a58f99961c17fb592d48b5e10731a","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-109","para":"55-109","html":"
Entity A would record the following journal entries.
","snippet":"Entity A would record the following journal entries.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ad0e9663aaa976dcb087ac11b437d94b84ab5b49f45f285ff45d7d8d16c08653","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-110","para":"55-110","html":"
Upon sale of the inventory, Entity A would record cost of goods sold of $67,610 and reclassify $1,548 from other comprehensive income to earnings to achieve a net cost of goods sold of $66,062. The effect of the hedge would result in a net cost to Entity A of $66,140 for the purchase of the inventory.
","snippet":"Upon sale of the inventory, Entity A would record cost of goods sold of $67,610 and reclassify $1,548 from other comprehensive income to earnings to achieve a net cost of goods sold of $66,062. The effect of the hedge wo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6b7a3f64dd529b08de24e391f87313aac7350e17cfafcb61cdb444459f4353a","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-111","para":"55-111","html":"
The amount of the adjustment under paragraph 815-30-35-3(d) is that amount needed to ensure that a net amount in earnings reflects the effect of the hedge through each reporting period up to and including the final settlement of the payable.
","snippet":"The amount of the adjustment under paragraph 815-30-35-3(d) is that amount needed to ensure that a net amount in earnings reflects the effect of the hedge through each reporting period up to and including the final settl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dec1d1b52987ec3310e809aa48dde4231bc7cc5f9677584d2b2fa00feb0713ba","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-112","para":"55-112","html":"
The amount of cost or income to be ascribed to each period is calculated as follows.
","snippet":"The amount of cost or income to be ascribed to each period is calculated as follows.\nDaily interest rate implicit in the hedging relationship as a result of the forward contract: $65,750 PV, $66,140 FV, 227n, i = 0.00260…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:97257b3cda25c44e9f812f4689329d35186dcbba226952f6944c152283a49c13","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-113","para":"55-113","html":"
This Example illustrates the application of paragraphs
815-20-25-61 through 25-63
, specifically, the mechanism for offsetting risks assumed by a Treasury Center using internal derivatives on a net basis with third-party contracts. This Example does not demonstrate the computation of fair values and as such makes certain simplifying assumptions.
","snippet":"This Example illustrates the application of paragraphs 815-20-25-61 through 25-63, specifically, the mechanism for offsetting risks assumed by a Treasury Center using internal derivatives on a net basis with third-party …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2bcad3c8bcf56485659875bb2bb31780bc442240ac3ccfaca416c38ca86e08eb","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-114","para":"55-114","html":"
Entity XYZ is a U.S. entity with the U.S. dollar (USD) as both its functional currency and its reporting currency. Entity XYZ has three subsidiaries: Subsidiary A is located in Germany and has the Euro (EUR) as its functional currency, Subsidiary B is located in Japan and has the Japanese yen (JPY) as its functional currency, and Subsidiary C is located in the United Kingdom and has the pound sterling (GBP) as its functional currency. Entity XYZ uses its Treasury Center to manage foreign exchange risk on a centralized basis. Foreign exchange risk assumed by Subsidiaries A, B, and C through transactions with external third parties is transferred to the Treasury Center via internal contracts. The Treasury Center then offsets that exposure to foreign currency risk via third-party contracts. To the extent possible, the Treasury Center offsets exposure to each individual currency on a net basis with third-party contracts.
","snippet":"Entity XYZ is a U.S. entity with the U.S. dollar (USD) as both its functional currency and its reporting currency. Entity XYZ has three subsidiaries: Subsidiary A is located in Germany and has the Euro (EUR) as its funct…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:91838f33e6b64fa04043f7cb3c1a6487838d5ca18dce6c40466663b25c2bfa0e","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-115","para":"55-115","html":"
On January 1, Subsidiaries A, B, and C decide that various foreign-currency-denominated forecasted transactions with external third parties for purchases and sales of various goods are probable. Also on January 1, Subsidiaries A, B, and C enter into internal foreign currency forward contracts with the Treasury Center to hedge the foreign exchange risk of those transactions with respect to their individual functional currencies. The Treasury Center has the same functional currency as the parent entity (USD).
","snippet":"On January 1, Subsidiaries A, B, and C decide that various foreign-currency-denominated forecasted transactions with external third parties for purchases and sales of various goods are probable. Also on January 1, Subsid…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b1fb533aa3b045c55994de8d7fa1e77be34151c6ceb8a3b7e9275f57ee16aaa1","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-116","para":"55-116","html":"
Subsidiaries A, B, and C have the following foreign currency exposures and enter into the following internal contracts with the Treasury Center.
","snippet":"Subsidiaries A, B, and C have the following foreign currency exposures and enter into the following internal contracts with the Treasury Center.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c9f4748c713d4c2d0e33ae65060e0dd2d3ab3edb999ac30c91ffe741e2e26850","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-117","para":"55-117","html":"
Subsidiaries A, B, and C designate the internal contracts with the Treasury Center as cash flow hedges of their foreign currency forecasted purchases and sales. Those internal contracts may be designated as hedging instruments in the consolidated financial statements if the requirements of this Subtopic are met. From the subsidiaries' perspectives, the requirements of paragraph 815-20-25-61 for foreign currency cash flow hedge accounting are satisfied as follows:
  1. a
    From the perspective of the hedging affiliate, the hedging relationship must meet the requirements of paragraphs 815-20-25-30 and
    815-20-25-39 through 25-41
    for cash flow hedge accounting.     Subsidiaries A, B, and C meet those requirements. In each hedging relationship, the forecasted transaction being hedged is denominated in a currency other than the subsidiary's functional currency, and the individual subsidiary that has the foreign currency exposure relative to its functional currency is a party to the hedging instrument. In addition, the criteria in Section 815-20-25 are met. Specifically, each subsidiary prepares formal documentation of the hedging relationships, including the date on which the forecasted transactions are expected to occur and the amount of foreign currency being hedged. The forecasted transactions being hedged are specifically identified, are probable of occurring, and are transactions with external third parties that create cash flow exposure that would affect reported earnings. Each subsidiary also documents its expectation of high effectiveness based on the internal derivatives designated as hedging instruments.
  2. b
    The affiliate that issues the hedge must offset the internal derivative either individually or on a net basis. The Treasury Center determines that it will offset the exposure arising from the internal derivatives with Subsidiaries A, B, and C on a net basis with third-party contracts. Each currency for which a net exposure exists at the Treasury Center is offset by a third-party contract based on that currency.
","snippet":"Subsidiaries A, B, and C designate the internal contracts with the Treasury Center as cash flow hedges of their foreign currency forecasted purchases and sales. Those internal contracts may be designated as hedging instr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c3108fdf59834059833ca9868359744a7b1e1eda20f2b8726952b9c6861f9f3a","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-118","para":"55-118","html":"
To determine the net currency exposure arising from the internal contracts with Subsidiaries A, B, and C, the Treasury Center performs the following analysis.
","snippet":"To determine the net currency exposure arising from the internal contracts with Subsidiaries A, B, and C, the Treasury Center performs the following analysis.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c314595c8b35f300759eef6ba08209e261fa6ef6233c56a2ed746a1520af707","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-119","para":"55-119","html":"
For Subsidiaries A, B, and C to designate the internal contracts as hedging instruments in the consolidated financial statements, the Treasury Center must meet certain required criteria outlined in paragraphs
815-20-25-62 through 25-63
in determining how it will offset exposure arising from multiple internal derivatives that it has issued. Based on a determination that those requirements are satisfied (see the following paragraph, the Treasury Center determines the net exposure in each currency with respect to USD (its functional currency). The Treasury Center determines that it will enter into the following three third-party foreign currency forward contracts. The Treasury Center enters into the contracts on January 1. The contracts mature on June 30.
","snippet":"For Subsidiaries A, B, and C to designate the internal contracts as hedging instruments in the consolidated financial statements, the Treasury Center must meet certain required criteria outlined in paragraphs 815-20-25-6…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f0ef216bd9cb5e339122ce4ebf686f26991f30b84a0194bea80ca56771174146","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-120","para":"55-120","html":"
From the Treasury Center's perspective, the required criteria in paragraphs
815-20-25-62 through 25-63
are satisfied as follows:
  1. a
    The issuing affiliate enters into a derivative instrument with an unrelated third party to offset, on a net basis for each foreign currency, the foreign exchange risk arising from multiple internal derivatives, and the derivative instrument with the unrelated third party generates equal or closely approximating gains and losses when compared with the aggregate or net losses and gains generated by the derivative instruments issued to affiliates. The Treasury Center enters into third-party derivative instruments to offset the exposure of each foreign currency on a net basis. The Treasury Center offsets 100 percent of the net exposure to each currency; that is, the Treasury Center does not selectively keep any portion of that exposure. In this Example, the Treasury Center's third-party contracts generate losses that are equal to the losses on internal contracts designated as hedging instruments by Subsidiaries A, B, and C (see analysis beginning in the following paragraph).
  2. b
    Internal derivatives that are not designated as hedging instruments and all nonderivative instruments are excluded from the determination of the foreign currency exposure on a net basis that is offset by the third-party derivative instrument. The Treasury Center does not include in the determination of net exposure any internal derivatives not designated as hedging instruments or any nonderivative instruments.
  3. c
    Foreign currency exposure that is offset by a single net third-party contract arises from internal derivatives that involve the same currency and that mature within the same 31-day period. The offsetting net third-party derivative instrument related to that group of contracts must offset the aggregate or net exposure to that currency, must mature within the same 31-day period, and must be entered into within 3 business days after the designation of the internal derivatives as hedging instruments. The Treasury Center's third-party net contracts involve the same currency (that is, not a tandem currency) as the net exposure arising from the internal derivatives issued to Subsidiaries A, B, and C. The Treasury Center's third-party derivative instruments mature within the same 31-day period as the internal contracts that involve currencies that are offset on a net basis. In this Example, for simplicity, all internal contracts and third-party derivative instruments are entered into on the same date.
  4. d
    The issuing affiliate tracks the exposure that it acquires from each hedging affiliate and maintains documentation supporting linkage of each derivative instrument and the offsetting aggregate or net derivative instrument with an unrelated third party. The Treasury Center maintains documentation supporting linkage of third-party contracts and internal contracts throughout the hedge period.
  5. e
    The issuing affiliate does not alter or terminate the offsetting derivative instrument with an unrelated third party unless the hedging affiliate initiates that action. If the issuing affiliate does alter or terminate the offsetting third-party derivative (which should be rare), the hedging affiliate must prospectively cease hedge accounting for the internal derivatives that are offset by that third-party derivative. Based on Entity XYZ's policy, the Treasury Center may not alter or terminate the offsetting derivative instrument with an unrelated third party unless the hedging affiliate initiates that action.
  6. f
    If an internal derivative that is included in determining the foreign currency exposure on a net basis is modified or dedesignated as a hedging instrument, compliance must be reassessed. For simplicity, this Example does not involve a modification or dedesignation of an internal derivative.
","snippet":"From the Treasury Center's perspective, the required criteria in paragraphs 815-20-25-62 through 25-63 are satisfied as follows:\n(a) The issuing affiliate enters into a derivative instrument with an unrelated third party…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2475645216aa24bcdccc137de49f1a755d8154a0126e3d4c1990ee27d4b8e42b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-121","para":"55-121","html":"
At the end of the quarter, each subsidiary determines the functional currency gains and losses for each contract with the Treasury Center.
","snippet":"At the end of the quarter, each subsidiary determines the functional currency gains and losses for each contract with the Treasury Center.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:970920b976ccde7f9a8bc0431ef9d9a162ac0338a524b5ef3ec0b2455802967d","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-122","para":"55-122","html":"
At the end of the quarter, the Treasury Center determines its gains or losses on third-party contracts.
","snippet":"At the end of the quarter, the Treasury Center determines its gains or losses on third-party contracts.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:35af3db213ffb38c5d54b85ff6f5e6f0ceb55678d842e14f2c8af778c4d9a791","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-123","para":"55-123","html":"
Journal Entries at March 31 (Note: All journal entries are in USD.)
","snippet":"Journal Entries at March 31 (Note: All journal entries are in USD.)","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:92f68c672f2c5b58174c2b8d3658725326bc13f88d57e32a7775381b088cf786","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-124","para":"55-124","html":"
In consolidation, the amounts in the balance sheets of Subsidiaries A, B, and C reflecting derivative instrument assets and derivative instrument liabilities arising from internal derivatives acquired from the Treasury Center eliminate against the Treasury Center's derivative instrument liabilities and derivative instrument assets arising from internal derivatives issued to the subsidiaries. The amount reflected in consolidated other comprehensive income reflects the net entry to other comprehensive income of Subsidiaries A, B, and C. The Treasury Center's gross derivative instrument asset and gross derivative instrument liability arising from third-party contracts are also reflected in the consolidated balance sheet. Based on the assumptions in this Example, the Treasury Center's net loss on third-party derivative instruments used to offset the exposure, on a net basis, of internal contracts with Subsidiaries A, B, and C equals the net loss on internal contracts with the subsidiaries. Therefore, within the Treasury Center, the gains on internal contracts issued to Subsidiaries A, B, and C, and the losses on third-party contracts are equal and offsetting. If the Treasury Center's net gain or loss on third-party contracts does not equal the net gain or loss on internal derivatives designated as hedging instruments by affiliates, the difference must be recognized in consolidated other comprehensive income.
","snippet":"In consolidation, the amounts in the balance sheets of Subsidiaries A, B, and C reflecting derivative instrument assets and derivative instrument liabilities arising from internal derivatives acquired from the Treasury C…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0b539c97037dfb4bed882f8cdb3e8e89c5538027e2be3fabf04028b14ec0aa7b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-125","para":"55-125","html":"
The reclassification of amounts out of consolidated other comprehensive income is based on Subsidiaries A, B, and C's internal contracts with the Treasury Center. That is, the reclassification of amounts out of consolidated other comprehensive income into earnings is based on the timing and amounts of the individual subsidiaries' forecasted transactions. In this Example, at June 30, the forecasted transactions at Subsidiaries A, B, and C have been consummated and the net debit amount in consolidated other comprehensive income of 3 has been reversed.
","snippet":"The reclassification of amounts out of consolidated other comprehensive income is based on Subsidiaries A, B, and C's internal contracts with the Treasury Center. That is, the reclassification of amounts out of consolida…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ae645c62846b9eb9c2ee9352f885496f8ec150ba9ec116641f92899ecb6c65fd","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-126","para":"55-126","html":"
This Example illustrates when the hedging instrument's gain or loss that is reported in accumulated other comprehensive income should be reclassified out of accumulated other comprehensive income into earnings under paragraph 815-30-35-36.
","snippet":"This Example illustrates when the hedging instrument's gain or loss that is reported in accumulated other comprehensive income should be reclassified out of accumulated other comprehensive income into earnings under para…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:df006749d9cff91d82c62b5e1d0d642ba9431be472f71ed2522acbddd0605405","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-127","para":"55-127","html":"
An entity forecasts that 1 year later it will purchase 1,000 ounces of gold at then current market prices for use in its operations. The entity wishes to protect itself against increases in the cost of gold above the current market price of $275 per ounce. The entity purchases a 1-year cash-settled at-the-money gold option on 1,000 ounces of gold, paying a premium of $10,000. If the price of gold is above $275 at the maturity (settlement) date, the counterparty will pay the entity 1,000 times the difference. If the price of gold is $275 or below at the maturity date, the contract expires worthless. The option cannot be exercised before its contractual maturity date. The entity designates the purchased option contract as a hedge of the variability in the purchase price (cash outflow) of the 1,000 ounces of gold for prices above $275 per ounce. The entity would reclassify the purchased option's gain or loss that is reported in accumulated other comprehensive income in earnings when the cost of the gold affects earnings (such as being included in cost of goods sold) and present that gain or loss in the same income statement line item as the earnings effect of the hedged item.
","snippet":"An entity forecasts that 1 year later it will purchase 1,000 ounces of gold at then current market prices for use in its operations. The entity wishes to protect itself against increases in the cost of gold above the cur…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0c2269b92cf2529e9e07d856c4fdda5e82e6ab7cfc88cdd249b8324210a7b572","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-128","para":"55-128","html":"
The following Cases illustrate the application of paragraph 815-30-40-5 in determining whether an entity should immediately reclassify into earnings the entire net gain or loss related to the derivative instrument in accumulated other comprehensive income when issuing debt at a date that is not the same as originally forecasted:
  1. a
    Amounts are not reclassified immediately into earnings (Case A).
  2. b
    Amounts are reclassified immediately into earnings (Case B).
","snippet":"The following Cases illustrate the application of paragraph 815-30-40-5 in determining whether an entity should immediately reclassify into earnings the entire net gain or loss related to the derivative instrument in acc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2be3b825c95b024d811cdf28de1747845debc8327232942e062892189aff8019","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-129","para":"55-129","html":"
  1. a
    Entity A expects to borrow $100 million over a 10-year period beginning in 6 months.
  2. b
    Entity A initially plans to issue $100 million of 10-year fixed-rate debt at or near par at the then-current market interest rate.
  3. c
    Entity A will be exposed to variability in cash flows for the future quarterly interest payments on the debt due to changes in credit risk and interest rate risk that occur during this six-month period before issuance.
  4. d
    To hedge the risk of changes in these 40 quarterly interest payments attributable to changes in the benchmark interest rate for the 6-month period, Entity A does both of the following:
    1. 1
      Enters into a derivative instrument (for example, a forward-starting interest rate swap)
    2. 2
      Documents that it is hedging the variability in the 40 future quarterly interest payments, attributable to changes in the benchmark interest rate, over the next 10 years related to its 10-year $100 million borrowing program that begins in 6 months.
  5. e
    Entity A documents that it will assess the effectiveness of the hedging relationship semimonthly on a quantitative basis.
  6. f
    Six months after inception of the hedging relationship, Entity A decides to delay the issuance of the 10-year debt for 3 months.
","snippet":"(a) Entity A expects to borrow $100 million over a 10-year period beginning in 6 months.\n(b) Entity A initially plans to issue $100 million of 10-year fixed-rate debt at or near par at the then-current market interest ra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2057339e4fcf9a9361d81dd2728bcda18679fdab1e2afe1763fde4248d0c1971","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-130","para":"55-130","html":"
When Entity A decides to delay the issuance of the 10-year debt for 3 months, Entity A should not immediately reclassify into earnings the entire net gain or loss in accumulated other comprehensive income related to the derivative instrument. Entity A's strategy is a cash flow hedge of 40 individual probable quarterly interest payments. A cash flow hedge of future interest payments is a hedge of a series of forecasted transactions; consequently, Entity A must first determine the likelihood of whether and when each forecasted transaction in the series will occur. If at any time during the hedging relationship Entity A determines that it is no longer probable that any of the forecasted transactions in the series will occur by the date (or within the time period) originally specified, it must terminate the original hedging relationship for each of those specific nonprobable forecasted transactions—even if the forecasted transaction will occur within an additional two-month period of time after that originally specified date. Entity A need not terminate the original hedging relationship for those specific forecasted transactions that remain probable of occurring by the date or within the time period originally specified. After the hedging relationship is terminated, Entity A must determine whether it is probable that any or all of those specific nonprobable forecasted transactions will not occur either by the date (or within the time period) originally specified or within an additional two-month period of time thereafter (see paragraphs
815-30-40-4 through 40-5
). Entity A should reclassify into earnings from accumulated other comprehensive income the amount of the net derivative instrument gain or loss related to those specific nonprobable forecasted transactions for which it is probable they will not occur. That amount should be equivalent to the present value of the derivative instrument's cash flows intended to offset the changes in the original forecasted transactions for which Entity A has determined it is probable that they will not occur by the date (or within the time period) originally specified or within an additional two-month period of time thereafter.
","snippet":"When Entity A decides to delay the issuance of the 10-year debt for 3 months, Entity A should not immediately reclassify into earnings the entire net gain or loss in accumulated other comprehensive income related to the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d45a5eb9528aac4f4f8f2f312e4ffd8e406cd69eb1fc617a7b8a9545feb38772","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-131","para":"55-131","html":"
In this Case, when Entity A originally documented the hedging relationship, it was hedging 40 forecasted transactions (forecasted interest payments) that would begin in 6 months' time and continue over a 10-year period. Because Entity A did not issue the debt instrument as originally documented, Entity A would determine that it is probable that the first forecasted transaction will not occur at the time forecasted; consequently, Entity A must terminate the original hedging relationship with respect to that first forecasted transaction. However, Entity A would also determine that it is probable that the other 39 forecasted transactions will occur at the time forecasted. After the hedging relationship is terminated for the specific nonprobable first forecasted transaction, Entity A must determine whether it is probable that specific nonprobable first forecasted transaction will not occur by the forecasted date or within an additional two-month period of time thereafter. In this Case, Entity A determines that it is probable that the first hedged quarterly interest payment will not occur within two months of its specified date. The amount reclassified into earnings from accumulated other comprehensive income is the portion of the interest rate swap's net gain or loss equivalent to the present value of the cash flows from the interest rate swap intended to offset the changes in the first forecasted transaction that is probable not to occur.
","snippet":"In this Case, when Entity A originally documented the hedging relationship, it was hedging 40 forecasted transactions (forecasted interest payments) that would begin in 6 months' time and continue over a 10-year period. …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f39ae2120b2edb272f48631bad3f486640db4e98f57966b229d938840b172817","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-132","para":"55-132","html":"
This Case has the following assumptions:
  1. a
    Entity B expects to issue $100 million of 10-year, 9 percent debt in 6 months.
  2. b
    Because the debt will have a fixed interest rate of 9 percent, Entity B will not be exposed to variability in the future quarterly interest payments at 9 percent, but it will be exposed to variability in the cash flows received as proceeds on the debt due to changes in credit risk and interest rate risk that occur during the 6-month period before issuance.
  3. c
    To hedge the risk of changes in the total proceeds attributable to changes in the benchmark interest rate, Entity B does both of the following:
    1. 1
      Enters into a derivative instrument (for example, a short position in U.S. Treasury note futures contracts)
    2. 2
      Documents that it is hedging the variability in the cash proceeds attributable to changes in the benchmark interest rate to be received from the 9 percent fixed-rate debt it will issue in 6 months and that it will assess effectiveness on a quantitative basis.
  4. d
    Because Entity B plans to issue $100 million of 10-year, 9 percent debt regardless of the then-current interest rate environment, the effect of increases or decreases in interest rates will be reflected in issuing the debt at a discount or a premium, respectively.
  5. e
    Six months after inception of the hedging relationship, Entity B decides to delay the issuance of the debt for three months.
","snippet":"This Case has the following assumptions:\n(a) Entity B expects to issue $100 million of 10-year, 9 percent debt in 6 months.\n(b) Because the debt will have a fixed interest rate of 9 percent, Entity B will not be exposed …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1371086be829965dcaa991c42a99f4ec44a2ac32cda66c97096ce2d9c693f97f","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-133","para":"55-133","html":"
This strategy is a cash flow hedge of the variability in proceeds attributable to changes in the benchmark interest rate to be received from the issuance of debt in six months. A cash flow hedge of the proceeds attributable to changes in the benchmark interest rate is a hedge of a single forecasted transaction specified to occur in six months; consequently, when the single forecasted transaction is no longer probable of occurring by the date (or within the time period) originally specified, Entity B must terminate the hedging relationship. After the hedging relationship is terminated, Entity B must determine whether it is probable that the specific nonprobable forecasted transaction will not occur by the date (or within the time period) originally specified or within an additional two-month period of time thereafter. Because Entity B decided to delay the issuance of the debt for a three-month period of time, Entity B concludes that it is probable that the forecasted transaction will not occur by the date (or within the time period) originally specified or within an additional two-month period of time thereafter. Consequently, Entity B should immediately reclassify into earnings the entire net gain or loss related to the derivative instrument in accumulated other comprehensive income. Given the guidance in paragraph 815-30-40-5, the nonoccurrence of the hedged forecasted transactions described in this Case could potentially jeopardize Entity B's ability to use cash flow hedge accounting in the future for the situation described.
","snippet":"This strategy is a cash flow hedge of the variability in proceeds attributable to changes in the benchmark interest rate to be received from the issuance of debt in six months. A cash flow hedge of the proceeds attributa…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6410b780c065b425ba481bf181c313bceca24fc2233eeb0d98d2b8e4d8151ab","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-134","para":"55-134","html":"
This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic for assessing effectiveness for a cash flow hedge of a forecasted purchase of inventory with a forward contract for which the hedged risk is variability in cash flows attributable to changes in a contractually specified component. Assume the entity elects to perform subsequent assessments of hedge effectiveness on a quantitative basis using a cumulative-dollar-offset approach and all hedge documentation requirements were satisfied at inception.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7
Editor's Note: Paragraph 815-30-55-134 will be amended upon transition, together with its heading:
• > Example 22: Assessing Effectiveness of a Cash Flow Hedge of a Forecasted Purchase of Inventory with a Forward Contract
This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic for assessing effectiveness for a cash flow hedge of a forecasted purchase of inventory with a forward contract for which the hedged risk is variability in cash flows attributable to changes in an explicitly referenced variable component of the purchase price of the inventory. Assume the entity elects to perform subsequent assessments of hedge effectiveness on a quantitative basis using a cumulative-dollar-offset approach and all hedge documentation requirements were satisfied at inception.
","snippet":"This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic for assessing effectiveness for a cash flow hedge of a forecasted purchase of inventory with a forward contract for which the …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fb3248ff555070568522e84082855c5a79d00feccf61c5b963db2f795c099263","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-135","para":"55-135","html":"
Entity J manufactures keys for door locks on buildings and cars. The keys are cut from sheets of metal called key plates. Entity J primarily purchases its key plates from Supplier 1 as needed. Supplier 1 and Entity J have an outstanding agreement specifying that the per-unit cost of each key plate will be determined by Supplier 1 on the first business day of each month on the basis of the following pricing formula:
  1. a
    Spot price of COMEX Zinc per pound × 0.2 pounds, plus
  2. b
    Spot price of COMEX Copper per pound × 0.1 pounds, plus
  3. c
    The current cost of refining copper and zinc into key plates, plus
  4. d
    The current cost of transporting the key plates to Entity J.
","snippet":"Entity J manufactures keys for door locks on buildings and cars. The keys are cut from sheets of metal called key plates. Entity J primarily purchases its key plates from Supplier 1 as needed. Supplier 1 and Entity J hav…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d9fdf955ac41a57d083262b185580c7c3c04aa63ee8323a7707fb280ad610653","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-136","para":"55-136","html":"
In January 20X1, Entity J expects to purchase 100,000 key plates in July 20X1, which requires 10,000 pounds of copper for the manufacturing process. Entity J decides that it wishes to hedge only the change in value of the price of COMEX Copper used to create the key plates being purchased in July 20X1.
","snippet":"In January 20X1, Entity J expects to purchase 100,000 key plates in July 20X1, which requires 10,000 pounds of copper for the manufacturing process. Entity J decides that it wishes to hedge only the change in value of th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4cfcd2ac4c885f8c20cbfeb73a255546b649bc5cb685b6d3b12814d7e6407117","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-137","para":"55-137","html":"
On January 15, 20X1, Entity J enters into a forward contract maturing on July 1, 20X1 (that is, the date on which the price of copper used to manufacture the key plates is fixed) to purchase 10,000 pounds of COMEX Copper at $2.10 per pound. Any settlement amount on the forward contract will be based on the difference between the contract price of $2.10 per pound and the spot price of COMEX Copper on the maturity date (July 1, 20X1), multiplied by the notional amount of 10,000 pounds.
","snippet":"On January 15, 20X1, Entity J enters into a forward contract maturing on July 1, 20X1 (that is, the date on which the price of copper used to manufacture the key plates is fixed) to purchase 10,000 pounds of COMEX Copper…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:be381b0a09134e948a5f39abfc048ee153710667f20a15dfabd4ed9c6857d4af","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-138","para":"55-138","html":"
Entity J designates a cash flow hedge in which the hedging instrument is the forward contract, the hedged item is the forecasted purchase of key plates in July 20X1, and the hedged risk is the variability in the purchase price of the key plates attributable to changes in the COMEX Copper price index, which is a contractually specified component within the frame agreement. Entity J documents in its hedge documentation that the requirements to designate variability in cash flows attributable to changes in a contractually specified component as the hedged risk in paragraph 815-20-25-22A are met.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity J designates a cash flow hedge in which the hedging instrument is the forward contract, the hedged item is the forecasted purchase of key plates in July 20X1, and the hedged risk is the variability in the purchase price of the key plates attributable to changes in the COMEX Copper price index. Entity J determines that the COMEX Copper price index explicitly referenced in the agreement’s pricing formula is clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to key plates and concludes that the conditions in paragraph 815-20-25-22C(b)(1) are met.
","snippet":"Entity J designates a cash flow hedge in which the hedging instrument is the forward contract, the hedged item is the forecasted purchase of key plates in July 20X1, and the hedged risk is the variability in the purchase…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d3cac1d91e1f64e1e66491f09c644de9ad7f47be41d27093347f63f3236b61b0","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-139","para":"55-139","html":"
Entity J bases its assessment of hedge effectiveness on cumulative changes in the fair value of the hedging instrument and the hedged item attributable to changes in the hedged risk.
","snippet":"Entity J bases its assessment of hedge effectiveness on cumulative changes in the fair value of the hedging instrument and the hedged item attributable to changes in the hedged risk.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e0af27c0dc379a04f6ce90ec6abb43f656871c532e5adfec99c0420a35972dcc","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-140","para":"55-140","html":"
In assessing hedge effectiveness on an ongoing basis, Entity J must consider the extent of offset between the change in expected cash flows on the hedging instrument (the copper forward contract) and the hedged item attributable to changes in the hedged risk (change in expected cash flows associated with forecasted purchases of key plates attributable to changes in the COMEX Copper price index). The table below illustrates the cumulative changes in the hedging instrument and hedged item attributable to changes in the hedged risk as of the first subsequent quarterly effectiveness assessment date.
","snippet":"In assessing hedge effectiveness on an ongoing basis, Entity J must consider the extent of offset between the change in expected cash flows on the hedging instrument (the copper forward contract) and the hedged item attr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a686ef3f6d2ccf28e3c7ff7508b5a94e84abd1233228f72be0269fd47cbb47a2","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-141","para":"55-141","html":"
Entity J could assess effectiveness as of March 31, 20X1, by comparing the $1,500 change in the hedging instrument with the $1,500 change in the hedged item attributable to changes in the hedged risk because the hedging instrument's maturity date and the date on which the price of copper will be fixed match (that is, July 1, 20X1).
","snippet":"Entity J could assess effectiveness as of March 31, 20X1, by comparing the $1,500 change in the hedging instrument with the $1,500 change in the hedged item attributable to changes in the hedged risk because the hedging …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:27d0fdcc5f0bd8a2989a0ae922a61e57bff2a5861ccba1edd06cb1e6307b4e63","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-142","para":"55-142","html":"
This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to the designation of a cash flow hedge of a forecasted purchase of inventory in which the commodity exposure is managed centrally at the aggregate level. Assume the entity elects to perform subsequent assessments of hedge effectiveness on a qualitative basis and all hedge documentation requirements were satisfied at inception.
","snippet":"This Example illustrates the application of the guidance in Subtopic 815-20 and this Subtopic to the designation of a cash flow hedge of a forecasted purchase of inventory in which the commodity exposure is managed centr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2497c58072d00de47de5677a7d1eb0b5210b51362c87ed54662598f184cef7eb","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-143","para":"55-143","html":"
Entity Q is seeking to hedge the variability in cash flows associated with commodity price risk of its monthly plastic purchases for the next 12 months. It has two different manufacturing plant locations (Plant A and Plant B) that are purchasing five different grades of plastic from Supplier A. The plastic purchase price for each month is based on the month-end Joint Plastic (JP) index and a fixed basis differential component. The fixed basis differential offered by the supplier is determined by:
  1. a
    The grade of the plastic purchased
  2. b
    The distance between the plant location and supplier location.
","snippet":"Entity Q is seeking to hedge the variability in cash flows associated with commodity price risk of its monthly plastic purchases for the next 12 months. It has two different manufacturing plant locations (Plant A and Pla…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c8092dbe743ce90c046ecbddfaafbc9de132a52b09d9b425b5a3c12646a6cc03","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-144","para":"55-144","html":"
At January 1, 20X1, Entity Q enters into a supply agreement with Supplier A to purchase plastic over the next 12 months. The respective agreements allow Entity Q to purchase the various grades of plastic at both of its plant locations as the need arises over the following year. The following table summarizes the pricing provisions contained in the supply agreement for each grade of plastic.
","snippet":"At January 1, 20X1, Entity Q enters into a supply agreement with Supplier A to purchase plastic over the next 12 months. The respective agreements allow Entity Q to purchase the various grades of plastic at both of its p…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ff410c3aee37dff38e0b3bbcfcdb62c6c563da58289421338709e84526bf988","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-145","para":"55-145","html":"
Entity Q's risk management objective is to hedge the variability in the purchase price of plastic attributable to changes in the JP index of the first 80,000 pounds of plastic purchased in each month regardless of grade or plant location delivered to. To accomplish this objective, Entity Q executes 12 separate forward contracts at January 1, 20X1, to purchase plastic as follows.
","snippet":"Entity Q's risk management objective is to hedge the variability in the purchase price of plastic attributable to changes in the JP index of the first 80,000 pounds of plastic purchased in each month regardless of grade …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8631f661de5c54c03bd55261a82538ece6ba584f267f337b39120808a456eaeb","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-146","para":"55-146","html":"
Entity Q determines that the variable JP index referenced in the supply agreement constitutes a contractually specified component and that the requirements to designate variability in the cash flows attributable to changes in a contractually specified component as the hedged risk in paragraph 815-20-25-22A are met.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity Q designates the variability in cash flows attributable to changes in the JP index component as the hedged risk. Entity Q determines that the JP index explicitly referenced in the supply agreement is clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to plastic and concludes that the conditions in paragraph 815-20-25-22C(b)(1) are met.
","snippet":"Entity Q determines that the variable JP index referenced in the supply agreement constitutes a contractually specified component and that the requirements to designate variability in the cash flows attributable to chang…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2e09acdd9c8f9c3665ae8bdde5e58cb98ad473761939dd485c15077dfa2c177a","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-147","para":"55-147","html":"
Because Entity Q determined that it will purchase at least 80,000 pounds of plastic each month in the coming 12 months to fulfill its expected manufacturing requirements, it documents that the hedged item (that is, the forecasted transaction within each month) is probable of occurring. Entity Q designates each forward contract as a cash flow hedge of the variability in cash flows attributable to changes in the contractually specified JP index on the first 80,000 pounds of plastic purchased (regardless of grade or plant location delivered to) for the appropriate month. The individual purchases of differing grades of plastic by Plant A and Plant B during each month share the risk exposure to the variability in the purchase price of the plastic attributable to changes in the contractually specified JP index. Therefore, the individual transactions in the hedged portfolio of plastic purchases for each month share the same risk exposure for which they are designated as being hedged in accordance with paragraph 815-20-25-15(a)(2).
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Because Entity Q determined that it will purchase at least 80,000 pounds of plastic each month in the coming 12 months to fulfill its expected manufacturing requirements, it documents that the hedged item (that is, the forecasted transaction within each month) is probable of occurring. Entity Q designates each forward contract as a cash flow hedge of the variability in cash flows attributable to changes in the explicitly referenced JP index on the first 80,000 pounds of plastic purchased (regardless of grade or plant location delivered to) for the appropriate month.
","snippet":"Because Entity Q determined that it will purchase at least 80,000 pounds of plastic each month in the coming 12 months to fulfill its expected manufacturing requirements, it documents that the hedged item (that is, the f…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9f4d04b24bb4d09cbafe8acbf1e97fece22ac6859e04bef8ba7c14ee9101529","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-148","para":"55-148","html":"
In accordance with paragraph 815-20-25-3(b)(2)(iv)(01)(B), if Entity Q has determined the critical terms of the hedged item and hedging instrument match, it may elect to assess effectiveness qualitatively both at inception of the hedging relationship and on an ongoing basis on the basis of the following factors in accordance with paragraphs
815-20-25-84 through 25-85
:
  1. a
    The hedging instrument's underlying matches the index upon which plastic purchases will be determined (that is, the JP Index).
  2. b
    The notional of the hedging instrument matches the forecasted quantity designated as the hedged item.
  3. c
    The date on which the derivatives mature matches the timing in which the forecasted purchases are expected to be made. That is, the quantity of the hedged item, 80,000 pounds, is an aggregate amount expected to be purchased over the course of the respective month (that is, the same 31-day period) in which the derivative matures.
  4. d
    Each hedging instrument was traded with at-market terms (that is, it has an initial fair value of zero).
  5. e
    Assessment of effectiveness will be performed on the basis of the total change in the fair value of the hedging instrument.
  6. f
    Although the amount of plastic being hedged each period is a cumulative amount across multiple grades of plastic, the basis differentials between grades of plastic and location are not required to be included in assessments of effectiveness because Entity Q has designated the variability in cash flows attributable to changes in the JP index (the contractually specified component) as the hedged risk within its purchases of plastics.
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7In accordance with paragraph 815-20-25-3(b)(2)(iv)(01)(B), if Entity Q has determined that the critical terms of the hedged item and hedging instrument match, it may elect to assess effectiveness qualitatively both at inception of the hedging relationship and on an ongoing basis on the basis of the following factors in accordance with paragraphs
815-20-25-84 through 25-85
:
  1. a
    The hedging instrument's underlying matches the index upon which plastic purchases will be determined (that is, the JP index).
  2. b
    The notional of the hedging instrument matches the forecasted quantity designated as the hedged item.
  3. c
    The date on which the derivatives mature matches the timing in which the forecasted purchases are expected to be made. That is, the quantity of the hedged item (80,000 pounds) is an aggregate amount expected to be purchased over the course of the respective month (that is, the same 31-day period) in which the derivative matures.
  4. d
    Each hedging instrument was traded with at-market terms (that is, it has an initial fair value of zero).
  5. e
    Assessment of effectiveness will be performed on the basis of the total change in the fair value of the hedging instrument.
  6. f
    Although the amount of plastic being hedged each period is a cumulative amount across multiple grades of plastic, the basis differentials between grades of plastic and location are not required to be included in assessments of effectiveness because Entity Q has designated the variability in cash flows attributable to changes in the JP index (the explicitly referenced variable component of the forecasted purchase price) as the hedged risk.
In accordance with paragraph 815-20-55-23B, if Entity Q assesses hedge effectiveness in accordance with paragraphs
815-20-25-84 through 25-85
and applies the similar risk assessment method described in paragraph 815-20-55-23A(a), it also may assume that the hedged risks related to the group of forecasted transactions are similar.
","snippet":"In accordance with paragraph 815-20-25-3(b)(2)(iv)(01)(B), if Entity Q has determined the critical terms of the hedged item and hedging instrument match, it may elect to assess effectiveness qualitatively both at incepti…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:aa35c0d81698d86532c2e8884b883fd44928c57de49efc0724fd91d122dd3b10","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-149","para":"55-149","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7This Example illustrates the application of the guidance in paragraphs 815-20-25-15(e) and 815-20-25-22C to determine whether a price component is eligible to be designated as the hedged risk in a forecasted purchase of nonfinancial assets in which the associated forward contracts are accounted for as derivatives because physical settlement is not probable of occurring but it is probable that any shortfall will be purchased in the spot market. On January 1, 20X1, Entity R enters into forward contracts with multiple suppliers to purchase an aggregate 1,000 bushels of soybeans for delivery in June 20X1 to use in its operations. Each contract stipulates that the purchase price per bushel is equal to the ABC soybean index price (June maturity) plus a variable basis differential representing transportation costs. Furthermore, each contract permits net settlement of the contract if the quality of the soybeans delivered does not meet Entity R’s specifications. If that happens, Entity R will net settle the affected forward contracts and purchase soybeans of the appropriate specifications in the spot market to make up for any shortfall. Given a history of suppliers not delivering soybeans meeting the required specifications, Entity R cannot assert that any specific forward contract will be physically settled and, therefore, determines that the forward contracts do not qualify for the normal purchases and normal sales scope exception.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7This Example illustrates the application of the guidance in paragraphs 815-20-25-15(e) and 815-20-25-22C to determine whether a p…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fd08ef470465dfa7c4af9860c0b84609092f4a563dfb11d2219aabec688468d4","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-150","para":"55-150","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On January 1, 20X1, Entity R enters into a futures contract to fix the price of 1,000 bushels of ABC soybeans in accordance with its risk management objective. Entity R designates this futures contract as a hedge of the variability in cash flows attributable to changes in the ABC soybean index (a component of the price of soybeans) related to the first 1,000 bushels of soybeans forecasted to be purchased in June 20X1. The forecasted purchases include ABC soybeans purchased from suppliers in accordance with forward contracts and ABC soybeans purchased in the spot market.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On January 1, 20X1, Entity R enters into a futures contract to fix the price of 1,000 bushels of ABC soybeans in accordance with …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:61b5b39eb2881e2ac04b8aa26ae93ca4009efe4d8b8a45a9ebbd4453af75e895","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-151","para":"55-151","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity R determines that the ABC soybean index is an eligible hedged risk for the forecasted purchase of 1,000 bushels of ABC soybeans for delivery in June 20X1 either in the spot market or in accordance with the supplier contracts. To reach that conclusion, Entity R performs two distinct assessments. In accordance with paragraph 815-20-25-22C(a), Entity R determines that the ABC soybean index (that is, the hedged variable component) is clearly and closely related to the nonfinancial asset being purchased (that is, ABC soybeans in the pertinent spot market). In accordance with paragraph 815-20-25-22C(b)(1), Entity R determines that the ABC soybean index (that is, the hedged variable component) is explicitly referenced in the pricing formula of the supplier contracts and that the ABC soybean index is clearly and closely related to ABC soybeans purchased in accordance with the supplier contracts. Although Entity R is unable to assert that forward contracts with suppliers are probable of physical settlement, Entity R can assert that the forecasted transactions are probable of occurring through a combination of physically settled forward contracts and spot market transactions.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity R determines that the ABC soybean index is an eligible hedged risk for the forecasted purchase of 1,000 bushels of ABC soy…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e2ff04244e024e36f69a019e99e1654c2ce793dcc11b382263dd1fc72e31d5c7","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-152","para":"55-152","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7This Example illustrates the application of the guidance in paragraph 815-20-25-22C to determine whether a subcomponent of a component that is explicitly referenced in an agreement can be designated as the hedged risk in a cash flow hedge of a forecasted purchase of a nonfinancial asset.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7This Example illustrates the application of the guidance in paragraph 815-20-25-22C to determine whether a subcomponent of a comp…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f3cc307dc42ffaa2d7dc327c48c897d95920c5f5fbdb20cda4eaa3c42c985852","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-153","para":"55-153","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity X is a manufacturing company that uses copper wire (that is, copper that has been drawn down to size and processed for manufacturing purposes) in the normal course of business. On January 1, 20X1, Entity X enters into a supply agreement to purchase 1,000 pounds of copper wire for its manufacturing operations in each of the next 12 months. The supply agreement stipulates that the monthly purchase price per pound is equal to the ABC Copper Wire index price (maturing in month of delivery), plus other basis differentials. Entity X determines that the supply agreement meets the definition of a derivative in Topic 815.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity X is a manufacturing company that uses copper wire (that is, copper that has been drawn down to size and processed for man…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6fefe2d5cf8626453f96f52a5e467d239aa7e213b47c8872dcfbba1642163fda","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-154","para":"55-154","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity X is seeking to reduce its commodity price exposure to the forecasted purchase of 1,000 pounds of copper wire in each of the next 12 months. Derivatives referencing the ABC Copper Wire index are less liquid than derivatives referencing the core underlying ingredient in copper wire, which is raw copper. Entity X determines that the market for the ABC Copper Wire index is based on the price of raw copper plus processing costs, that it takes one pound of raw copper to produce one pound of copper wire, and that raw copper prices are based on COMEX Copper futures. Therefore, on January 1, 20X1, Entity X executes 12 futures contracts, each having a 1,000-pound notional amount tied to the COMEX Copper index futures price (maturing in successive months). Those derivatives are designated as hedging the risk of cash flow variability attributable to the COMEX Copper index (a subcomponent of the explicitly referenced ABC Copper Wire index) related to its forecasted purchase of the first 1,000 pounds of copper wire per month.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity X is seeking to reduce its commodity price exposure to the forecasted purchase of 1,000 pounds of copper wire in each of t…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b21f17f86d411e25b86436da7325e66c30b41c7c63bcf18ce418e566d643388d","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-155","para":"55-155","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity X applies the normal purchases and normal sales scope exception in accordance with Subtopic 815-10 to the contract to purchase copper wire. Therefore, Entity X determines that the condition in paragraph 815-20-25-22C(b)(1) is met and the ABC Copper Wire index (the explicitly referenced component in the forward contract) is clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to the forecasted transaction in accordance with paragraph 815-20-55-18D. In addition, Entity X determines that the COMEX Copper index is clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to the explicitly referenced ABC Copper Wire index. Thus, Entity X determines that the COMEX Copper index is an eligible risk subcomponent in accordance with paragraph 815-20-25-22C(b)(2).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity X applies the normal purchases and normal sales scope exception in accordance with Subtopic 815-10 to the contract to purc…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:acb2633114ac4eaf59de243dfb8d957fa3b2c2ce432aa0c79d6b46c04117d787","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-156","para":"55-156","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7This Example illustrates the application of the guidance in paragraph 815-20-25-22C to determine whether a price component in a forecasted purchase of a nonfinancial asset in the spot market is eligible to be designated as the hedged risk.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7This Example illustrates the application of the guidance in paragraph 815-20-25-22C to determine whether a price component in a f…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a0f93ad924f705a5b07b24f5b95cfe2fdce4558cae0b14969f38e942e3f0614","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-157","para":"55-157","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On December 31, 20X0, Entity C forecasts that it will purchase at least 20,000 MMBtus of natural gas in the spot market for production purposes in June 20X1. On January 1, 20X1, Entity C enters into a futures contract to fix the price of 20,000 MMBtus of natural gas that is tied to the XYZ National NatGas index (June 20X1 maturity) in accordance with its risk management objective. Entity C designates the futures contract as the hedging instrument in a cash flow hedge of the variability in cash flows attributable to the XYZ National NatGas index component related to its forecasted purchase of the first 20,000 MMBtus of natural gas in the spot market in June 20X1.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On December 31, 20X0, Entity C forecasts that it will purchase at least 20,000 MMBtus of natural gas in the spot market for produ…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f54a3019b76371852967491e8f6dec78bd61e0823fcd75ef05eb14df1385211","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-158","para":"55-158","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity C concludes that agreements to purchase natural gas in this region are frequently priced using one of the following formulas:
  1. a
    ABC Regional NatGas index price + Fixed Spread
  2. b
    XYZ National NatGas index price + Cost to Transport + Fixed Spread.
Purchases of natural gas in this region are often tied to the ABC Regional NatGas index because it reflects the natural gas prices of the closest geographical proximity to an entity. Additionally, the XYZ National NatGas index is a nationally recognized index that is commonly used by market participants to price contracts throughout the country, adjusted for the cost to transport that natural gas to various hubs for sale. Entity C reasonably determines that the ABC Regional NatGas index and the XYZ National NatGas index are not extraneous to changes in the fair value of natural gas in the region of the transaction.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity C concludes that agreements to purchase natural gas in this region are frequently priced using one of the following formul…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:980bf2a095ab7c7979e8c759defbf521d827005841a4ba1da57c73be6de88c6f","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-159","para":"55-159","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity C determines that the XYZ National NatGas index component is clearly and closely related (as described in paragraph 815-10-15-32(a) through (b)) to the forecasted purchase of natural gas in the spot market in accordance with paragraph 815-20-25-22C(a). Because the price of natural gas being purchased by Entity C is not set forth in an agreement, the guidance in paragraph 815-20-25-22C(b) would not apply. If Entity C had chosen to designate the ABC Regional NatGas index as the hedged risk and determined that this index was clearly and closely related to the forecasted purchase of natural gas in the spot market, that also would be permissible under paragraph 815-20-25-22C(a).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity C determines that the XYZ National NatGas index component is clearly and closely related (as described in paragraph 815-10…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ad3bbfc46d4e5e01393303de3cdc36a29d70b92994129753b4a37bd173ac567f","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-160","para":"55-160","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7This Example illustrates the application of the guidance in paragraph 815-20-25-22C to determine whether multiple price components are eligible to be designated as the hedged risks in a group of forecasted purchases of nonfinancial assets when uncertainty exists about which component or components will be explicitly referenced in the pricing formulas of not-yet-existing contracts.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7This Example illustrates the application of the guidance in paragraph 815-20-25-22C to determine whether multiple price component…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cd5274faf3c4dc6dc460bd2e582b9e487e3a14b24aeeacedbf248c64aa83e0ae","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-161","para":"55-161","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity Y’s objective is to hedge the variability in cash flows attributable to changes in the explicitly referenced component or components in not-yet-existing agreements to purchase 1,000 bushels of soybeans. On January 1, 20X1, Entity Y begins negotiations with multiple vendors to purchase 1,000 bushels of soybeans on June 30, 20X2. As of April 1, 20X1, the counterparties have not agreed on whether the pricing formula of the agreements will price the soybeans on the basis of the ABC Soybean index or the DEF Soybean index. Entity Y concludes that it is probable that 1,000 bushels of soybeans will be purchased and that the pricing formula in the agreements will reference any combination of the ABC Soybean index and the DEF Soybean index.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity Y’s objective is to hedge the variability in cash flows attributable to changes in the explicitly referenced component or …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:62189e6067a557e68d304987f5c6d26e363b7acc85c8fe0d29925ab2349ef72b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-162","para":"55-162","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On April 1, 20X1, Entity Y enters into a futures contract for 1,000 bushels of ABC Soybeans maturing on June 30, 20X2. Entity Y designates that futures contract as a hedge of cash flow variability attributable to the designated hedged risk for the forecasted purchase of the first 1,000 bushels of soybeans purchased under agreements with a pricing formula that references any combination of the ABC Soybean index and the DEF Soybean index on June 30, 20X2. Because of the uncertainty of whether the not-yet-existing agreements’ pricing formulas will reference the ABC Soybean index or the DEF Soybean index, Entity Y designates both indexes as the hedged risks in the cash flow hedge.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On April 1, 20X1, Entity Y enters into a futures contract for 1,000 bushels of ABC Soybeans maturing on June 30, 20X2. Entity Y d…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f57a1d304d42cee21e3c3fc6a8c85aa667056fcf49e1ac6dd9824035b749241","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-163","para":"55-163","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7At hedge inception, Entity Y expects that the forecasted transactions will have multiple risks occurring at the same time (that is, the purchase agreements will reference a combination of the ABC Soybean index and the DEF Soybean index), but Entity Y is uncertain what combination of the ABC Soybean index and the DEF Soybean index will be explicitly referenced in the pricing formulas in the agreements. Entity Y determines that both the ABC Soybean index and the DEF Soybean index will be eligible components for designation in accordance with paragraph 815-20-25-22C(b) upon execution of the purchase agreements. Entity Y elects to assess whether the hedged risks in the group of individual forecasted transactions have similar risk exposure by assessing whether the designated hedging instrument is highly effective in achieving offsetting changes in cash flows attributable to each hedged risk in the group, on an individual basis, in accordance with paragraph 815-20-55-23A(a). That is, Entity Y assesses and determines that the hedging instrument is highly effective against both designated risks (ABC and DEF Soybean indexes) in the group. Entity Y uses that assessment as a “dual purpose” test to support that the forecasted transactions in the group are similar and that the hedging instrument is highly effective at achieving offsetting cash flows of the forecasted transactions, regardless of whether the ABC Soybean index or the DEF Soybean index is ultimately referenced in the not-yet-existing agreements’ pricing formulas.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7At hedge inception, Entity Y expects that the forecasted transactions will have multiple risks occurring at the same time (that i…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:14adec0db29e4edb5514f20658fc34c29a2212a1ccefdfa424bbc3f6a6c86a27","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-164","para":"55-164","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On June 30, 20X1, Entity Y enters into forward contracts with multiple vendors. Each agreement includes a pricing formula referencing either the ABC Soybean index or the DEF Soybean index, with a June 30, 20X2 delivery date. The hedging relationship continues to be eligible for hedge accounting in accordance with paragraph 815-20-25-22C(b). Entity Y determines that the designated hedged risks (ABC and DEF Soybean indexes) in the group are similar because the hedging instrument is highly effective against both risks in the group in accordance with paragraph 815-20-55-23A(a). Therefore, Entity Y concludes that the relationship continues to be eligible for hedge accounting.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On June 30, 20X1, Entity Y enters into forward contracts with multiple vendors. Each agreement includes a pricing formula referen…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:389a4f18aa2118d475c8fcce79c0d8e48034326aab4798f686c41a68c3b88d71","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-165","para":"55-165","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7This Example illustrates the application of the guidance in paragraphs
815-30-35-37B through 35-37M
in which the designated hedged risk is the variability in cash flows attributable to changes in the contractually specified interest rate on a choose-your-rate debt instrument that is:
  1. a
    Yet to be issued
  2. b
    Issued and outstanding
  3. c
    Replaced during the hedge period.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7This Example illustrates the application of the guidance in paragraphs 815-30-35-37B through 35-37M in which the designated hedge…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:544e6af1fbe9cc6bedfb6380a9ce887fbaf2db2485bec192e4b27fe642755c52","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-166","para":"55-166","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On January 1, 20X1, Entity A determines that it is probable it will enter into a choose-your-rate debt arrangement with a bank for a 5-year, $20 million variable-rate note payable to be issued on April 1, 20X1, with the principal due at maturity. On January 1, 20X1, Entity A determines that the interest rate indexes and interest rate tenors included in choose-your-rate debt being offered in the market are as follows:
  1. a
    1-Month Term SOFR (paid every 30 days)
  2. b
    3-Month Term SOFR (paid every 90 days)
  3. c
    6-Month Term SOFR (paid every 6 months)
  4. d
    1-Month U.S. Treasury Rate (paid every 30 days)
  5. e
    Prime (paid every 30 days).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On January 1, 20X1, Entity A determines that it is probable it will enter into a choose-your-rate debt arrangement with a bank fo…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c6583988c3306948a90ebeb2f23e3fbffb2ddfaed5fa86e68a462ae4ce75a25a","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-167","para":"55-167","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity A seeks to hedge the cash flow variability attributable to changes in the contractually specified interest rate on this choose-your-rate debt instrument. Accordingly, on January 1, 20X1, Entity A enters into a forward-starting receive-variable, pay-fixed, 5-year, $20 million notional interest rate swap that requires settlement and resets every 30 days beginning after April 1, 20X1. Under the terms of the swap, Entity A receives variable payments every 30 days beginning after April 1, 20X1, based on the average of Daily SOFR over the past 30 days (that is, the variable-rate interest payments are indexed to 30-Day Average SOFR, in arrears) and pays a fixed rate of 5 percent. On January 1, 20X1, the fair value of the interest rate swap is zero.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity A seeks to hedge the cash flow variability attributable to changes in the contractually specified interest rate on this ch…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:bad17e42999940731d1756be3219b3335980a51b4bbb3935a61bb51cf213741e","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-168","para":"55-168","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On January 1, 20X1, Entity A designates the swap as hedging the variability in cash flows attributable to changes in the contractually specified interest rate on the 5-year, $20 million notional choose-your-rate debt instrument forecasted to begin accruing interest on April 1, 20X1, and any related replacement debt, in accordance with paragraph 815-30-35-37B. On January 1, 20X1, Entity A documents the interest rate indexes and interest rate tenors included in choose-your-rate debt being offered in the market (that is, those interest rate indexes and interest rate tenors included in paragraph 815-30-55-166(a) through (e)) in accordance with paragraph 815-30-35-37D. Only interest rate indexes and interest rate tenors are required to be documented in accordance with paragraph 815-30-35-37D (that is, payment conventions included in paragraph 815-30-55-166(a) through (e) are included only for illustrative purposes and do not depict an incremental documentation requirement). Entity A determines that it is probable that it will issue choose-your-rate debt and initially select one of those interest rate indexes and interest rate tenors when the choose-your-rate debt is issued on April 1, 20X1.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On January 1, 20X1, Entity A designates the swap as hedging the variability in cash flows attributable to changes in the contract…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:702ad51212573793fd050a5b7c379013e0534a47f1591c9a3fc9cc73b8df8522","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-169","para":"55-169","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity A’s best estimate of the interest rate index and interest rate tenor that it will initially select for the first interest period when the choose-your-rate debt is issued is 1-Month Term SOFR. In accordance with paragraph 815-30-35-37C, Entity A designates that interest rate index and interest rate tenor as its contractually specified interest rate. Entity A performs an initial quantitative hedge effectiveness assessment on January 1, 20X1, based on this best estimate (that is, 60 monthly interest payments that begin to accrue on April 1, 20X1, based on 1-Month Term SOFR, with the rate resetting immediately following each payment due date) and concludes that the relationship is highly effective. In accordance with paragraph 815-20-25-79B, this effectiveness assessment does not consider the optionality expected to be embedded within the choose-your-rate debt instrument. That is, the terms used to estimate changes in the hedged forecasted cash flows for purposes of the hedge effectiveness assessment only consider Entity A’s best estimate of the interest rate index and interest rate tenor that it will select for the first interest period when the choose-your-rate debt is issued, which is 1-Month Term SOFR.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity A’s best estimate of the interest rate index and interest rate tenor that it will initially select for the first interest …","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:df6d03455d4b1374346b8741ede10b510ea09f83b6eb065eb606358e5fa9258f","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-170","para":"55-170","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On April 1, 20X1, the note payable is issued. The note payable allows Entity A to pay interest at any of the following variable interest rates based on the rate that the entity selects at each reset date:
  1. a
    1-Month Term SOFR (paid every 30 days)
  2. b
    3-Month Term SOFR (paid every 90 days)
  3. c
    6-Month Term SOFR (paid every 6 months)
  4. d
    1-Month U.S. Treasury Rate (paid every 30 days)
  5. e
    Prime (paid every 30 days)
  6. f
    Effective Federal Funds Rate (paid every 30 days).
Entity A chooses to pay interest based on 1-Month Term SOFR with the rate resetting immediately following each payment due date. If Entity A had determined that it was probable that Entity A would issue fixed-rate or single variable-rate debt or choose to pay interest at the Effective Federal Funds Rate (an interest rate that was not documented at hedge inception) for the first interest period, the entity would have discontinued applying hedge accounting and immediately reclassified the gain or loss on the interest rate swap reported in accumulated other comprehensive income into earnings in accordance with paragraph 815-30-40-5. Entity A also would have considered whether it had demonstrated a pattern of determining that hedged forecasted transactions are probable of not occurring and the propriety of using hedge accounting in the future for similar forecasted transactions in accordance with paragraph 815-30-40-5.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On April 1, 20X1, the note payable is issued. The note payable allows Entity A to pay interest at any of the following variable i…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c280eb3239a8006a2b73eb3e68b6b6b27fcc0c7386ba97df5755112e37aa583c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-171","para":"55-171","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7In accordance with paragraphs
815-30-35-37H through 35-37J
, after the choose-your-rate debt is issued and Entity A chooses the first interest rate index and interest rate tenor upon which interest will accrue, the list of interest rates and interest rate tenors documented at hedge inception is replaced by the list of interest rates and interest rate tenors included in the issued choose-your-rate debt agreement for the purposes of determining whether hedge accounting can continue. After Entity A chooses the first interest rate index and interest rate tenor upon which interest will accrue, it updates its hedge documentation in accordance with paragraph 815-30-35-37J to indicate that it will choose to designate the contractually specified interest rate index and interest rate tenor as any interest rate index and interest rate tenor selected in the issued choose-your-rate debt, which would include the Effective Federal Funds Rate. In the future, if Entity A selects an alternative interest rate index or interest rate tenor on the choose-your-rate debt instrument, the designated contractually specified interest rate would be the interest rate index and interest rate tenor selected at that time. Similarly, if Entity A replaces the choose-your-rate debt instrument with a debt instrument for which the interest rate index and interest rate tenor match one of the interest rate index and interest rate tenor options included in the originally issued choose-your-rate debt instrument, interest payments on the replacement debt would continue to be considered the designated forecasted transactions.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7In accordance with paragraphs 815-30-35-37H through 35-37J, after the choose-your-rate debt is issued and Entity A chooses the fi…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b48e287aaa5b4cde71c17864968bdb92d5e6b03ae9fac28cb1ce2a2b0ab2b184","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-172","para":"55-172","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7After the choose-your-rate debt is issued on April 1, 20X1, Entity A performs a prospective and retrospective hedge effectiveness assessment based on the then-selected interest rate index and interest rate tenor of the debt instrument. In accordance with paragraph 815-20-25-79B, this effectiveness assessment does not consider the optionality embedded within the choose-your-rate debt instrument. That is, the terms used to estimate changes in the hedged forecasted cash flows for purposes of the hedge effectiveness assessment only consider the currently selected interest rate index and interest rate tenor of 1-Month Term SOFR.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7After the choose-your-rate debt is issued on April 1, 20X1, Entity A performs a prospective and retrospective hedge effectiveness…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c20692b4a3d2d6d859f8a0a6eb366025a8bd9ecc6c49dc6267be265335cc84cc","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-173","para":"55-173","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Subsequent elections to change the interest rate index and interest rate tenor on the choose-your-rate debt instrument or replacement debt instrument may affect ongoing hedge accounting for this relationship. Consider the following scenarios, each occurring on April 1, 20X4:
  1. a
    Entity A changes the variable interest rate on the choose-your-rate debt instrument to 3-Month Term SOFR, payable every 90 days, with the rate resetting immediately following each payment (Scenario A).
  2. b
    Entity A changes the variable interest rate on the choose-your-rate debt instrument to Prime, payable every 30 days, with the rate resetting immediately following each payment (Scenario B).
  3. c
    Entity A replaces the choose-your-rate debt instrument with a 1-year, $30 million 3-Month Term SOFR note, payable every 90 days, with the rate resetting immediately following each payment, with the principal due at maturity (Scenario C).
  4. d
    Entity A replaces the choose-your-rate debt instrument with a 2-year, $20 million 12-Month Term SOFR note, payable annually, with the rate resetting immediately following each payment, with the principal due at maturity (Scenario D).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Subsequent elections to change the interest rate index and interest rate tenor on the choose-your-rate debt instrument or replace…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8c923a33ee6e23020807d7cb64237e31feeac2e3f543d0e654e874e02c308038","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-174","para":"55-174","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On April 1, 20X4, Entity A elects to make future interest payments on the existing choose-your-rate debt instrument based on 3-Month Term SOFR. Consistent with Entity A’s hedge documentation, this election automatically changes the contractually specified interest rate in the hedging relationship from 1-Month Term SOFR to 3-Month Term SOFR. The resulting change in the number and frequency of hedged interest payments in the hedging relationship does not result in a mandatory hedge dedesignation or require that Entity A consider the guidance in paragraphs
815-30-40-4 through 40-6
.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On April 1, 20X4, Entity A elects to make future interest payments on the existing choose-your-rate debt instrument based on 3-Mo…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c220c145774c8b5202f6f1594a7071bfe7d51cd919b9139fa83fac61ad566fd5","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-175","para":"55-175","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity A performs a final retrospective assessment of hedge effectiveness on the basis of changes in cash flows on 1-Month Term SOFR interest payments (payable every 30 days), assuming that the contractually specified interest rate will not change, and determines that the hedging relationship was highly effective through April 1, 20X4. Entity A then performs a prospective assessment of hedge effectiveness on the basis of changes in cash flows on 3-Month Term SOFR interest payments (payable every 90 days). When assessing hedge effectiveness with the new risk, Entity A creates the terms of the instrument used to estimate the changes in the cash flows of the 3-Month Term SOFR interest payments on the basis of market data as of January 1, 20X1, as required by paragraphs
815-30-35-37L through 35-37M
. In performing this assessment, Entity A assumes that 3-Month Term SOFR was and will continue to be the contractually specified interest rate designated in the hedging relationship. Entity A determines that the revised hedging relationship is expected to continue to be highly effective at achieving offsetting cash flows attributable to 3-Month Term SOFR on a prospective basis and continues to apply hedge accounting.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity A performs a final retrospective assessment of hedge effectiveness on the basis of changes in cash flows on 1-Month Term S…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d80e792c705fb095f81ecc8249aeac449f5f68a9464ee45206fd690d57723454","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-176","para":"55-176","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On April 1, 20X4, Entity A elects to make future interest payments on the existing choose-your-rate debt instrument based on Prime, payable every 30 days, with the rate resetting immediately following each payment. Consistent with Entity A’s hedge documentation, this election automatically changes the contractually specified interest rate in the hedging relationship from 1-Month Term SOFR to Prime (30-day reset).
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On April 1, 20X4, Entity A elects to make future interest payments on the existing choose-your-rate debt instrument based on Prim…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ec3248c464b0f9346079e1309399f668f1296705bba3519fce745df778cee280","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-177","para":"55-177","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity A performs a final retrospective assessment of hedge effectiveness on the basis of changes in cash flows on 1-Month Term SOFR interest payments (payable every 30 days), assuming that the contractually specified interest rate will not change, and determines that the hedging relationship was highly effective through April 1, 20X4. Entity A then performs a prospective assessment of hedge effectiveness on the basis of changes in cash flows on Prime interest payments (payable every 30 days). When assessing hedge effectiveness with the new risk, Entity A creates the terms of the instrument used to estimate the changes in the cash flows of the Prime interest payments on the basis of market data as of January 1, 20X1, as required by paragraphs
815-30-35-37L through 35-37M
. In performing this assessment, Entity A assumes that 30-day Prime was and will continue to be the contractually specified interest rate in the hedging relationship. Entity A determines that the revised hedging relationship is not expected to be highly effective at achieving offsetting cash flows attributable to 30-day Prime on a prospective basis. As a result, Entity A discontinues hedge accounting but continues to report the previously recognized derivative gain or loss on the hedging instrument in accumulated other comprehensive income until the forecasted interest payments affect earnings or it is probable that the forecasted interest payments will not occur.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity A performs a final retrospective assessment of hedge effectiveness on the basis of changes in cash flows on 1-Month Term S…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ed4699240c593c1e5578067fb0a0342488ca2965196f7351d870931c88d19c7","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-178","para":"55-178","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On April 1, 20X4, Entity A replaces the choose-your-rate debt instrument with a 1-year, $30 million 3-Month Term SOFR note, payable every 90 days. The replacement debt instrument does not need to be choose-your-rate debt in order for interest payments on the replacement debt to continue to be considered the forecasted transactions designated at hedge inception. That is, the replacement debt may have a single contractual variable rate or a list of possible contractual interest rate indexes and interest rate tenors from which the borrower may select. In either circumstance, if the interest rate index and interest rate tenor at which the replacement debt instrument is accruing interest match one of the interest rate index and interest rate tenor options included in the original choose-your-rate debt instrument, interest payments on the replacement debt will continue to be considered the designated forecasted transactions. However, if the replacement debt is fixed-rate debt or includes interest rate indexes or interest rate tenors not included in the terms of the original debt instrument and Entity A selects one of those interest rate indexes or interest rate tenors, the interest payments should not be considered the designated forecasted transactions. Once that instance becomes probable, the entity should discontinue applying hedge accounting and immediately reclassify the gain or loss on the hedging instrument recognized in accumulated other comprehensive income into earnings in accordance with paragraph 815-30-40-5. The entity also should consider whether it has demonstrated a pattern of determining that hedged forecasted transactions are probable of not occurring and the propriety of using hedge accounting in the future for similar forecasted transactions in accordance with paragraph 815-30-40-5.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On April 1, 20X4, Entity A replaces the choose-your-rate debt instrument with a 1-year, $30 million 3-Month Term SOFR note, payab…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2c998cc01f3290ff0924b45f6b5f788786c94bf1d04b3647f4347e9d5879839b","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-179","para":"55-179","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Although the replacement debt matures before the end of the hedge period (that is, the replacement debt matures March 31, 20X5, while the hedge period ends March 31, 20X6), Entity A determines that it is probable that it will issue eligible replacement debt for the remaining hedge period. Accordingly, while the currently outstanding replacement debt matures before the end of the hedge period, Entity A may continue to apply hedge accounting because it is probable that replacement debt will accrue interest payments over the remainder of the hedge period at one of the interest rate indexes and interest rate tenors included in the terms of the original choose-your-rate debt instrument. In addition, the forecasted interest payments on the outstanding replacement debt instrument should be considered the forecasted transactions in accordance with paragraph 815-30-35-37K because the interest rate specified in the outstanding replacement debt (3-Month Term SOFR) was an interest rate index and interest rate tenor option included in the original choose-your-rate debt instrument. The fact that the principal of the outstanding replacement debt exceeds the principal hedged does not result in interest payments on the replacement debt instrument being ineligible to be hedged. Consistent with Entity A’s hedge documentation, replacing the hedged debt instrument automatically changes the contractually specified interest rate designated in the hedging relationship from 1-Month Term SOFR to 3-Month Term SOFR.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Although the replacement debt matures before the end of the hedge period (that is, the replacement debt matures March 31, 20X5, w…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:79c00b5718fc63e2e372d935b33891447564df033cf61d6d907251df46c5ff4c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-180","para":"55-180","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7Entity A performs a final retrospective assessment of hedge effectiveness on the basis of changes in cash flows on 1-Month Term SOFR interest payments (payable every 30 days), assuming that the contractually specified interest rate will not change, and determines that the hedging relationship was highly effective through April 1, 20X4. Entity A then performs a prospective assessment of hedge effectiveness on the basis of changes in cash flows on 3-Month Term SOFR interest payments (payable every 90 days). When assessing hedge effectiveness with the new risk, Entity A creates the terms of the instrument used to estimate the changes in the cash flows of the 3-Month Term SOFR interest payments on the basis of market data as of January 1, 20X1, as required by paragraphs
815-30-35-37L through 35-37M
. In performing this assessment, Entity A assumes that 3-Month Term SOFR was and will continue to be the contractually specified interest rate designated in the hedging relationship. Entity A determines that the revised hedging relationship is expected to continue to be highly effective at achieving offsetting cash flows attributable to 3-Month Term SOFR on a prospective basis and continues to apply hedge accounting.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7Entity A performs a final retrospective assessment of hedge effectiveness on the basis of changes in cash flows on 1-Month Term S…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:828564e4fdd3d8182c3bad3acaf330f2ca90bac00b249c048aea50fdcb684c9c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"citation":"815-30-55-181","para":"55-181","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:
815-20-65-7On April 1, 20X4, Entity A replaces the choose-your-rate debt instrument with a 2-year, $20 million 12-Month Term SOFR note, payable every 360 days. Because 12-Month Term SOFR was not listed as one of the interest rate index and interest rate tenor options included in the original choose-your-rate debt instrument, interest payments on this 12-Month Term SOFR note are not eligible to be designated as hedged forecasted transactions. Once it becomes probable that the choose-your-rate debt instrument will be replaced with a 2-year, $20 million 12-Month Term SOFR note that is payable every 360 days, Entity A must immediately reclassify amounts previously recognized in accumulated other comprehensive income into earnings in accordance with paragraph 815-30-40-5. Entity A also should consider whether it has demonstrated a pattern of determining that hedged forecasted transactions are probable of not occurring and the propriety of using hedge accounting in the future for similar forecasted transactions in accordance with paragraph 815-30-40-5.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2027Transition guidance:815-20-65-7On April 1, 20X4, Entity A replaces the choose-your-rate debt instrument with a 2-year, $20 million 12-Month Term SOFR note, paya…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4fcb681da3d5f4224b31cb75cca73e317b4e8591531a585997bb51d31dfca6c5","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:da8d31c50f9740b8989d1db8ed8056ad74d791bb22a569be8b99915998d1bc6d","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:54e232a1c1a1f5cb41c5a619b241b87554ee5d3c749ea827a2b2b8b80a72623c","downloaded_from":"2026-09-10T01:38:04.280Z","last_downloaded_at":"2026-09-10T01:38:04.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480839","source_sha256":"61feb142d6a48a74984ba96b2b2c8aaddac608457c5eda0b5ced5ace9a0e268f"}},{"number":"S00","label":"SEC 00 Status","anchor":"sec-00-status","is_sec":true,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-30-S00-1","para":"S00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
815-30-S45-1SupersededAccounting Standards Update No. 2010-0401/15/2010
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\n815-30-S45-1 | Superseded | Accounting Standards Update No. 2010-04 | 01/15/2010 |","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0ea6fe28db0f3eebe6f43462e32e55d7679d03c03c60b7afa9cfa1936e741abc","downloaded_from":"2026-09-10T01:38:12.078Z","last_downloaded_at":"2026-09-10T01:38:12.078Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479569","source_sha256":"173b321c85b6d045bb5cb83eb8cb020a4f86699f6e9de9d42fe2f8cb5647b003"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fefd1ab394a0aecfdfd3f44ec9b4c65d072572571d6c9ce634f01dc590b1b2d0","downloaded_from":"2026-09-10T01:38:12.078Z","last_downloaded_at":"2026-09-10T01:38:12.078Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479569","source_sha256":"173b321c85b6d045bb5cb83eb8cb020a4f86699f6e9de9d42fe2f8cb5647b003"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:813756b8e5b66dd978365e5bff8ea92843a7564b830941b373315353fd25736a","downloaded_from":"2026-09-10T01:38:12.078Z","last_downloaded_at":"2026-09-10T01:38:12.078Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479569","source_sha256":"173b321c85b6d045bb5cb83eb8cb020a4f86699f6e9de9d42fe2f8cb5647b003"}},{"number":"S45","label":"SEC 45 Other Presentation Matters","anchor":"sec-45-other-presentation-matters","is_sec":true,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-30-S45-1","para":"S45-1","html":"
Paragraph superseded by Accounting Standards Update No. 2010-04.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2010-04.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:77b06b3313454496960f7c8f72f6c120597ef1f0c0a62d3ddc734bb867f219e3","downloaded_from":"2026-09-10T01:38:16.160Z","last_downloaded_at":"2026-09-10T01:38:16.160Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479538","source_sha256":"8f80598f008e0e8c44320b5a7629ea4097d00bade57c9e21da3e6637241f5b9d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ab9b8d9328787372f207af530470164a4c17a38597ece50082785e20ecbcfc8b","downloaded_from":"2026-09-10T01:38:16.160Z","last_downloaded_at":"2026-09-10T01:38:16.160Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479538","source_sha256":"8f80598f008e0e8c44320b5a7629ea4097d00bade57c9e21da3e6637241f5b9d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:81988c14bc9f43ac6aae309de7b656ebaf6e94160908dfe1e16c95454fb2cf59","downloaded_from":"2026-09-10T01:38:16.160Z","last_downloaded_at":"2026-09-10T01:38:16.160Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479538","source_sha256":"8f80598f008e0e8c44320b5a7629ea4097d00bade57c9e21da3e6637241f5b9d"}}],"enrichment":{"summary":"ASC 815-30 provides the incremental accounting for cash flow hedges — derivatives designated as hedging the variability in expected future cash flows of a forecasted transaction or of a recognized variable-cash-flow asset/liability. The entire change in fair value of the hedging instrument that is included in the assessment of effectiveness is recorded in other comprehensive income and reclassified into earnings in the same period(s) the hedged forecasted transaction affects earnings, presented in the same income statement line item as the hedged item. The Subtopic also governs excluded components, quantitative effectiveness methods for interest rate hedges, and discontinuation/dedesignation (including immediate reclassification when the forecasted transaction is probable of not occurring).","key_points":["When a hedging relationship is highly effective, the entire change in fair value of the designated hedging instrument that is included in the assessment of effectiveness is recorded in other comprehensive income (815-30-35-3), and is later reclassified to earnings in the same period(s) the hedged forecasted transaction (or the asset acquired/liability incurred) affects earnings, in the same income statement line item as the hedged item (815-30-35-3(b), 35-38, 35-39).","Components excluded from the assessment of effectiveness (e.g., an option's time value, a forward's spot-forward difference) are recognized in earnings under either the amortization approach (815-20-25-83A) or the mark-to-market approach (815-20-25-83B), presented in the same line item as the hedged item's earnings effect (815-30-35-3(a)).","Entities that do not report earnings are not permitted to use cash flow hedge accounting (815-30-15-2(a)).","Three quantitative effectiveness methods are available for interest rate swap cash flow hedges — change-in-variable-cash-flows, hypothetical-derivative, and change-in-fair-value — but the change-in-variable-cash-flows method may not be used if the swap's fair value is not somewhat near zero at inception (815-30-35-10, 35-13, 35-14).","A loss must be reclassified immediately from AOCI into earnings to the extent continued deferral would result in recognizing a net loss on the combination of the hedging instrument and the hedged transaction (815-30-35-40 through 35-41); recognition of impairment or credit losses on the related asset or liability likewise triggers immediate reclassification of an offsetting net gain (815-30-35-43).","Hedge accounting is discontinued prospectively if a criterion is no longer met, the derivative expires or is sold/terminated/exercised, or the designation is removed; the existing net gain or loss remains in AOCI and is reclassified as the forecasted transaction affects earnings (815-30-40-1, 40-2).","If it becomes probable the forecasted transaction will not occur by the end of the originally specified period or within an additional two months (absent rare extenuating circumstances), the AOCI amount is reclassified into earnings immediately and may not later be returned to AOCI (815-30-40-4 through 40-6); disclosures include the estimated net amount expected to be reclassified within the next 12 months (815-30-50-1(c))."],"categories":["Derivatives and hedging","Subsequent measurement","Presentation","Disclosure"],"audience_level":"advanced","student_note":"Cash flow hedges are heavily tested because of the OCI-then-reclassify mechanic: the entire effective change in fair value goes to OCI (no separate ineffectiveness recognition after ASU 2017-12) and leaves AOCI only when the hedged transaction hits earnings. The classic trap is the two-month rule — a discontinued hedge keeps its gain or loss in AOCI unless the forecasted transaction becomes probable of not occurring by the original date plus two months, which forces immediate reclassification to earnings.","related_topics":["815-20","815-25","815-10","830-20","220-10","954-815"],"key_concepts":["cash flow hedge","accumulated other comprehensive income","forecasted transaction","highly effective","excluded component","hypothetical-derivative method","dedesignation","reclassification into earnings"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3ea98da70e82a0e4f1335a69ce220302c9355ee3f5841a7fd6df68daf3a81562","downloaded_from":"2026-09-10T01:37:35.233Z","last_downloaded_at":"2026-09-10T01:38:16.160Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"815-35","title":"Net Investment Hedges","topic_title":"Derivatives and Hedging","score":0.8501,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:21332730f05d8e88cbaea9d924fdbce6e84665bd0ec4993c44c8e2cd4cd80f4b","downloaded_from":"2026-09-10T01:38:18.840Z","last_downloaded_at":"2026-09-10T01:38:43.011Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-20","title":"Hedging—General","topic_title":"Derivatives and Hedging","score":0.789,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:57ec264422eb9df56b4eba0e6e417acbb56ae87215ceb2d7c036550f56b4ad38","downloaded_from":"2026-09-10T01:36:33.249Z","last_downloaded_at":"2026-09-10T01:37:01.175Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-25","title":"Fair Value Hedges","topic_title":"Derivatives and Hedging","score":0.7888,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4202c2b94015261a65a7b4dd71c4e0f9a764cacbdc161897151e98b0a0199935","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:31.976Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"325-40","title":"Beneficial Interests in Securitized Financial Assets","topic_title":"Investments—Other","score":0.7651,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1c1fbad8f32dbb2b381c879087150ce0a5c6e3ff4c944e2ad7f4d1bfa1607361","downloaded_from":"2026-09-09T23:44:27.827Z","last_downloaded_at":"2026-09-09T23:44:58.835Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"860-30","title":"Secured Borrowing and Collateral","topic_title":"Transfers and Servicing","score":0.7479,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:beea2824a65089f97b702bcb2b801c601b9f2a42836c76850a23cad0c21635da","downloaded_from":"2026-09-10T02:06:50.852Z","last_downloaded_at":"2026-09-10T02:07:35.766Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"326-20","title":"Measured at Amortized Cost","topic_title":"Financial Instruments—Credit Losses","score":0.7449,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4b9dcd24494fb6767dd88ab39f9e6345b30da77bacd7cd6103e1aa934568edae","downloaded_from":"2026-09-09T23:49:16.307Z","last_downloaded_at":"2026-09-09T23:49:55.257Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}}],"prev":{"number":"815-25","title":"Fair Value Hedges","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c0cd20b1342260850462e96ea524fd791f8ea3504abbf13b8bbdd043f5a089a","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:31.976Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by 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by retrieval timestamps"}},{"number":"815-35","topic":"815","title":"Net Investment Hedges","area":"Broad Transactions","paragraphs":39,"summary":"ASC 815-35 governs the subsequent measurement of hedges of a net investment in a foreign operation (designated under 815-20). The effective portion of the gain or loss on the hedging derivative — or the foreign currency transaction gain or loss on a nonderivative hedging instrument such as foreign-currency debt — is reported the same way as a translation adjustment, i.e., in the cumulative translation adjustment (CTA) section of other comprehensive income (815-35-35-1). An entity elects either the spot method or the forward method to assess effectiveness and must apply that choice consistently to all derivative net investment hedges (815-35-35-4).","concepts":["net investment hedge","cumulative translation adjustment","spot method versus forward method","excluded component","hypothetical derivative","cross-currency interest rate swap","nonderivative hedging instrument","after-tax hedging"],"categories":["Derivatives and hedging","Foreign currency","Subsequent measurement","Financial instruments"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-35-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Other Comprehensive IncomeAddedMaintenance Update 2014-20 (PDF)09/29/2014
Spot RateAddedAccounting Standards Update No. 2014-0603/14/2014
815-35-05-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-1AmendedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-1AmendedMaintenance Update 2014-20 (PDF)09/29/2014
815-35-35-3 through 35-5
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-4AAddedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-5AmendedAccounting Standards Update No. 2014-0603/14/2014
815-35-35-5AAddedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-5BAddedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-7AmendedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-9 through 35-14
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-15SupersededAccounting Standards Update No. 2017-1208/28/2017
815-35-35-16SupersededAccounting Standards Update No. 2017-1208/28/2017
815-35-35-17AmendedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-17AAddedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-18 through 35-21
AmendedAccounting Standards Update No. 2017-1208/28/2017
815-35-35-20AmendedAccounting Standards Update No. 2012-0410/01/2012
815-35-35-22 through 35-25
SupersededAccounting Standards Update No. 2017-1208/28/2017
815-35-35-26AmendedAccounting Standards Update No. 2017-1208/28/2017
815-35-40-1AddedAccounting Standards Update No. 2017-1208/28/2017
815-35-50-2SupersededAccounting Standards Update No. 2017-1208/28/2017
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nOther Comprehensive Income | Added | Maintenance Update 2014-20 | 09/29/2014 |\nSpot Rate…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2f82440a134134bd59a875336d12809d1bfa38e289174a9264056370f054239a","downloaded_from":"2026-09-10T01:38:18.840Z","last_downloaded_at":"2026-09-10T01:38:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480784","source_sha256":"4493b39005a9f307731e78fddc58ea0c6389a2eea5f2fd4c6a7c2ef95a2df210"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:967ae79452a40146ac61217e019f4a11fa2a46078da5b0ea42d7b242ea9eb1c7","downloaded_from":"2026-09-10T01:38:18.840Z","last_downloaded_at":"2026-09-10T01:38:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480784","source_sha256":"4493b39005a9f307731e78fddc58ea0c6389a2eea5f2fd4c6a7c2ef95a2df210"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a0aa73decffe8e8074cbb5e60ad0f61794d7db592978e029f25185f14233e5f","downloaded_from":"2026-09-10T01:38:18.840Z","last_downloaded_at":"2026-09-10T01:38:18.840Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480784","source_sha256":"4493b39005a9f307731e78fddc58ea0c6389a2eea5f2fd4c6a7c2ef95a2df210"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-35-05-1","para":"05-1","html":"
This Subtopic provides incremental guidance on accounting for and financial reporting of hedges of a net investment in a foreign operation established under the criteria in Subtopic 815-20, such as subsequent measurement and dedesignation of a hedging relationship.
","snippet":"This Subtopic provides incremental guidance on accounting for and financial reporting of hedges of a net investment in a foreign operation established under the criteria in Subtopic 815-20, such as subsequent measurement…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0a88ac840e73e26f86edac7832d70a5b8e19fc249ebe6c026e5828d5c9676fc4","downloaded_from":"2026-09-10T01:38:20.733Z","last_downloaded_at":"2026-09-10T01:38:20.733Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480753","source_sha256":"93e21389594407c5a5f4e370fe6c5247fa5d2aa0628d7c34d188fa487c0b1242"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d81d14b42ac6b7c5e69c77db936c72f0f63f38564cd8ecb5dfee035da5ca390b","downloaded_from":"2026-09-10T01:38:20.733Z","last_downloaded_at":"2026-09-10T01:38:20.733Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480753","source_sha256":"93e21389594407c5a5f4e370fe6c5247fa5d2aa0628d7c34d188fa487c0b1242"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8bab1491d3c0431807c919887d65136d10dc6811eefb9e4dd685767df7dbd8c0","downloaded_from":"2026-09-10T01:38:20.733Z","last_downloaded_at":"2026-09-10T01:38:20.733Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480753","source_sha256":"93e21389594407c5a5f4e370fe6c5247fa5d2aa0628d7c34d188fa487c0b1242"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Overall Guidance","paragraphs":[{"citation":"815-35-15-1","para":"15-1","html":"
This Subtopic follows the same Scope and Scope Exceptions as outlined in Subtopic 815-20, see Section 815-20-15.
","snippet":"This Subtopic follows the same Scope and Scope Exceptions as outlined in Subtopic 815-20, see Section 815-20-15.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f2df63dec7c3663baa37ca876234dfca85c9792e743b41297ee034a6cbaf9ebe","downloaded_from":"2026-09-10T01:38:22.760Z","last_downloaded_at":"2026-09-10T01:38:22.760Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480727","source_sha256":"cc7820d7893aeb87bafd4912472190729565ee8e1b3998f3a8bd8bac14a7a9a0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f0b158fbca63bd54e810853d06496537d47d846876a89345e6ad4c254449d74c","downloaded_from":"2026-09-10T01:38:22.760Z","last_downloaded_at":"2026-09-10T01:38:22.760Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480727","source_sha256":"cc7820d7893aeb87bafd4912472190729565ee8e1b3998f3a8bd8bac14a7a9a0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3e0bdcaa120a92a8c08ac45c3a11ea693075c06e7d2f202844b0b59d0c7f3349","downloaded_from":"2026-09-10T01:38:22.760Z","last_downloaded_at":"2026-09-10T01:38:22.760Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480727","source_sha256":"cc7820d7893aeb87bafd4912472190729565ee8e1b3998f3a8bd8bac14a7a9a0"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-35-25-1","para":"25-1","html":"
See Section 815-20-25 for the criteria under which an entity may designate a net investment hedge.
","snippet":"See Section 815-20-25 for the criteria under which an entity may designate a net investment hedge.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ab0e0380363696b889fde6c1ff6ad1be9918ede586acd1739299c51d84542946","downloaded_from":"2026-09-10T01:38:30.031Z","last_downloaded_at":"2026-09-10T01:38:30.031Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480673","source_sha256":"d9792c2e06d14b0edc38e0fdca36a8ff0cbdfafa3870f258c40d30da7e41fe22"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9a25d1e4a2d1af04a638b3caacea0fcbd941cc970409f4ff2a34f8a4437779fc","downloaded_from":"2026-09-10T01:38:30.031Z","last_downloaded_at":"2026-09-10T01:38:30.031Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480673","source_sha256":"d9792c2e06d14b0edc38e0fdca36a8ff0cbdfafa3870f258c40d30da7e41fe22"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5f8b3eb1f66d408a53a3e9e8e7e1ac26ab405b9406f678ce53d5d2b31c27b06","downloaded_from":"2026-09-10T01:38:30.031Z","last_downloaded_at":"2026-09-10T01:38:30.031Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480673","source_sha256":"d9792c2e06d14b0edc38e0fdca36a8ff0cbdfafa3870f258c40d30da7e41fe22"}},{"number":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":"Overall","paragraphs":[{"citation":"815-35-35-1","para":"35-1","html":"
The gain or loss on a hedging derivative instrument (or the foreign currency transaction gain or loss on the nonderivative hedging instrument) that is designated as, and is effective as, an economic hedge of the net investment in a foreign operation shall be reported in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment section of other comprehensive income).
","snippet":"The gain or loss on a hedging derivative instrument (or the foreign currency transaction gain or loss on the nonderivative hedging instrument) that is designated as, and is effective as, an economic hedge of the net inve…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8e0b26cbc9fd9d12f0b31cb0e6a6d38596d1ba4e1baeb57f07b47631ed5fc96a","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-2","para":"35-2","html":"
The hedged net investment shall be accounted for consistent with Topic 830. The provisions of Subtopic 815-25 for recognizing the gain or loss on assets designated as being hedged in a fair value hedge do not apply to the hedge of a net investment in a foreign operation.
","snippet":"The hedged net investment shall be accounted for consistent with Topic 830. The provisions of Subtopic 815-25 for recognizing the gain or loss on assets designated as being hedged in a fair value hedge do not apply to th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7eb7317440b9462be82f4e2b6833ce217bb6eea6fa0c49ae2e8b54612f224a39","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-3","para":"35-3","html":"
If an entity has designated and documented that it will assess effectiveness and measure hedge results on an after-tax basis as permitted by paragraph 815-20-25-3(b)(2)(vi), the portion of the gain or loss on the hedging instrument that exceeded the loss or gain on the hedged item shall be included as an offset to the related tax effects in the period in which those tax effects are recognized.
","snippet":"If an entity has designated and documented that it will assess effectiveness and measure hedge results on an after-tax basis as permitted by paragraph 815-20-25-3(b)(2)(vi), the portion of the gain or loss on the hedging…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9fd669930e9f9c4c35fc0c085359b12a70b2da1b54da1c5a0fab32942d1df5e8","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b9fa4afea2d1701d5a5e2feb2b81f1c8e8be76bc2bc906939fea374f27b69309","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"block":null,"heading":"Assessing Hedge Effectiveness and Measuring Hedge Results","paragraphs":[{"citation":"815-35-35-4","para":"35-4","html":"
If a derivative instrument is used as the hedging instrument, an entity may assess the effectiveness of a net investment hedge using either a method based on changes in spot exchange rates (as specified in paragraphs
815-35-35-5 through 35-15
) or a method based on changes in forward exchange rates (as specified in paragraphs
815-35-35-17 through 35-26
). This guidance can also be applied to purchased options used as hedging instruments in a net investment hedge. However, an entity shall consistently use the same method for all its net investment hedges in which the hedging instrument is a derivative instrument; use of the spot method for some net investment hedges and the forward method for other net investment hedges is not permitted. An entity may change the method that it chooses to assess the effectiveness of its net investment hedges in accordance with paragraphs 815-20-55-55 through 55-56A.
","snippet":"If a derivative instrument is used as the hedging instrument, an entity may assess the effectiveness of a net investment hedge using either a method based on changes in spot exchange rates (as specified in paragraphs 815…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:94552baa3db82754316f9029b2243e4ecdab70aa11cabe682bdd5740d1275ac9","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-4A","para":"35-4A","html":"
Hedge effectiveness shall be assessed on a quantitative basis at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(01) unless one of the exceptions in that paragraph applies. Subsequent assessments of hedge effectiveness may be performed either on a quantitative basis or on a qualitative basis in accordance with paragraphs 815-20-35-2 through 35-2F.
","snippet":"Hedge effectiveness shall be assessed on a quantitative basis at hedge inception in accordance with paragraph 815-20-25-3(b)(2)(iv)(01) unless one of the exceptions in that paragraph applies. Subsequent assessments of he…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c5f984986266bfbb37ee0c2ccd05fd14baf6f4d32c85d390840ab04bb7975f9","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-5","para":"35-5","html":"
The change in the fair value of the derivative instrument attributable to changes in the difference between the forward rate and spot rate would be excluded from the assessment of hedge effectiveness if all of the following conditions are met:
  1. a
    The notional amount of the derivative instrument designated as a hedge of a net investment in a foreign operation matches (that is, equals) the portion of the net investment designated as being hedged.
  2. b
    The derivative instrument's underlying exchange rate is the exchange rate between the functional currency of the hedged net investment and the investor's functional currency.
  3. c
    When the hedging derivative instrument is a cross-currency interest rate swap, it is eligible for designation in a net investment hedge in accordance with paragraph 815-20-25-67.
In that circumstance, the hedging relationship would be considered perfectly effective, and no quantitative effectiveness assessment is required at hedge inception. (See paragraph 815-20-25-3(b)(2)(iv)(01).)
","snippet":"The change in the fair value of the derivative instrument attributable to changes in the difference between the forward rate and spot rate would be excluded from the assessment of hedge effectiveness if all of the follow…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0c821308276e4f805bf933fe3b6e2124a21ea86aaba501d43ab96c2e155d48bb","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-5A","para":"35-5A","html":"
An entity shall recognize in earnings the initial value of the component excluded from the assessment of effectiveness using a systematic and rational method over the life of the hedging instrument. Any difference between the change in fair value of the excluded component and amounts recognized in earnings under that systematic and rational method shall be recognized in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment section of other comprehensive income).
","snippet":"An entity shall recognize in earnings the initial value of the component excluded from the assessment of effectiveness using a systematic and rational method over the life of the hedging instrument. Any difference betwee…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:05fa68faaa5d6112d1ad78718859c68e0b537cf1c5c8acd7597bb637f2494dd8","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-5B","para":"35-5B","html":"
An entity alternatively may elect to record changes in the fair value of the excluded component currently in earnings. This election shall be applied consistently to similar hedges in accordance with paragraph 815-20-25-81.
","snippet":"An entity alternatively may elect to record changes in the fair value of the excluded component currently in earnings. This election shall be applied consistently to similar hedges in accordance with paragraph 815-20-25-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e6a57927a8133a391720bf2993f79d64a5a5dcbe24e9872c530b54488bd2b62a","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-6","para":"35-6","html":"
The interest accrual (periodic cash settlement) components of qualifying receive-variable-rate, pay-variable-rate and receive-fixed rate, pay-fixed-rate cross-currency interest rate swaps shall also be reported directly in earnings.
","snippet":"The interest accrual (periodic cash settlement) components of qualifying receive-variable-rate, pay-variable-rate and receive-fixed rate, pay-fixed-rate cross-currency interest rate swaps shall also be reported directly …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:22b936e3ba5df430ffb261491e8c36fdf5c85f12f759bef8b8659291373eff7b","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-7","para":"35-7","html":"
The change in fair value of the derivative instrument attributable to changes in the spot rate shall be reported in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment section of other comprehensive income).
","snippet":"The change in fair value of the derivative instrument attributable to changes in the spot rate shall be reported in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c8a1ce49060dd242b0ab7f4a56d2c941c570488821ced2a7500a77b3e17172a4","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-8","para":"35-8","html":"
The spot-to-spot changes in value reported in the cumulative translation adjustment section of other comprehensive income shall not be discounted.
","snippet":"The spot-to-spot changes in value reported in the cumulative translation adjustment section of other comprehensive income shall not be discounted.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a62b25bc831be74ffeea7d75ba9cb923feb762fe0441d2b0da9b070f2f08012","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-9","para":"35-9","html":"
The hedging relationship would not be considered perfectly effective, and the guidance in paragraph 815-35-35-10 shall be applied if any of the following conditions exist:
  1. a
    The notional amount of the derivative instrument does not match the portion of the net investment designated as being hedged.
  2. b
    The derivative instrument's underlying exchange rate is not the exchange rate between the functional currency of the hedged net investment and the investor's functional currency.
  3. c
    When the hedging derivative instrument is a cross-currency interest rate swap eligible for designation in a net investment hedge in accordance with paragraph 815-20-25-67, both legs are not based on comparable interest rate curves (for example, pay foreign currency based on the three-month London Interbank Offered Rate [LIBOR], receive functional currency based on three-month commercial paper rates).
","snippet":"The hedging relationship would not be considered perfectly effective, and the guidance in paragraph 815-35-35-10 shall be applied if any of the following conditions exist:\n(a) The notional amount of the derivative instru…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1db9fafa96c3f3544b79065c38e27c80b1f90b10f9175631e9a639e573dcfea1","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-10","para":"35-10","html":"
If any of the conditions in paragraph 815-35-35-9 exist, the change in fair value of the hypothetical derivative instrument that does not incorporate those differences shall be compared with the change in fair value of the actual derivative instrument in assessing hedge effectiveness.
","snippet":"If any of the conditions in paragraph 815-35-35-9 exist, the change in fair value of the hypothetical derivative instrument that does not incorporate those differences shall be compared with the change in fair value of t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8cb8b12019a6a2407c1235cf3057873b9c758f54fec8ae7502972ac89b8597a8","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-11","para":"35-11","html":"
The hypothetical derivative instrument used to assess hedge effectiveness also shall have a maturity and repricing and payment frequencies for any interim payments that match the maturity and repricing and payment frequencies for any interim payments of the actual derivative instrument designated as the hedging instrument in the net investment hedge.
","snippet":"The hypothetical derivative instrument used to assess hedge effectiveness also shall have a maturity and repricing and payment frequencies for any interim payments that match the maturity and repricing and payment freque…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d3b19b3036ea78cec6e1f345eff5bd55f204ddf214ecea20ed6b28d0e49db251","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-12","para":"35-12","html":"
The translation gain or loss determined under Subtopic 830-30 by reference to the spot exchange rate between the transaction currency of the debt and the functional currency of the investor (after tax effects, if appropriate) shall be reported in the same manner as the translation adjustment associated with the hedged net investment (that is, reported in the cumulative translation adjustment section of other comprehensive income) if both of the following conditions are met:
  1. a
    The notional amount of the nonderivative instrument matches the portion of the net investment designated as being hedged.
  2. b
    The nonderivative instrument is denominated in the functional currency of the hedged net investment.
In that circumstance, the hedging relationship would be considered perfectly effective, and no prospective quantitative effectiveness assessment is required at hedge inception (see paragraph 815-20-25-3(b)(2)(iv)(01)).
","snippet":"The translation gain or loss determined under Subtopic 830-30 by reference to the spot exchange rate between the transaction currency of the debt and the functional currency of the investor (after tax effects, if appropr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:976513d544b87f6af7938cfa3336e71e585642108ecfffbea612d650867952aa","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-13","para":"35-13","html":"
The hedging relationship would not be perfectly effective if either of the following conditions is met:
  1. a
    The notional amount of the nonderivative instrument does not match the portion of the net investment designated as being hedged.
  2. b
    The nonderivative instrument is denominated in a currency other than the functional currency of the hedged net investment.
","snippet":"The hedging relationship would not be perfectly effective if either of the following conditions is met:\n(a) The notional amount of the nonderivative instrument does not match the portion of the net investment designated …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e3a7d704f63ba774243c6c67cf83814eea47ebcf7c0aeb88aa37fbc0d42a94ad","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-14","para":"35-14","html":"
Effectiveness shall be assessed by comparing the following two values:
  1. a
    The foreign currency transaction gain or loss based on the spot rate change (after tax effects, if appropriate) of that nonderivative instrument
  2. b
    The transaction gain or loss based on the spot rate change (after tax effects, if appropriate) that would result from the appropriate hypothetical nonderivative instrument that does not incorporate those differences. The hypothetical nonderivative instrument shall also have a maturity that matches the maturity of the actual nonderivative instrument designated as the net investment hedge.
","snippet":"Effectiveness shall be assessed by comparing the following two values:\n(a) The foreign currency transaction gain or loss based on the spot rate change (after tax effects, if appropriate) of that nonderivative instrument\n…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:72c930f223a3dbb2dd249039c74c793e04ccf40593b79c4dd1d65bb057305077","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-15","para":"35-15","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:621cca1443e1d96a24a8670ca81e4e355e2893974904558428eeffad2de908d0","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-16","para":"35-16","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d2fd88b34e31889f93667550a99c6d55a057668873efdb4a5205bae4a00429ee","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-17","para":"35-17","html":"
Under a method based on changes in forward exchange rates, an entity shall report all changes in fair value of the derivative instrument in the same manner as a translation adjustment (that is, reported in the cumulative translation adjustment section of other comprehensive income), including the following amounts:
  1. a
    The time value component of purchased options
  2. b
    The interest accrual/periodic cash settlement components of qualifying receive-variable-rate, pay-variable-rate and receive-fixed-rate, pay-fixed-rate cross-currency interest rate swaps.
","snippet":"Under a method based on changes in forward exchange rates, an entity shall report all changes in fair value of the derivative instrument in the same manner as a translation adjustment (that is, reported in the cumulative…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d4cddfa559f6b9d2bd70404e606308a72b1b41f31468b00b30bac97358d2068e","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-17A","para":"35-17A","html":"
If the notional amount of the derivative instrument designated as a hedge of a net investment in a foreign operation matches (that is, equals) the portion of the net investment designated as being hedged and the derivative instrument's underlying relates solely to the foreign exchange rate between the functional currency of the hedged net investment and the investor's functional currency, the hedging relationship would be considered perfectly effective, and no quantitative effectiveness assessment is required at hedge inception (see paragraph 815-20-25-3(b)(2)(iv)(01)).
","snippet":"If the notional amount of the derivative instrument designated as a hedge of a net investment in a foreign operation matches (that is, equals) the portion of the net investment designated as being hedged and the derivati…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a4b7b7efe0810a5adfe89e9e54eaaa41c1c4329a15ff494c9058b5eea6715db9","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-18","para":"35-18","html":"
However, the hedging relationship would not be considered perfectly effective if any of the following conditions exist:
  1. a
    The notional amount of the derivative instrument does not match the portion of the net investment designated as being hedged.
  2. b
    The derivative instrument's underlying exchange rate is not the exchange rate between the functional currency of the hedged net investment and the investor's functional currency.
  3. c
    When the hedging derivative instrument is a cross-currency interest rate swap eligible for designation in a net investment hedge in accordance with paragraph 815-20-25-67, both legs are not based on comparable interest rate curves (for example, pay foreign currency based on three-month LIBOR, receive functional currency based on three-month commercial paper rates).
","snippet":"However, the hedging relationship would not be considered perfectly effective if any of the following conditions exist:\n(a) The notional amount of the derivative instrument does not match the portion of the net investmen…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dae3e045a98bea6e7b747a5dc7080aa4abe8675e5b97ffffd5b13817d74b13d9","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-19","para":"35-19","html":"
The assessment of hedge effectiveness due to such differences between the hedging derivative instrument and the hedged net investment considers the following:
  1. a
    Different notional amounts. If the notional amount of the derivative instrument designated as a hedge of the net investment does not match the portion of the net investment designated as being hedged, hedge effectiveness shall be assessed by comparing the following two values:
    1. 1
      The change in fair value of the actual derivative instrument designated as the hedging instrument
    2. 2
      The change in fair value of a hypothetical derivative instrument that has a notional amount that matches the portion of the net investment being hedged and a maturity that matches the maturity of the actual derivative instrument designated as the net investment hedge. See paragraph 815-35-35-26 for situations in which the hedge of a net investment in a foreign operation is hedging foreign currency risk on an after-tax basis, as permitted by paragraph 815-20-25-3(b)(2)(vi).
  2. b
    Different currencies. If the derivative instrument designated as the hedging instrument has an underlying foreign exchange rate that is not the exchange rate between the functional currency of the hedged net investment and the investor's functional currency (a tandem currency hedge), hedge effectiveness shall be assessed by comparing the following two values:
    1. 1
      The change in fair value of the actual cross-currency hedging instrument
    2. 2
      The change in fair value of a hypothetical derivative instrument that has as its underlying the foreign exchange rate between the functional currency of the hedged net investment and the investor's functional currency and a maturity and repricing and payment frequencies for any interim payments that match the maturity and repricing and payment frequencies for any interim payments of the actual derivative instrument designated as the net investment hedge.
  3. c
    Multiple underlyings. In accordance with paragraph 815-20-25-67(a), the only derivative instruments with multiple underlyings permitted to be designated as a hedge of a net investment are receive-variable-rate, pay-variable-rate cross-currency interest rate swaps that meet certain criteria. Paragraph 815-20-25-67(b) also permits receive-fixed-rate, pay-fixed-rate cross-currency interest rate swaps to be designated as a hedge of a net investment.
","snippet":"The assessment of hedge effectiveness due to such differences between the hedging derivative instrument and the hedged net investment considers the following:\n(a) Different notional amounts. If the notional amount of the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c11f4201621ea8696af0c6ca480b034e298b9f30b6bc45d2e24ba4cdea4971d8","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-20","para":"35-20","html":"
If a receive-variable-rate, pay-variable-rate cross-currency interest rate swap is designated as the hedging instrument in a net investment hedge, hedge effectiveness shall be assessed by comparing the following two values:
  1. a
    The change in fair value of the actual cross-currency interest rate swap designated as the hedging instrument
  2. b
    The change in fair value of a hypothetical receive-variable-rate, pay-variable-rate cross-currency interest rate swap in which the interest rates are based on the same currencies contained in the hypothetical swap and both legs of the hypothetical swap have the same repricing intervals and dates. The hypothetical derivative instrument also shall have a maturity that matches the maturity of the actual cross-currency interest rate swap designated as the net investment hedge.
","snippet":"If a receive-variable-rate, pay-variable-rate cross-currency interest rate swap is designated as the hedging instrument in a net investment hedge, hedge effectiveness shall be assessed by comparing the following two valu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2e82ccf7d2b71a51195e71c7ea1e968b49b09bb7898806f1a93cbc2c40d48b13","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-21","para":"35-21","html":"
If a receive-fixed-rate, pay-fixed-rate cross-currency interest rate swap is designated as the hedging instrument in a net investment hedge, hedge effectiveness shall be assessed by comparing the following two values:
  1. a
    The change in fair value of the actual cross-currency interest rate swap designated as the hedging instrument
  2. b
    The change in fair value of a hypothetical receive-fixed-rate, pay-fixed-rate cross-currency interest rate swap in which the interest rates are based on the same currencies contained in the hypothetical swap. The hypothetical derivative instrument shall also have a maturity that matches the maturity of the actual cross-currency interest rate swap designated as the net investment hedge.
","snippet":"If a receive-fixed-rate, pay-fixed-rate cross-currency interest rate swap is designated as the hedging instrument in a net investment hedge, hedge effectiveness shall be assessed by comparing the following two values:\n(a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e229504fbeb16155167c4768025b2ed12ac2964e014ba8dd1b1f9bfbac98cc4c","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-22","para":"35-22","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ccf1bcb57ceb570f60158a795f52591fe4f2b49710f1ff30183fa4336503dffe","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-23","para":"35-23","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b08b5750a1af95500a96514ea51f7f79418bea681d0aa6063acd531fdd0db9dc","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-24","para":"35-24","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2a218fcd8d7e695b657be94d8a18b8b8b0de3f3b99ed7a797ac40dbf347b5c67","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-25","para":"35-25","html":"
Paragraph superseded by Accounting Standards Update No. 2017-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2017-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:baab60bf2184e0f03d691c99e9af986e80ac79e05f0043bfea7c52996d2dfb84","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"citation":"815-35-35-26","para":"35-26","html":"
Paragraph 815-20-25-3(b)(2)(vi) permits hedging foreign currency risk on an after-tax basis, provided that the documentation of the hedge at its inception indicated that the assessment of effectiveness and measurement of hedge results will be on an after-tax basis (rather than on a pretax basis). If an entity has elected to hedge foreign currency risk on an after-tax basis, it shall adjust the notional amount of its derivative instrument appropriately to reflect the effect of tax rates. In that case, the hypothetical derivative instrument used to assess effectiveness shall have a notional amount that has been appropriately adjusted (pursuant to the documentation at inception) to reflect the effect of the after-tax approach.
","snippet":"Paragraph 815-20-25-3(b)(2)(vi) permits hedging foreign currency risk on an after-tax basis, provided that the documentation of the hedge at its inception indicated that the assessment of effectiveness and measurement of…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0005b8c0af95f42cabcc854cd57727b40f3d5f5d446de6005b5f4fff041fab76","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b172a8ccc05e2999602c6c050b32a94e1cdf3fe72d637c4a5a9a717d62932aa5","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"block":null,"heading":"Redesignation","paragraphs":[{"citation":"815-35-35-27","para":"35-27","html":"
If an entity documents that the effectiveness of its hedge of the net investment in a foreign operation will be assessed based on the beginning balance of its net investment and the entity's net investment changes during the year, the entity shall consider the need to redesignate the hedging relationship (to indicate what the hedging instrument is and what numerical portion of the current net investment is the hedged portion) whenever financial statements or earnings are reported, and at least every three months. An entity is not required to redesignate the hedging relationship more frequently even when a significant transaction (for example, a dividend) occurs during the interim period. Example 1 (see paragraph 815-35-55-1) illustrates the application of this guidance.
","snippet":"If an entity documents that the effectiveness of its hedge of the net investment in a foreign operation will be assessed based on the beginning balance of its net investment and the entity's net investment changes during…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:513922e890d944c3c518fb6e11da925fb090b3b23637987004b6deffac0c22a6","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:67a99d84ebbf9e54c3f51651724b2325f27583c0aed35c3e90628a330d90c306","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e9839e6235389b598e4669c0ad20b258896261903b696064126319e1dea8cea8","downloaded_from":"2026-09-10T01:38:32.426Z","last_downloaded_at":"2026-09-10T01:38:32.426Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480649","source_sha256":"c593d7861a807a0f820bc967108d9e9f7e441bc25e81d6bd43471050a7abefa6"}},{"number":"40","label":"40 Derecognition","anchor":"40-derecognition","is_sec":false,"groups":[{"block":null,"heading":"Discontinuing Hedge Accounting","paragraphs":[{"citation":"815-35-40-1","para":"40-1","html":"
When applying the guidance in paragraph 815-35-35-5A and a hedge is discontinued, any amounts that have not yet been recognized in earnings shall remain in the cumulative translation adjustment section of accumulated other comprehensive income until the hedged net investment is sold or liquidated in accordance with paragraphs 830-30-40-1 through 40-1A.
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Paragraph not used.
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Paragraph superseded by Accounting Standards Update No. 2017-12.
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This Example illustrates the application of paragraph 815-35-35-27. Assume that an entity enters into a foreign currency forward contract that has a notional amount equal to the beginning balance of its investment in a foreign operation (for example, 100,000 foreign currency units [FC]). This foreign currency forward contract is immediately designated as a hedge of the entire beginning balance of the net investment at the inception of the hedge. As the net investment changes, the entity would periodically assess the original hedging relationship and decide whether it needs to remove (that is, dedesignate) that original relationship and designate a new hedging relationship for the following assessment period. The following presents one method of such redesignation in those circumstances in which the entity chooses not to obtain a new derivative instrument:
  1. a
    If the net investment had increased (for example, to FC 120,000), the entire forward contract would be designated prospectively as hedging only a portion of the beginning balance of the net investment in that foreign operation. The hedged portion would be the ratio of the net investment at the inception of the hedge to the net investment at the beginning of the new assessment period (for example, five-sixths of the FC 120,000).
  2. b
    If the net investment had decreased (for example, to FC 90,000), only a proportion of the forward contract would be designated prospectively as hedging the entire beginning balance of the net investment in that foreign operation. The proportion of the forward contract designated prospectively as the hedging instrument would be the ratio of the net investment at the beginning of the new assessment period to the net investment at the inception of the hedge (for example, nine-tenths of the forward contract). The proportion of the forward contract not designated prospectively as the hedging instrument in the net investment hedge could be designated as a hedging instrument in a different hedging relationship or simply reported at fair value with its gain or loss after the dedesignation date recognized currently in earnings pursuant to paragraph 815-20-35-1(a).
","snippet":"This Example illustrates the application of paragraph 815-35-35-27. Assume that an entity enters into a foreign currency forward contract that has a notional amount equal to the beginning balance of its investment in a f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7360d0dc23018141100b6325f154523ff5517cabc61fdbe749027fd4fba7a69c","downloaded_from":"2026-09-10T01:38:40.018Z","last_downloaded_at":"2026-09-10T01:38:40.018Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480538","source_sha256":"efa4792d8467d3fc02d0aecb885198860c1a18342961d21e12dccc40e620722d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d4e5dcaaeed360347786112a516157a43eeff3c2a829f56cdf7520b07b714e24","downloaded_from":"2026-09-10T01:38:40.018Z","last_downloaded_at":"2026-09-10T01:38:40.018Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480538","source_sha256":"efa4792d8467d3fc02d0aecb885198860c1a18342961d21e12dccc40e620722d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:80c2eb09fe7e5dff0aa321d0239887563d58301778fec5105144e4e25a982c51","downloaded_from":"2026-09-10T01:38:40.018Z","last_downloaded_at":"2026-09-10T01:38:40.018Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480538","source_sha256":"efa4792d8467d3fc02d0aecb885198860c1a18342961d21e12dccc40e620722d"}}],"enrichment":{"summary":"ASC 815-35 governs the subsequent measurement of hedges of a net investment in a foreign operation (designated under 815-20). The effective portion of the gain or loss on the hedging derivative — or the foreign currency transaction gain or loss on a nonderivative hedging instrument such as foreign-currency debt — is reported the same way as a translation adjustment, i.e., in the cumulative translation adjustment (CTA) section of other comprehensive income (815-35-35-1). An entity elects either the spot method or the forward method to assess effectiveness and must apply that choice consistently to all derivative net investment hedges (815-35-35-4).","key_points":["Gains and losses on an effective net investment hedge (derivative or nonderivative) are reported like a translation adjustment in the CTA section of OCI, and the hedged net investment itself is accounted for under Topic 830, not under the fair value hedge rules of 815-25 (815-35-35-1 through 35-2).","An entity may assess effectiveness using either the spot-rate method (815-35-35-5 through 35-15) or the forward-rate method (815-35-35-17 through 35-26), but must use the same method for all net investment hedges using derivatives (815-35-35-4).","Under the spot method, the forward-spot difference is excluded from the effectiveness assessment if the notional matches the hedged portion, the underlying is the exchange rate between the hedged operation's functional currency and the investor's functional currency, and any cross-currency interest rate swap qualifies under 815-20-25-67; the hedge is then perfectly effective with no quantitative inception assessment (815-35-35-5).","The initial value of an excluded component is recognized in earnings by a systematic and rational method over the life of the instrument, with the difference from actual fair value change reported in CTA within OCI; alternatively an entity may elect to record all excluded-component fair value changes currently in earnings (815-35-35-5A through 35-5B).","Under the forward method, all changes in the derivative's fair value — including option time value and the interest accrual/periodic cash settlement components of qualifying cross-currency interest rate swaps — go to CTA in OCI (815-35-35-17); under the spot method those interest accrual components go directly to earnings (815-35-35-6).","When notional amounts, currencies, or swap legs do not match (815-35-35-9, 35-13, 35-18), effectiveness is assessed by comparing the actual instrument's fair value change with that of a hypothetical derivative or nonderivative instrument that eliminates the mismatch and matches the actual instrument's maturity and repricing/payment frequencies (815-35-35-10, 35-11, 35-14, 35-19 through 35-21).","On discontinuation, amounts not yet recognized in earnings under 815-35-35-5A remain in CTA within AOCI until the hedged net investment is sold or liquidated under 830-30-40-1 through 40-1A (815-35-40-1)."],"categories":["Derivatives and hedging","Foreign currency","Subsequent measurement","Financial instruments"],"audience_level":"advanced","student_note":"Net investment hedges are the one hedge type where a nonderivative (e.g., foreign-currency-denominated debt) can be the hedging instrument and where effective gains/losses sit in CTA rather than a separate AOCI bucket. Students commonly assume the CTA amounts recycle at discontinuation — they do not; they stay in AOCI until the foreign operation is sold or liquidated under Topic 830.","related_topics":["815-20","815-25","830-30","830-20","815-10"],"key_concepts":["net investment hedge","cumulative translation adjustment","spot method versus forward method","excluded component","hypothetical derivative","cross-currency interest rate swap","nonderivative hedging instrument","after-tax hedging"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ad64f9bb22b6370292f1fc153b0ccf0cd8b37a659f75db5b3398fa6cfe273867","downloaded_from":"2026-09-10T01:38:18.840Z","last_downloaded_at":"2026-09-10T01:38:43.011Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"815-30","title":"Cash Flow Hedges","topic_title":"Derivatives and Hedging","score":0.8501,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fd812081179dc5aea838fe581a7fc9da7b3fc960a68659ca23617ee70db089cf","downloaded_from":"2026-09-10T01:37:35.233Z","last_downloaded_at":"2026-09-10T01:38:16.160Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-20","title":"Hedging—General","topic_title":"Derivatives and Hedging","score":0.7854,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:38f2b23a96c9a019c40e51546f5348c1990ef4fd53cfaa6f7035c02ff1a6c921","downloaded_from":"2026-09-10T01:36:33.249Z","last_downloaded_at":"2026-09-10T01:37:01.175Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-25","title":"Fair Value Hedges","topic_title":"Derivatives and Hedging","score":0.7633,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1016e8f8432b5e15a1ec6187f0546d12414df3629ce84079b057671f706d163f","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:31.976Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"830-20","title":"Foreign Currency Transactions","topic_title":"Foreign Currency Matters","score":0.7607,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0e8ed206c5f638ffb344397aa721fc7c2d11ddc917b4eb3d7bb3c366b1f72894","downloaded_from":"2026-09-10T01:46:33.561Z","last_downloaded_at":"2026-09-10T01:47:07.110Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"320-10","title":"Overall","topic_title":"Investments—Debt 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retrieval timestamps"}},"next":{"number":"815-40","title":"Contracts in Entity's Own Equity","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5040a15691413c54042cd79085dde320ab35da0db743b56d286f138a3ba786bf","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d7f838c1d58ae9cb3d2b18c17215cc6def9a62834627077ac4c022a8aabb1264","downloaded_from":"2026-09-10T01:38:18.840Z","last_downloaded_at":"2026-09-10T01:38:43.011Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-40","topic":"815","title":"Contracts in Entity's Own Equity","area":"Broad Transactions","paragraphs":154,"summary":"ASC 815-40 governs contracts (freestanding or embedded) that are indexed to, and potentially settled in, an entity's own stock — warrants, written/purchased options, forward sale and purchase contracts, and conversion features. It supplies the two-part test for the derivative scope exception in 815-10-15-74(a): whether the instrument is \"indexed to the entity's own stock\" (two-step analysis in 815-40-15-7 through 15-7I) and whether it would be classified in stockholders' equity (conditions in 815-40-25-7 through 25-30). Equity-classified contracts stay in permanent equity with no remeasurement; contracts failing either part are assets or liabilities measured at fair value through earnings, with classification reassessed every balance sheet date.","concepts":["indexed to entity's own stock","fixed-for-fixed","exercise contingency","net cash settlement","net share settlement","equity classification conditions","down round feature","warrant modification"],"categories":["Derivatives and hedging","Debt and equity","Financial instruments","Presentation"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-40-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Convertible SecurityAddedAccounting Standards Update No. 2020-0608/05/2020
Down Round FeatureAddedAccounting Standards Update No. 2017-1107/13/2017
Freestanding Financial InstrumentAddedAccounting Standards Update No. 2020-0608/05/2020
Financial InstrumentAmendedAccounting Standards Update No. 2024-0203/29/2024
Not-for-Profit EntityAddedAccounting Standards Update No. 2020-0608/05/2020
Public Business EntityAddedAccounting Standards Update No. 2020-0608/05/2020
Registration Payment ArrangementAddedAccounting Standards Update No. 2016-1912/14/2016
Security (2nd def.)AddedAccounting Standards Update No. 2020-0608/05/2020
Securities and Exchange Commission (SEC) FilerAddedAccounting Standards Update No. 2020-0608/05/2020
Share-Based Payment ArrangementAddedAccounting Standards Update No. 2018-0706/20/2018
TransactionAmendedAccounting Standards Update No. 2024-0203/29/2024
815-40-15-2AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-15-2AAddedAccounting Standards Update No. 2020-0608/05/2020
815-40-15-3 through 15-5
AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-15-3AmendedAccounting Standards Update No. 2018-0706/20/2018
815-40-15-5AAmendedAccounting Standards Update No. 2018-0706/20/2018
815-40-15-5DAddedAccounting Standards Update No. 2017-1107/13/2017
815-40-15-6AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-40-15-7CAmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-15-7DAmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-15-8AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-15-8AAmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-15-8AAddedAccounting Standards Update No. 2012-0410/01/2012
815-40-25-1AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-25-3AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-25-4AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-25-6AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-25-6AmendedAccounting Standards Update No. 2016-1912/14/2016
815-40-25-10AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-25-10AAddedAccounting Standards Update No. 2020-0608/05/2020
815-40-25-11 through 25-17
SupersededAccounting Standards Update No. 2020-0608/05/2020
815-40-25-18AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-25-18AmendedAccounting Standards Update No. 2012-0410/01/2012
815-40-25-31 through 25-35
SupersededAccounting Standards Update No. 2020-0608/05/2020
815-40-25-39 through 25-41
AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-35-1AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-35-3AddedAccounting Standards Update No. 2021-0405/03/2021
815-40-35-4AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-40-35-4AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-35-8 through 35-10
AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-35-14 through 35-18
AddedAccounting Standards Update No. 2021-0405/03/2021
815-40-50-1SupersededAccounting Standards Update No. 2020-0608/05/2020
815-40-50-1AAddedAccounting Standards Update No. 2020-0608/05/2020
815-40-50-2AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-50-2AAmendedAccounting Standards Update No. 2025-1112/08/2025
815-40-50-2AAddedAccounting Standards Update No. 2020-0608/05/2020
815-40-50-5AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-50-6AddedAccounting Standards Update No. 2021-0405/03/2021
815-40-55-1SupersededAccounting Standards Update No. 2020-0608/05/2020
815-40-55-1AmendedAccounting Standards Update No. 2018-0706/20/2018
815-40-55-5AmendedAccounting Standards Update No. 2025-1212/17/2025
815-40-55-7AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-55-8 through 55-12
SupersededAccounting Standards Update No. 2020-0608/05/2020
815-40-55-13AmendedAccounting Standards Update No. 2020-0608/05/2020
815-40-55-25AAddedAccounting Standards Update No. 2020-0608/05/2020
815-40-55-26 through 55-32
AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-40-55-33AmendedAccounting Standards Update No. 2017-1107/13/2017
815-40-55-34AmendedAccounting Standards Update No. 2017-1107/13/2017
815-40-55-34AAddedAccounting Standards Update No. 2017-1107/13/2017
815-40-55-35 through 55-42
AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-40-55-42AmendedAccounting Standards Update No. 2012-0410/01/2012
815-40-55-44AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-40-55-45AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-40-55-47AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-40-55-48AmendedMaintenance Update 2020-18 (PDF)11/25/2020
815-40-55-48AmendedAccounting Standards Update No. 2018-0706/20/2018
815-40-55-49 through 55-52
AddedAccounting Standards Update No. 2021-0405/03/2021
815-40-65-1AddedAccounting Standards Update No. 2020-0608/05/2020
815-40-65-2AddedAccounting Standards Update No. 2021-0405/03/2021
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nConvertible Security | Added | Accounting Standards Update No. 2020-06 | 08/05/2020 |\nDo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:91ebbfc7bd3d3d7500c2eda94e8997b1a6e5d13b2f64f7c083931639a1617854","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:38:46.766Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480476","source_sha256":"5e4b42a588b6687d2a65c513cacfbca2d9bd30f73923c99283c0302d2bc4c054"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2bcb0be11b9db52030f678341e79591ff5be26fee881a32266a9392829e18de4","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:38:46.766Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480476","source_sha256":"5e4b42a588b6687d2a65c513cacfbca2d9bd30f73923c99283c0302d2bc4c054"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:57695a5f07524fda2cbfc162d7290cc7c4a1e779428c664c920cbd911e46b461","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:38:46.766Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480476","source_sha256":"5e4b42a588b6687d2a65c513cacfbca2d9bd30f73923c99283c0302d2bc4c054"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-40-05-1","para":"05-1","html":"
For a number of business reasons, an entity may enter into contracts that are indexed to, and sometimes settled in, its own stock. This Subtopic provides guidance on accounting for such contracts. Examples of these contracts include put and call options (both written and purchased) and forward contracts (for both sales and purchases). These contracts may be settled using a variety of settlement methods, or the issuing entity or counterparty may have a choice of settlement methods. The contracts may be either freestanding or embedded in another financial instrument.
","snippet":"For a number of business reasons, an entity may enter into contracts that are indexed to, and sometimes settled in, its own stock. This Subtopic provides guidance on accounting for such contracts. Examples of these contr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4e5f9651f009780d683d8007bcba604ff6e674b6a95171332484a5f12a3b9cfb","downloaded_from":"2026-09-10T01:38:48.549Z","last_downloaded_at":"2026-09-10T01:38:48.549Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480446","source_sha256":"1ea38fe18a2b261212a42d1f33f7ba735bdafc3de834319bccb72f3394f9fe05"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:24fa7511874f5552fc358a805b2c3685f8d35ceb191ae72ffe95a6e8ba34ce89","downloaded_from":"2026-09-10T01:38:48.549Z","last_downloaded_at":"2026-09-10T01:38:48.549Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480446","source_sha256":"1ea38fe18a2b261212a42d1f33f7ba735bdafc3de834319bccb72f3394f9fe05"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f91d7ef73bb0ed546ea45b88d3f5ba748f0549d2c54ca461979bd583d6f7de53","downloaded_from":"2026-09-10T01:38:48.549Z","last_downloaded_at":"2026-09-10T01:38:48.549Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480446","source_sha256":"1ea38fe18a2b261212a42d1f33f7ba735bdafc3de834319bccb72f3394f9fe05"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Entities","paragraphs":[{"citation":"815-40-15-1","para":"15-1","html":"
The guidance in this Subtopic applies to all entities.
","snippet":"The guidance in this Subtopic applies to all entities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0bf6e815fa7de5ed0d6085195421fe65cfd8760a2001b61d553e56783aeed924","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e7e2c0cc76240a05ee56849103d26f6df12bcc51a7e276b0f2bb27dff29a1518","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"block":null,"heading":"Instruments","paragraphs":[{"citation":"815-40-15-2","para":"15-2","html":"
The guidance in this Subtopic applies to freestanding contracts that are potentially indexed to, and potentially settled in, an entity's own stock.
","snippet":"The guidance in this Subtopic applies to freestanding contracts that are potentially indexed to, and potentially settled in, an entity's own stock.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cf6c1e19e4acc0fae11a05629937a5aece27cc07a8ae4b267ccf86da5773fd72","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-2A","para":"15-2A","html":"
The scope of this Subtopic includes security price guarantees or other financial instruments indexed to, or otherwise based on, the price of the entity's stock that are issued in connection with a business combination and that are accounted for as contingent consideration.
","snippet":"The scope of this Subtopic includes security price guarantees or other financial instruments indexed to, or otherwise based on, the price of the entity's stock that are issued in connection with a business combination an…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:58fde1023b7b64a78af07d68b47517a7819c3df9d4ebc71d74fd69a1402a4fb7","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-3","para":"15-3","html":"
The guidance in this Subtopic does not apply to any of the following:
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2020-06.
  2. b
    Contracts that are issued to compensate grantees in a share-based payment arrangementwithin the scope of Topic 718
  3. c
    Subparagraph superseded by Accounting Standards Update No. 2018-07.
  4. d
    A written put option and a purchased call option embedded in the shares of a noncontrolling interest of a consolidated subsidiary if the arrangement is accounted for as a financing under the guidance beginning in paragraph 480-10-55-53
  5. e
    Financial instruments that are within the scope of Topic 480 (see paragraph 815-40-15-12).
","snippet":"The guidance in this Subtopic does not apply to any of the following:\n(a) Subparagraph superseded by Accounting Standards Update No. 2020-06.\n(b) Contracts that are issued to compensate grantees in a share-based payment …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0195843693256f16da0b86fdc1d9a856dd4a316ea2522a3a2cfde68da02eecbc","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-4","para":"15-4","html":"
The guidance in this Subtopic applies to derivatives embedded in contracts in analyzing the embedded feature under paragraphs 815-15-25-1(c) and 815-15-25-14 as though it were a freestanding instrument (as further discussed in paragraphs
815-40-25-39 through 25-40
).
","snippet":"The guidance in this Subtopic applies to derivatives embedded in contracts in analyzing the embedded feature under paragraphs 815-15-25-1(c) and 815-15-25-14 as though it were a freestanding instrument (as further discus…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ad18aef3a0927010a9cf4847b2b33c0aff7b52c70bf3143303168926f40d2ff0","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a72e393ac6182be51e76851a022c92fd3e63fbb38c651f2ab93b30da3ad287e4","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"block":null,"heading":"Evaluating Whether an Instrument or Embedded Feature Is Considered Indexed to an Entity's Own Stock","paragraphs":[{"citation":"815-40-15-5","para":"15-5","html":"
The guidance in this paragraph through paragraph 815-40-15-8 applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative instrument (see the guidance beginning in paragraph 815-10-15-83). That guidance applies for the purpose of determining whether that instrument or embedded feature qualifies for the first part of the scope exception in paragraph 815-10-15-74(a). That guidance does not address the second part of the scope exception in paragraph 815-10-15-74(a), which is addressed in Section 815-40-25. The guidance also applies to any freestanding financial instrument that is potentially settled in an entity's own stock, regardless of whether the instrument has all the characteristics of a derivative instrument for purposes of determining whether the instrument is within the scope of this Subtopic.
","snippet":"The guidance in this paragraph through paragraph 815-40-15-8 applies to any freestanding financial instrument or embedded feature that has all the characteristics of a derivative instrument (see the guidance beginning in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d8a38212cbc697b86330bebf40f25fe479486fc91dbce20fb2c5159e7d051e97","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-5A","para":"15-5A","html":"
The guidance in this paragraph through paragraph 815-40-15-8 does not apply to share-based payment awards within the scope of Topic 718 for purposes of determining whether instruments are classified as liability awards or equity awards under that Topic. Equity-linked financial instruments issued to investors for purposes of establishing a market-based measure of the grant-date fair value of employee stock options are not within the scope of Topic 718 themselves. Consequently, the guidance in this paragraph through paragraph 815-40-15-8 applies to such market-based share-based payment stock option valuation instruments for purposes of making the determinations described in paragraph 815-40-15-5.
","snippet":"The guidance in this paragraph through paragraph 815-40-15-8 does not apply to share-based payment awards within the scope of Topic 718 for purposes of determining whether instruments are classified as liability awards o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c4d79893a47118ef47893ca025978ea545c3fe276fa8b0d02c48187fbe0caa8","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-5B","para":"15-5B","html":"
The guidance in paragraphs
815-40-15-5 through 15-8
shall be applied to the appropriate unit of accounting, as determined under other applicable U.S. generally accepted accounting principles. For example, if an entity issues two freestanding financial instruments and concludes that those two instruments are required to be accounted for separately, then the guidance in paragraphs
815-40-15-5 through 15-8
shall be applied separately to each instrument. In contrast, if an entity issues two freestanding financial instruments and concludes that those two instruments are required to be linked and accounted for on a combined basis as a single financial instrument (for example, pursuant to the guidance in paragraph 815-10-15-8), then the guidance in paragraphs
815-40-15-5 through 15-8
shall be applied to the combined financial instrument.
","snippet":"The guidance in paragraphs 815-40-15-5 through 15-8 shall be applied to the appropriate unit of accounting, as determined under other applicable U.S. generally accepted accounting principles. For example, if an entity is…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:308ff3bff3d42835d381bc00a125baa23e97f3957c0844462e2016a02ea744d5","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-5C","para":"15-5C","html":"
Freestanding financial instruments (and embedded features) for which the payoff to the counterparty is based, in whole or in part, on the stock of a consolidated subsidiary are not precluded from being considered indexed to the entity's own stock in the consolidated financial statements of the parent if the subsidiary is a substantive entity. If the subsidiary is not a substantive entity, the instrument or embedded feature shall not be considered indexed to the entity's own stock. If the subsidiary is considered to be a substantive entity, the guidance beginning in paragraph 815-40-15-5 shall be applied to determine whether the freestanding financial instrument (or an embedded feature) is indexed to the entity's own stock and shall be considered in conjunction with other applicable GAAP (for example, this Subtopic) in determining the classification of the freestanding financial instrument (or an embedded feature) in the financial statements of the entity. The guidance in this paragraph applies to those instruments (and embedded features) in the consolidated financial statements of the parent, whether the instrument was entered into by the parent or the subsidiary. The guidance in this paragraph does not affect the accounting for instruments (or embedded features) that would not otherwise qualify for the scope exception in paragraph 815-10-15-74(a). For example, freestanding instruments that are classified as liabilities (or assets) under Topic 480 and put and call options embedded in a noncontrolling interest that is accounted for as a financing arrangement under Topic 480 are not affected by this guidance. For guidance on presentation of an equity-classified instrument (including an embedded feature that is separately recorded in equity under applicable GAAP) within the scope of the guidance in this paragraph, see paragraph 810-10-45-17A.
","snippet":"Freestanding financial instruments (and embedded features) for which the payoff to the counterparty is based, in whole or in part, on the stock of a consolidated subsidiary are not precluded from being considered indexed…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:72aeaabe52511aa7785cdbacf5f8e3db91498421eb73675f18dafe63c1f60305","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-5D","para":"15-5D","html":"
When classifying a financial instrument with a down round feature, the feature is excluded from the consideration of whether the instrument is indexed to the entity's own stock for the purposes of applying paragraphs
815-40-15-7C through 15-7I
(Step 2).
","snippet":"When classifying a financial instrument with a down round feature, the feature is excluded from the consideration of whether the instrument is indexed to the entity's own stock for the purposes of applying paragraphs 815…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:105135dc62f7d1f11d41be18846005aafb28d78e2d8ccb2200e49739b50dd55a","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-6","para":"15-6","html":"
The guidance in this paragraph applies to both the issuer and the holder of the instrument. Outstanding instruments within the scope of the guidance in paragraphs
815-40-15-5 through 15-8
shall always be considered issued for accounting purposes, except as discussed in the next sentence. Lock-up options shall not be considered issued for accounting purposes unless and until the options become exercisable.
","snippet":"The guidance in this paragraph applies to both the issuer and the holder of the instrument. Outstanding instruments within the scope of the guidance in paragraphs 815-40-15-5 through 15-8 shall always be considered issue…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86b555e027c4c75a5db850aa5c641d765a77450bfec8cd4508882b18677add60","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7","para":"15-7","html":"
An entity shall evaluate whether an equity-linked financial instrument (or embedded feature), as discussed in paragraphs
815-40-15-5 through 15-8
is considered indexed to its own stock within the meaning of this Subtopic and paragraph 815-10-15-74(a) using the following two-step approach:
  1. a
    Evaluate the instrument's contingent exercise provisions, if any.
  2. b
    Evaluate the instrument's settlement provisions.
","snippet":"An entity shall evaluate whether an equity-linked financial instrument (or embedded feature), as discussed in paragraphs 815-40-15-5 through 15-8 is considered indexed to its own stock within the meaning of this Subtopic…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:17d505f31893c1a5e3250964e86b2c8fbfd29b473e950586ddfc1aa910998f02","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7A","para":"15-7A","html":"
An exercise contingency shall not preclude an instrument (or embedded feature) from being considered indexed to an entity's own stock provided that it is not based on either of the following:
  1. a
    An observable market, other than the market for the issuer's stock (if applicable)
  2. b
    An observable index, other than an index calculated or measured solely by reference to the issuer's own operations (for example, sales revenue of the issuer; earnings before interest, taxes, depreciation, and amortization of the issuer; net income of the issuer; or total equity of the issuer).
If the evaluation of Step 1 (this paragraph) does not preclude an instrument from being considered indexed to the entity's own stock, the analysis shall proceed to Step 2 (see paragraph 815-40-15-7C).
","snippet":"An exercise contingency shall not preclude an instrument (or embedded feature) from being considered indexed to an entity's own stock provided that it is not based on either of the following:\n(a) An observable market, ot…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b7ef68622d9776dbac84add045bc28189a92985a2e74b7725c63d6a94b0e761d","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7B","para":"15-7B","html":"
If an instrument's strike price or the number of shares used to calculate the settlement amount would be adjusted upon the occurrence of an exercise contingency, the exercise contingency shall be evaluated under Step 1 (see the preceding paragraph) and the potential adjustment to the instrument's settlement amount shall be evaluated under Step 2 (see the guidance beginning in the following paragraph).
","snippet":"If an instrument's strike price or the number of shares used to calculate the settlement amount would be adjusted upon the occurrence of an exercise contingency, the exercise contingency shall be evaluated under Step 1 (…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:434b12fbb29150986d630e44227540e53f33f46e658f687dcf784e57f78ce28b","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7C","para":"15-7C","html":"
Unless paragraph 815-40-15-7A precludes it, an instrument (or embedded feature) shall be considered indexed to an entity's own stock if its settlement amount will equal the difference between the following:
  1. a
    The fair value of a fixed number of the entity's equity shares
  2. b
    A fixed monetary amount or a fixed amount of a debt instrument issued by the entity.
For example, an issued share option that gives the counterparty a right to buy a fixed number of the entity's shares for a fixed price or for a fixed stated principal amount of a bond issued by the entity shall be considered indexed to the entity's own stock.
","snippet":"Unless paragraph 815-40-15-7A precludes it, an instrument (or embedded feature) shall be considered indexed to an entity's own stock if its settlement amount will equal the difference between the following:\n(a) The fair …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c386231a4cc15da480a83974b187e481a2b9ee934db6a80e86304b6df5141e83","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7D","para":"15-7D","html":"
An instrument's strike price or the number of shares used to calculate the settlement amount are not fixed if its terms provide for any potential adjustment, regardless of the probability of such adjustment(s) or whether such adjustments are in the entity's control. If the instrument's strike price or the number of shares used to calculate the settlement amount are not fixed, the instrument (or embedded feature) shall still be considered indexed to an entity's own stock if the only variables that could affect the settlement amount would be inputs to the fair value of a fixed-for-fixed forward or option on equity shares (provided that paragraph 815-40-15-7A does not preclude such a conclusion).
","snippet":"An instrument's strike price or the number of shares used to calculate the settlement amount are not fixed if its terms provide for any potential adjustment, regardless of the probability of such adjustment(s) or whether…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e9faff05a1397dec794b765088cc661b3fb101bd4a668a986db380bb77f267d4","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7E","para":"15-7E","html":"
A fixed-for-fixed forward or option on equity shares has a settlement amount that is equal to the difference between the price of a fixed number of equity shares and a fixed strike price. The fair value inputs of a fixed-for-fixed forward or option on equity shares may include the entity's stock price and additional variables, including all of the following:
  1. a
    Strike price of the instrument
  2. b
    Term of the instrument
  3. c
    Expected dividends or other dilutive activities
  4. d
    Stock borrow cost
  5. e
    Interest rates
  6. f
    Stock price volatility
  7. g
    The entity's credit spread
  8. h
    The ability to maintain a standard hedge position in the underlying shares.
Determinations and adjustments related to the settlement amount (including the determination of the ability to maintain a standard hedge position) shall be commercially reasonable.
","snippet":"A fixed-for-fixed forward or option on equity shares has a settlement amount that is equal to the difference between the price of a fixed number of equity shares and a fixed strike price. The fair value inputs of a fixed…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3cc07ae0f88c43fc92d61cccd363fc90852f0c65517f5f4ee00031a49888d7a1","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7F","para":"15-7F","html":"
An instrument (or embedded feature) shall not be considered indexed to the entity's own stock if its settlement amount is affected by variables that are extraneous to the pricing of a fixed-for-fixed option or forward contract on equity shares. An instrument (or embedded feature) shall not be considered indexed to the entity's own stock if either:
  1. a
    The instrument's settlement calculation incorporates variables other than those used to determine the fair value of a fixed-for-fixed forward or option on equity shares.
  2. b
    The instrument contains a feature (such as a leverage factor) that increases exposure to the additional variables listed in the preceding paragraph in a manner that is inconsistent with a fixed-for-fixed forward or option on equity shares.
","snippet":"An instrument (or embedded feature) shall not be considered indexed to the entity's own stock if its settlement amount is affected by variables that are extraneous to the pricing of a fixed-for-fixed option or forward co…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8d88dd575982e86f89b3484988017ad326b02054327e189eb1a4d10388d70ace","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7G","para":"15-7G","html":"
Standard pricing models for equity-linked financial instruments contain certain implicit assumptions. One such assumption is that the stock price exposure inherent in those instruments can be hedged by entering into an offsetting position in the underlying equity shares. For example, the Black-Scholes-Merton option-pricing model assumes that the underlying shares can be sold short without transaction costs and that stock price changes will be continuous. Accordingly, for purposes of applying Step 2, fair value inputs include adjustments to neutralize the effects of events that can cause stock price discontinuities. For example, a merger announcement may cause an immediate jump (up or down) in the price of shares underlying an equity-linked option contract. A holder of that instrument would not be able to continuously adjust its hedge position in the underlying shares due to the discontinuous stock price change. As a result, changes in the fair value of an equity-linked instrument and changes in the fair value of an offsetting hedge position in the underlying shares will differ, creating a gain or loss for the instrument holder as a result of the merger announcement. Therefore, inclusion of provisions that adjust the terms of the instrument to offset the net gain or loss resulting from a merger announcement or similar event do not preclude an equity-linked instrument (or embedded feature) from being considered indexed to an entity's own stock.
","snippet":"Standard pricing models for equity-linked financial instruments contain certain implicit assumptions. One such assumption is that the stock price exposure inherent in those instruments can be hedged by entering into an o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0131d4c6f18da0853a9c8b55cf99fb2ccc557d7b09e0120b0eebad5ed0f9ee24","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7H","para":"15-7H","html":"
Some equity-linked financial instruments contain provisions that provide an entity with the ability to unilaterally modify the terms of the instrument at any time, provided that such modification benefits the counterparty. For example, the terms of a convertible debt instrument may explicitly permit the issuer to reduce the conversion price at any time to induce conversion of the instrument. For purposes of applying Step 2, such provisions do not affect the determination of whether an instrument (or embedded feature) is considered indexed to an entity's own stock.
","snippet":"Some equity-linked financial instruments contain provisions that provide an entity with the ability to unilaterally modify the terms of the instrument at any time, provided that such modification benefits the counterpart…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0ce25b60ca9512b4cee9ffea6f7dea6f747d575819faccb312ed9d8e8f0c59a6","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-7I","para":"15-7I","html":"
The issuer of an equity-linked financial instrument incurs an exposure to changes in currency exchange rates if the instrument's strike price is denominated in a currency other than the functional currency of the issuer. An equity-linked financial instrument (or embedded feature) shall not be considered indexed to the entity's own stock if the strike price is denominated in a currency other than the issuer's functional currency (including a conversion option embedded in a convertible debt instrument that is denominated in a currency other than the issuer's functional currency). The determination of whether an equity-linked financial instrument is indexed to an entity's own stock is not affected by the currency (or currencies) in which the underlying shares trade.
","snippet":"The issuer of an equity-linked financial instrument incurs an exposure to changes in currency exchange rates if the instrument's strike price is denominated in a currency other than the functional currency of the issuer.…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ba1f44b365f32e42ae8f6b8d30d1472820083fe056608e464fdc8673065cecc7","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-8","para":"15-8","html":"
Examples 2-21 (see paragraphs
815-40-55-26 through 55-48
) illustrate the application of the guidance in paragraphs
815-40-15-5 through 15-7
. These examples do not address whether an instrument (or embedded feature) is classified in equity (or would be classified in equity if freestanding). These examples also do not address whether the instrument is within the scope of Topic 480 or whether the instrument would be subject to the two-class method under Topic 260.
","snippet":"Examples 2-21 (see paragraphs 815-40-55-26 through 55-48) illustrate the application of the guidance in paragraphs 815-40-15-5 through 15-7. These examples do not address whether an instrument (or embedded feature) is cl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:12d171f3a3c11afacd732c82b0db54c379282ebb076301af256009b8b09aa11d","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-8A","para":"15-8A","html":"
If the instrument does not meet the criteria to be considered indexed to an entity's own stock as described in paragraphs
815-40-15-5 through 15-8
, it shall be classified as a liability or an asset. See paragraph 815-40-35-4 for subsequent measurement guidance for those instruments. See paragraph 815-40-15-9 for guidance on the interaction with this Subtopic and Subtopics 815-10 and 815-15 for derivative instruments and embedded derivatives.
","snippet":"If the instrument does not meet the criteria to be considered indexed to an entity's own stock as described in paragraphs 815-40-15-5 through 15-8, it shall be classified as a liability or an asset. See paragraph 815-40-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:555c184fd71a3e6e8cfe7fe04c37810174587005136649e6cd18c09449e497e5","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e19d75efc1bbcbaea2a78322f680279211332c242703a2ffed225aebacf3135a","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"block":null,"heading":"Other Considerations","paragraphs":[{"citation":"815-40-15-9","para":"15-9","html":"
For guidance on the interaction of this Subtopic and Subtopic 815-10, see paragraphs
815-10-15-74 through 15-78
. For guidance on the interaction of this Subtopic and Subtopic 815-15, see paragraph 815-15-25-15.
","snippet":"For guidance on the interaction of this Subtopic and Subtopic 815-10, see paragraphs 815-10-15-74 through 15-78. For guidance on the interaction of this Subtopic and Subtopic 815-15, see paragraph 815-15-25-15.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b1b44d6107245d0fabff01534268e8cfdcf76da365eafecbcc0e9a21bced0a09","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-10","para":"15-10","html":"
Topic 460 provides an exception from its initial recognition and initial measurement requirements, but not its disclosure provisions, for a guarantee for which the guarantor's obligation would be reported as an equity item (rather than a liability) under generally accepted accounting principles (GAAP).
","snippet":"Topic 460 provides an exception from its initial recognition and initial measurement requirements, but not its disclosure provisions, for a guarantee for which the guarantor's obligation would be reported as an equity it…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0e14132cb5e62dbb7a645512136b9e0bcce2d715802485e813381a5eedde941a","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-11","para":"15-11","html":"
If a contract under this Subtopic is required to be accounted for as a liability under this Subtopic and also meets the definition of a guarantee under Topic 460 (for example, a physically settled written put option), both this Subtopic and that Topic are consistent with respect to requiring the issuer to account for the contract at fair value at the initial measurement date. In that situation, the guarantee would also be subject to the disclosure requirements of Topic 460.
","snippet":"If a contract under this Subtopic is required to be accounted for as a liability under this Subtopic and also meets the definition of a guarantee under Topic 460 (for example, a physically settled written put option), bo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:345ddbf8489d3e798e8a1d154cd800b766e8366498b9b37cc841f32f8546ea62","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-12","para":"15-12","html":"
Paragraph 480-10-15-5 explains that Topic 480 does not apply to a feature embedded in a financial instrument that is not a derivative instrument in its entirety (for example, a written put option embedded in a nonderivative host contract) in analyzing the embedded feature as though it were a separate instrument as required by paragraph 815-15-25-1(c). Therefore, this Subtopic applies in evaluating those embedded features under Subtopic 815-15.
","snippet":"Paragraph 480-10-15-5 explains that Topic 480 does not apply to a feature embedded in a financial instrument that is not a derivative instrument in its entirety (for example, a written put option embedded in a nonderivat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f5dd7c729fda5d06a6b75d3ada88e4aa86497c64198c2978cefaf21e2f09e6e","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"citation":"815-40-15-13","para":"15-13","html":"
Paragraph not used.
","snippet":"Paragraph not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:03a19e6a93b29897d638404aee19f67b7a4c8fc27e482b9e3a79fd78cce97af8","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8108739c37e10ef69645fcbd5f3801ff97c24361d51125d35686c1d25a222bbd","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:be4d08a6647abeec51518dee0ebb0ecf9233003abe216105aed83e17f8e33450","downloaded_from":"2026-09-10T01:38:51.967Z","last_downloaded_at":"2026-09-10T01:38:51.967Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480415","source_sha256":"8417836dc63c4479291fe28e10c53891e684f49f98ab3d3081dee9b31296aa69"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-40-25-1","para":"25-1","html":"
The guidance in this Section applies for the purpose of determining whether an instrument or embedded feature qualifies for the second part of the scope exception in paragraph 815-10-15-74(a). The first part of the scope exception in paragraph 815-10-15-74(a) is addressed in Section 815-40-15. The initial balance sheet classification of contracts within the scope of this Subtopic generally is based on the concept that:
  1. a
    Contracts that require net cash settlement are assets or liabilities.
  2. b
    Contracts that require settlement in shares are equity instruments.
","snippet":"The guidance in this Section applies for the purpose of determining whether an instrument or embedded feature qualifies for the second part of the scope exception in paragraph 815-10-15-74(a). The first part of the scope…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e47bff1197c747ddd7f8c2e1f132ccec50f8631d6b13ebf9f084583fc24bdb88","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-2","para":"25-2","html":"
Further, an entity shall observe both of the following:
  1. a
    If the contract provides the counterparty with a choice of net cash settlement or settlement in shares, this Subtopic assumes net cash settlement.
  2. b
    If the contract provides the entity with a choice of net cash settlement or settlement in shares, this Subtopic assumes settlement in shares.
","snippet":"Further, an entity shall observe both of the following:\n(a) If the contract provides the counterparty with a choice of net cash settlement or settlement in shares, this Subtopic assumes net cash settlement.\n(b) If the co…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:54d8c56317ae9a29f96306d8942b1724a816f46034280a22252d463e142536ca","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-3","para":"25-3","html":"
Except as noted in the last sentence of this paragraph, the approach discussed in paragraphs
815-40-25-1 through 25-2
does not apply if settlement alternatives do not have the same economic value attached to them or if one of the settlement alternatives is fixed or contains caps or floors. In those situations, the accounting for the instrument (or combination of instruments) shall be based on the economic substance of the transaction. For example, if a freestanding contract, issued together with another instrument, requires that the entity provide to the holder a fixed or guaranteed return such that the instruments are, in substance, debt, the entity shall account for both instruments as liabilities, regardless of the settlement terms of the freestanding contract. However, the approach discussed in paragraphs
815-40-25-1 through 25-2
does apply to contracts that have settlement alternatives with different economic values if the reason for the difference is a limit on the number of shares that must be delivered by the entity pursuant to a net share settlement alternative.
","snippet":"Except as noted in the last sentence of this paragraph, the approach discussed in paragraphs 815-40-25-1 through 25-2 does not apply if settlement alternatives do not have the same economic value attached to them or if o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ab5c68c1860a35d02eea774fc5d5df4b1b31a10ade2b4a2844e3a5d376c5c793","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-4","para":"25-4","html":"
Accordingly, unless the economic substance indicates otherwise:
  1. a
    Contracts shall be initially classified as either assets or liabilities in both of the following situations:
    1. 1
      Contracts that require net cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the entity)
    2. 2
      Contracts that give the counterparty a choice of net cash settlement or settlement in shares (physical settlement or net share settlement).
  2. b
    Contracts shall be initially classified as equity in both of the following situations:
    1. 1
      Contracts that require physical settlement or net share settlement
    2. 2
      Contracts that give the entity a choice of net cash settlement or settlement in its own shares (physical settlement or net share settlement), assuming that all the criteria set forth in paragraphs
      815-40-25-7 through 25-30
      and
      815-40-55-2 through 55-6
      have been met.
","snippet":"Accordingly, unless the economic substance indicates otherwise:\n(a) Contracts shall be initially classified as either assets or liabilities in both of the following situations:\n(1) Contracts that require net cash settlem…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:01dc3439d86064e915410cdbf5644e522c38114e8a4580efc452e55953a83879","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-5","para":"25-5","html":"
Paragraph 815-20-55-33 explains that derivative instruments that are indexed to an entity's own stock and recorded as assets or liabilities can be hedging instruments.
","snippet":"Paragraph 815-20-55-33 explains that derivative instruments that are indexed to an entity's own stock and recorded as assets or liabilities can be hedging instruments.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:022c4364eb3e99973cb7ef154b7e65a748f2d3723b4468b4cbce370f2f408a69","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-6","para":"25-6","html":"
The remainder of this Section addresses the following matters:
  1. a
    Additional conditions necessary for equity classification
  2. b
    Settlement alternatives that differ in gain and loss positions
  3. c
    Application of additional criteria to convertible debt and other hybrid instruments
  4. d
    Effect of a registration payment arrangement.
","snippet":"The remainder of this Section addresses the following matters:\n(a) Additional conditions necessary for equity classification\n(b) Settlement alternatives that differ in gain and loss positions\n(c) Application of additiona…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7efebbbc0fc9f5be22b9e12d7c1dfcf98447f39d6f21de79ba7a156931a5a4ed","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:89ac419676e3620746e64391936482393fb914797965a26a56f5a509960c4fad","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"block":null,"heading":"Additional Conditions Necessary for Equity Classification","paragraphs":[{"citation":"815-40-25-7","para":"25-7","html":"
Contracts that include any provision that could require net cash settlement cannot be accounted for as equity of the entity (that is, asset or liability classification is required for those contracts), except in those limited circumstances in which holders of the underlying shares also would receive cash (as discussed in the following two paragraphs and paragraphs
815-40-55-2 through 55-6
).
","snippet":"Contracts that include any provision that could require net cash settlement cannot be accounted for as equity of the entity (that is, asset or liability classification is required for those contracts), except in those li…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:072552568f72e7479ff46128358291270af34c17f23d7ae6b371f27e2485d264","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-8","para":"25-8","html":"
Generally, if an event that is not within the entity's control could require net cash settlement, then the contract shall be classified as an asset or a liability. However, if the net cash settlement requirement can only be triggered in circumstances in which the holders of the shares underlying the contract also would receive cash, equity classification is not precluded.
","snippet":"Generally, if an event that is not within the entity's control could require net cash settlement, then the contract shall be classified as an asset or a liability. However, if the net cash settlement requirement can only…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7af996acdab754a2397f39abedde830e77d04688d52783f0eccee4f3c6773f61","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-9","para":"25-9","html":"
This Subtopic does not allow for an evaluation of the likelihood that an event would trigger cash settlement (whether net cash or physical), except that if the payment of cash is only required upon the final liquidation of the entity, then that potential outcome need not be considered when applying the guidance in this Subtopic.
","snippet":"This Subtopic does not allow for an evaluation of the likelihood that an event would trigger cash settlement (whether net cash or physical), except that if the payment of cash is only required upon the final liquidation …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fdceafcc9a4b26f227451120b9c39e16e92c9bb23266037b4a044e551dd12840","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-10","para":"25-10","html":"
Because any contract provision that could require net cash settlement precludes accounting for a contract as equity of the entity (except for those circumstances in which the holders of the underlying shares would receive cash, as discussed in paragraphs
815-40-25-8 through 25-9
and paragraphs
815-40-55-2 through 55-6
), all of the following conditions must be met for a contract to be classified as equity:
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2020-06.
  2. b
    Entity has sufficient authorized and unissued shares. The entity has sufficient authorized and unissued shares available to settle the contract after considering all other commitments that may require the issuance of stock during the maximum period the derivative instrument could remain outstanding.
  3. c
    Contract contains an explicit share limit. The contract contains an explicit limit on the number of shares to be delivered in a share settlement.
  4. d
    No required cash payment (with the exception of penalty payments) if entity fails to timely file. There is no requirement to net cash settle the contract in the event the entity fails to make timely filings with the Securities and Exchange Commission (SEC).
  5. e
    No cash-settled top-off or make-whole provisions. There are no cash settled top-off or make-whole provisions.
  6. f
    Subparagraph superseded by Accounting Standards Update No. 2020-06.
  7. g
    Subparagraph superseded by Accounting Standards Update No. 2020-06.
Paragraphs
815-40-25-39 through 25-42
explain the application of these criteria to convertible debt and other hybrid instruments.
","snippet":"Because any contract provision that could require net cash settlement precludes accounting for a contract as equity of the entity (except for those circumstances in which the holders of the underlying shares would receiv…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9516410fc239fad0f78f012ab2317628361c8892ba443ea7386ca856c5f5df73","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-10A","para":"25-10A","html":"
The following conditions are not required to be considered in an entity's evaluation of net cash settlement (that is, if any one of these provisions is in a contract [or the contract is silent on these points], they should not preclude equity classification, except as described below):
  1. a
    Whether settlement is required in registered shares, unless the contract explicitly states that an entity must settle in cash if registered shares are unavailable. Requirements to deliver registered shares do not, by themselves, imply that an entity does not have the ability to deliver shares and, thus, do not require a contract that otherwise qualifies as equity to be classified as a liability.
  2. b
    Whether counterparty rights rank higher than shareholder rights. If the provisions of the contract indicate that the counterparty has rights that rank higher than the rights of a shareholder of the stock underlying the contract, this provision does not preclude equity classification.
  3. c
    Whether collateral is required. A provision requiring the entity to post collateral at any time for any reason does not preclude equity classification.
","snippet":"The following conditions are not required to be considered in an entity's evaluation of net cash settlement (that is, if any one of these provisions is in a contract [or the contract is silent on these points], they shou…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:798d12a5de52d0d64d29573e4df84961764decb22c21b13365e6ee45dc6e8bdf","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-11","para":"25-11","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2392048751c9eab4d5e2343c9dd8fb5be620db7d7f3ea68268b01f487f66e359","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-12","para":"25-12","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f2a101256dce278929d58670c7b2e79b0a82d10fac7fae9ffdd056b94ca279c6","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-13","para":"25-13","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f213b2becb85ed592bddd5bb68be3864bedecf2f5d196680835e0c3820343995","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-14","para":"25-14","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
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Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:582e03a9abeb3a0734764ee1536cb54af516030452dab5d667776d33622af001","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-16","para":"25-16","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
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Paragraph superseded by Accounting Standards Update No. 2020-06.
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If a settlement alternative includes a penalty that would be avoided by an entity under other settlement alternatives, the uneconomic settlement alternative shall be disregarded in classifying the contract.
","snippet":"If a settlement alternative includes a penalty that would be avoided by an entity under other settlement alternatives, the uneconomic settlement alternative shall be disregarded in classifying the contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5f9bf1adba67f92b0b13bb16369284daa5afb6cde5ee7703c3457bc050a3c8c7","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-19","para":"25-19","html":"
If an entity could be required to obtain shareholder approval to increase the entity's authorized shares to net share or physically settle a contract, share settlement is not controlled by the entity.
","snippet":"If an entity could be required to obtain shareholder approval to increase the entity's authorized shares to net share or physically settle a contract, share settlement is not controlled by the entity.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b839d3567e4d679c47f79b94a2921ea57cd75020ab39c5186e933ac2b61fdca8","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-20","para":"25-20","html":"
Accordingly, an entity shall evaluate whether a sufficient number of authorized and unissued shares exists at the classification assessment date to control settlement by delivering shares. In that evaluation, an entity shall compare both of the following amounts:
  1. a
    The number of currently authorized but unissued shares, less the maximum number of shares that could be required to be delivered during the contract period under existing commitments, including any of the following:
    1. 1
      Outstanding convertible debt that is convertible during the contract period
    2. 2
      Outstanding stock options that are or will become exercisable during the contract period
    3. 3
      Other derivative financial instruments indexed to, and potentially settled in, an entity's own stock.
  2. b
    The maximum number of shares that could be required to be delivered under share settlement (either net share or physical) of the contract.
","snippet":"Accordingly, an entity shall evaluate whether a sufficient number of authorized and unissued shares exists at the classification assessment date to control settlement by delivering shares. In that evaluation, an entity s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:89ce4b2be86ea2f518d2ef5fe6f3b5e8db0bcaf2761b24a6b7b2c5697cefcb3f","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-21","para":"25-21","html":"
When evaluating whether there are sufficient authorized and unissued shares available to settle a contract, an entity shall consider the maximum number of shares that could be required to be delivered under a registration payment arrangement to be an existing share commitment, regardless of whether the instrument being evaluated is subject to that registration payment arrangement.
","snippet":"When evaluating whether there are sufficient authorized and unissued shares available to settle a contract, an entity shall consider the maximum number of shares that could be required to be delivered under a registratio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ec4c026ebae4052b0e1efdd0cc4a07623679a8c0bc423d9c894c5482e1a1fc7c","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-22","para":"25-22","html":"
If the amount in paragraph 815-40-25-20(a) exceeds the amount in paragraph 815-40-25-20(b) and the other conditions in this Subtopic are met, share settlement is within the control of the entity and the contract shall be classified as a permanent equity instrument. Otherwise, share settlement is not within the control of the entity and asset or liability classification is required.
","snippet":"If the amount in paragraph 815-40-25-20(a) exceeds the amount in paragraph 815-40-25-20(b) and the other conditions in this Subtopic are met, share settlement is within the control of the entity and the contract shall be…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dcf3a0fbe93acf49c0a2e2b82eb48feeced98266a997a647f8d78ea584dca21f","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-23","para":"25-23","html":"
For purposes of this calculation, if a contract permits both (a) net share and (b) physical settlement by delivery of shares at the entity's option (both alternatives permit equity classification if the other conditions in this Section are met), the alternative that results in the lesser number of maximum shares shall be included in this calculation.
","snippet":"For purposes of this calculation, if a contract permits both (a) net share and (b) physical settlement by delivery of shares at the entity's option (both alternatives permit equity classification if the other conditions …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a06ab5e94aa737623736971392a2be07c9f77bed1f00d51228e5f09a93eb4b2f","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-24","para":"25-24","html":"
If a contract is classified as either an asset or a liability because the counterparty has the option to require settlement of the contract in cash, then the maximum number of shares that the counterparty could require to be delivered upon settlement of the contract (whether physical or net share) shall be assumed for purposes of this calculation.
","snippet":"If a contract is classified as either an asset or a liability because the counterparty has the option to require settlement of the contract in cash, then the maximum number of shares that the counterparty could require t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ab7944a19b380dacfb97fc33eed93f4d3dab2b34002c9dc6dcb11a0f3641dc5f","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-25","para":"25-25","html":"
Paragraph not used.
","snippet":"Paragraph not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fe0b8c5d434803fcd2e9d5a814bdbc434ecf31be7c487b2cde5d2f7102d2f4a4","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-26","para":"25-26","html":"
For certain contracts, the number of shares that could be required to be delivered upon net share settlement is essentially indeterminate. If the number of shares that could be required to be delivered to net share settle the contract is indeterminate, an entity will be unable to conclude that it has sufficient available authorized and unissued shares and, therefore, net share settlement is not within the control of the entity.
","snippet":"For certain contracts, the number of shares that could be required to be delivered upon net share settlement is essentially indeterminate. If the number of shares that could be required to be delivered to net share settl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5fcf41498c047cddad4e6a0f9ef90284b48e724b13dbd5c24e3d722c1c20c86","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-27","para":"25-27","html":"
If a contract limits or caps the number of shares to be delivered upon expiration of the contract to a fixed number, that fixed maximum number can be compared to the available authorized and unissued shares (the available number after considering the maximum number of shares that could be required to be delivered during the contract period under existing commitments as addressed in paragraph 815-40-25-20 and including top-off or make-whole provisions as discussed in paragraph 815-40-25-30) to determine if net share settlement is within the control of the entity. A contract termination trigger alone (for example, a provision that requires that the contract will be terminated and settled if the stock price falls below a specified price) does not satisfy this requirement because, in that circumstance, the maximum number of shares deliverable under the contract is not known with certainty unless there is a stated maximum number of shares.
","snippet":"If a contract limits or caps the number of shares to be delivered upon expiration of the contract to a fixed number, that fixed maximum number can be compared to the available authorized and unissued shares (the availabl…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d365f32eadca412a668a0e5fed600a82382161454a3a855e5026f9e720556f1b","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-28","para":"25-28","html":"
This paragraph addresses a contract structure that caps the number of shares that must be delivered upon net share settlement but would also provide that any contract valued in excess of that capped amount may be delivered to the counterparty in cash or by delivery of shares (at the entity's option) when authorized, unissued shares become available. The structure requires the entity to use its best efforts to authorize sufficient shares to satisfy the obligation. Under the structure, the number of shares specified in the cap is less than the entity's authorized, unissued shares less the number of shares that are part of other commitments (see paragraph 815-40-25-20). Use of the entity's best efforts to obtain sufficient authorized shares to settle the contract is within the entity's control. If the contract provides that the number of shares required to settle the excess obligation is fixed on the date that net share settlement of the contract occurs, the excess shares need not be considered when determining whether the entity has sufficient, authorized, unissued shares to net share settle the contract pursuant to paragraph 815-40-25-20. However, the contract may provide that the number of shares that must be delivered to settle the excess obligation is equal to a dollar amount that is fixed on the date of net share settlement (which may or may not increase based on a stated interest rate on the obligation) and that the number of shares to be delivered will be based on the market value of the stock at the date the excess amount is settled. In that case, the excess obligation represents stock-settled debt and shall preclude equity classification of the contract (or, if partial net share settlement is permitted under the contract pursuant to paragraph 815-40-35-11, precludes equity classification of the portion represented by the excess obligation).
","snippet":"This paragraph addresses a contract structure that caps the number of shares that must be delivered upon net share settlement but would also provide that any contract valued in excess of that capped amount may be deliver…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:75035a0b541cfb66d5cb3585b170c743c1a55242b43ef91503af2b8266adaa88","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-29","para":"25-29","html":"
The ability to make timely SEC filings is not within the control of the entity. Accordingly, if a contract permits share settlement but requires net cash settlement in the event that the entity does not make timely filings with the SEC, that contract shall be classified as an asset or a liability.
","snippet":"The ability to make timely SEC filings is not within the control of the entity. Accordingly, if a contract permits share settlement but requires net cash settlement in the event that the entity does not make timely filin…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47b383d1a03c8ef8d47fd488ebf2b75055065f3164431a68cfac6283a4d5a7a0","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-30","para":"25-30","html":"
A top-off or make-whole provision would not preclude equity classification if both of the following conditions exist:
  1. a
    The provision can be net share settled.
  2. b
    The maximum number of shares that could be required to be delivered under the contract (including any top-off or make-whole provisions) is both:
    1. 1
      Fixed
    2. 2
      Less than the number of available authorized shares (authorized and unissued shares less the maximum number of shares that could be required to be delivered during the contract period under existing commitments as discussed in paragraph 815-40-25-20).
If those conditions are not met, equity classification is precluded.
","snippet":"A top-off or make-whole provision would not preclude equity classification if both of the following conditions exist:\n(a) The provision can be net share settled.\n(b) The maximum number of shares that could be required to…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ee1e139527d7d789890aed1712a8537a7707065df9c35cb0725392819fcba14f","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-31","para":"25-31","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6c27eba5a1e1f37bec8dd3e6acd627332981eb94a1d7afce681b966381f2ed6f","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-32","para":"25-32","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d50dbebd1798580128517e816ab9c97388cc052f713f5bc34d0ff787c6a9526a","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-33","para":"25-33","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:25adf3e9418ca012774213eec290df77f807365a97033648e606ca234fb38fb1","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-34","para":"25-34","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:626e7e95e9d83c22b4dcd7a1e76636a184e6e014826bcb5afa735ece5dc1b21e","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-35","para":"25-35","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2d1f960768db7796640e826636e2b9028daafd5255402b6d53efa21f7d84ffa1","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b583b01e9e5b2a95cb97ca617f75c212d9e54c640fb8ae5e87043cb97605aa05","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"block":null,"heading":"Settlement Alternatives Differ in Gain and Loss Positions","paragraphs":[{"citation":"815-40-25-36","para":"25-36","html":"
This guidance addresses two circumstances in which settlement alternatives differ in gain and loss positions:
  1. a
    Net cash payment required in loss position
  2. b
    Net-stock alternative in loss position.
","snippet":"This guidance addresses two circumstances in which settlement alternatives differ in gain and loss positions:\n(a) Net cash payment required in loss position\n(b) Net-stock alternative in loss position.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:373a2c031948676e2294ad35fb96db5b77402c290e0e152e656d8dd65f3d3172","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-37","para":"25-37","html":"
A contract indexed to, and potentially settled in, an entity's own stock, with multiple settlement alternatives that require the entity to pay net cash when the contract is in a loss position but receive (a) net stock or (b) either net cash or net stock at the entity's option when the contract is in a gain position shall be accounted for as an asset or a liability.
","snippet":"A contract indexed to, and potentially settled in, an entity's own stock, with multiple settlement alternatives that require the entity to pay net cash when the contract is in a loss position but receive (a) net stock or…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:29fce467d1dbc02040f0e8356b8c578e5ed9529cd3221b1766e51db09a75f0da","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-38","para":"25-38","html":"
A contract indexed to, and potentially settled in, an entity's own stock, within the scope of this Subtopic and with multiple settlement alternatives that require the entity to receive net cash when the contract is in a gain position but pay (a) net stock or (b) either net cash or net stock at the entity's option when the contract is in a loss position shall be accounted for as an equity instrument. This guidance does not apply to a contract that is predominantly a purchased option in which the amount of cash that could be received when the contract is in a gain position is significantly larger than the amount that could be paid when the contract is in a loss position because, for example, there is a small contractual limit on the amount of the loss. Those contracts shall be accounted for as assets or liabilities.
","snippet":"A contract indexed to, and potentially settled in, an entity's own stock, within the scope of this Subtopic and with multiple settlement alternatives that require the entity to receive net cash when the contract is in a …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d0e7fb006d9fbb0bcd9549976728594f4fb85f1bf9040897ff5c06461ac7eeb5","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9033d787d477bf77f145994dc2f942a36b7de16128782d148f15898e08751c90","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"block":null,"heading":"Application of Additional Criteria to Convertible Debt Instruments and Other Hybrid Instruments","paragraphs":[{"citation":"815-40-25-39","para":"25-39","html":"
For purposes of evaluating under paragraph 815-15-25-1 whether an embedded derivative indexed to an entity's own stock would be classified in stockholders' equity if freestanding, the requirements of paragraphs
815-40-25-7 through 25-30
and
815-40-55-2 through 55-6
do not apply if the hybrid contract is a convertible debt instrument in which the holder may only realize the value of the conversion option by exercising the option and receiving the entire proceeds in a fixed number of shares or the equivalent amount of cash (at the discretion of the issuer).
","snippet":"For purposes of evaluating under paragraph 815-15-25-1 whether an embedded derivative indexed to an entity's own stock would be classified in stockholders' equity if freestanding, the requirements of paragraphs 815-40-25…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:186fb0662bdc95f104ff33174f55dacbc11cc8dccd54bddac6b742c33635bb8b","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-40","para":"25-40","html":"
However, the requirements of paragraphs
815-40-25-7 through 25-30
and
815-40-55-2 through 55-6
do apply if an issuer is evaluating whether any other embedded derivative is an equity instrument and thereby excluded from the scope of Subtopic 815-10.
","snippet":"However, the requirements of paragraphs 815-40-25-7 through 25-30 and 815-40-55-2 through 55-6 do apply if an issuer is evaluating whether any other embedded derivative is an equity instrument and thereby excluded from t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7b57988b8468f6635a01703ce1deafe3ede6b7a0f6d2f735ebfa3d02149b4cd5","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-41","para":"25-41","html":"
Instruments that provide the holder with an option to convert into a fixed number of shares (or equivalent amount of cash at the discretion of the issuer) for which the ability to exercise the option is based on the passage of time or a contingent event shall qualify for the exceptions included in paragraph 815-40-25-39. Standard antidilution provisions contained in an instrument do not preclude a conclusion that the instrument is convertible into a fixed number of shares.
","snippet":"Instruments that provide the holder with an option to convert into a fixed number of shares (or equivalent amount of cash at the discretion of the issuer) for which the ability to exercise the option is based on the pass…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ccc6b5d07fd99d9c436c58e8e5696d828bd7703c873e9c6df16a13f31baee4d7","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"citation":"815-40-25-42","para":"25-42","html":"
Convertible preferred stock with a mandatory redemption date may qualify for the exception included in paragraph 815-40-25-39 if the economic characteristics indicate that the instrument is more akin to debt than equity. An entity shall consider the guidance in paragraph 815-15-25-17 in assessing whether the instrument is more akin to debt or equity. That paragraph explains that, if the preferred stock is more akin to equity than debt, an equity conversion feature would be clearly and closely related to that host instrument.
","snippet":"Convertible preferred stock with a mandatory redemption date may qualify for the exception included in paragraph 815-40-25-39 if the economic characteristics indicate that the instrument is more akin to debt than equity.…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:84d11f2754b8496b6d571b0ce2b2fd79bf7055c5bb8d39e46f77c7cf3ed3ced3","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4496ca474711a1e01d40652de23f5ace605d318c5683323ffc08312ea31a51cb","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"block":null,"heading":"Effect of a Registration Payment Arrangement","paragraphs":[{"citation":"815-40-25-43","para":"25-43","html":"
Subtopic 825-20 requires that an entity recognize and measure a registration payment arrangement (see paragraph 825-20-15-3) as a separate unit of account from the financial instrument(s) subject to that arrangement. Accordingly, under that Subtopic (see paragraphs 825-20-25-2 and 825-20-30-2), a financial instrument that is both within the scope of this Subtopic and subject to a registration payment arrangement shall be recognized and measured in accordance with this Subtopic without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement.
","snippet":"Subtopic 825-20 requires that an entity recognize and measure a registration payment arrangement (see paragraph 825-20-15-3) as a separate unit of account from the financial instrument(s) subject to that arrangement. Acc…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ac72b7be0cb0ada8b1249e6dbddc63faa570f4d1c0d0d51822740dc0eb006ad4","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:13dbadb50c9e661931b780cb974ee805bc3cfc8f2d21f738b45273097eb7383c","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f15b820da5aa98e8985fc9b61273c0d0772283aff3edba7c8bf7af043abdc827","downloaded_from":"2026-09-10T01:39:00.143Z","last_downloaded_at":"2026-09-10T01:39:00.143Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480361","source_sha256":"84c35086845b2373789ec4e3cf1d4f9a83c7c7f010317c14f23c07faf00d7f5c"}},{"number":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-40-30-1","para":"30-1","html":"
All contracts within the scope of this Subtopic shall be initially measured at fair value.
","snippet":"All contracts within the scope of this Subtopic shall be initially measured at fair value.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:67f06521a12d3e948937e05c60cb9acb6c781a7276697437e8a8f7fad41fa2a1","downloaded_from":"2026-09-10T01:39:02.866Z","last_downloaded_at":"2026-09-10T01:39:02.866Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480331","source_sha256":"28f06d8d265e1fd073904bafa1598fcdadb8ac49a93985f8d50985f591383f7f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9966d17873018e6369d8d43fa29a8b441453178b455c908f177eaa5f720edbba","downloaded_from":"2026-09-10T01:39:02.866Z","last_downloaded_at":"2026-09-10T01:39:02.866Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480331","source_sha256":"28f06d8d265e1fd073904bafa1598fcdadb8ac49a93985f8d50985f591383f7f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e840d2c2e0c7869469e8a398b38a2c11e50ff5b5173a0388777deb95a128c373","downloaded_from":"2026-09-10T01:39:02.866Z","last_downloaded_at":"2026-09-10T01:39:02.866Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480331","source_sha256":"28f06d8d265e1fd073904bafa1598fcdadb8ac49a93985f8d50985f591383f7f"}},{"number":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":"Overall","paragraphs":[{"citation":"815-40-35-1","para":"35-1","html":"
All contracts shall be subsequently accounted for based on the current classification and the assumed or required settlement method in Section 815-40-15 or Section 815-40-25 as follows.
","snippet":"All contracts shall be subsequently accounted for based on the current classification and the assumed or required settlement method in Section 815-40-15 or Section 815-40-25 as follows.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:14c52b2638d94d2d9998e2db32415cbd4f35a50fe2304ef5f6801db600aa2fc8","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-2","para":"35-2","html":"
Contracts that are initially classified as equity under Section 815-40-25 shall be accounted for in permanent equity as long as those contracts continue to be classified as equity. Subsequent changes in fair value shall not be recognized as long as the contracts continue to be classified as equity. Both of the following shall be reported in permanent equity:
  1. a
    Contracts that require that the entity deliver shares as part of a physical settlement or a net share settlement
  2. b
    Contracts that give the entity a choice of either of the following:
    1. 1
      Net cash settlement or settlement in shares (including net share settlement and physical settlement that requires that the entity deliver shares)
    2. 2
      Either net share settlement or physical settlement that requires that the entity deliver cash.
","snippet":"Contracts that are initially classified as equity under Section 815-40-25 shall be accounted for in permanent equity as long as those contracts continue to be classified as equity. Subsequent changes in fair value shall …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e781ddded8cd223cd356544bff285185097ff6e278389a104e3f6cafe0ee0a65","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-3","para":"35-3","html":"
See paragraphs
815-40-35-14 through 35-18
for guidance on an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange.
","snippet":"See paragraphs 815-40-35-14 through 35-18 for guidance on an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or e…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2c1536dd30dda1ed4db7513fc5f6a94c478dc96d011a539cec8e14d6b1264416","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-4","para":"35-4","html":"
All other contracts classified as assets or liabilities under Section 815-40-25or paragraph 815-40-15-8Ashall be measured subsequently at fair value, with changes in fair value reported in earnings and disclosed in the financial statements as long as the contracts remain classified as assets or liabilities (see paragraph 815-40-50-1).
","snippet":"All other contracts classified as assets or liabilities under Section 815-40-25or paragraph 815-40-15-8Ashall be measured subsequently at fair value, with changes in fair value reported in earnings and disclosed in the f…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fbbf64d4937e4dff22dcc29941422e37b3154ef28711d32c8e9ab85cd619afe3","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:93fde21a3430f9cb2d64f7478c781cdb07929ee49dda983314a67cbe541e2dd1","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"block":null,"heading":"Settlement Assumptions","paragraphs":[{"citation":"815-40-35-5","para":"35-5","html":"
Net share settlement should be assumed for contracts that are classified under Section 815-40-25 as equity instruments that provide the entity with a choice of either of the following:
  1. a
    Net share settlement
  2. b
    Physical settlement that may require that the entity deliver cash.
","snippet":"Net share settlement should be assumed for contracts that are classified under Section 815-40-25 as equity instruments that provide the entity with a choice of either of the following:\n(a) Net share settlement\n(b) Physic…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8ddfc599eb25625d66ff04800e82dd5d18984982dcf1e728e39c5ccd15f63f9a","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-6","para":"35-6","html":"
Physical settlement should be assumed for contracts that are classified under Section 815-40-25 as equity instruments that provide the counterparty with a choice of either of the following:
  1. a
    Net share settlement
  2. b
    Physical settlement that may require that the entity deliver cash.
","snippet":"Physical settlement should be assumed for contracts that are classified under Section 815-40-25 as equity instruments that provide the counterparty with a choice of either of the following:\n(a) Net share settlement\n(b) P…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f15c4c074cf1d52d00b505e9f3ac2ebad3d0de822950f015a39b4fed4187a643","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-7","para":"35-7","html":"
Paragraph not used.
","snippet":"Paragraph not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4f019a62f838bd05160d1110bf220d6e5a8fdf5861887334da14d8fc4b7788aa","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7d7cd1bb8a70d27a3623cb40c577edd2dd2915c2e32062beb7b5a429e3360832","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"block":null,"heading":"Reclassification of Contracts","paragraphs":[{"citation":"815-40-35-8","para":"35-8","html":"
The classification of a contract (including freestanding financial instruments and embedded features) shall be reassessed at each balance sheet date. If the classification required under this Subtopic changes as a result of events during the period (if, for example, as a result of voluntary issuances of stock the number of authorized but unissued shares is insufficient to satisfy the maximum number of shares that could be required to net share settle the contract [see discussion in paragraph 815-40-25-20]), the contract shall be reclassified as of the date of the event that caused the reclassification. There is no limit on the number of times a contract may be reclassified.
","snippet":"The classification of a contract (including freestanding financial instruments and embedded features) shall be reassessed at each balance sheet date. If the classification required under this Subtopic changes as a result…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3053bc2a5c0e347cab3fab6d299403b72340488d90f47c7dfe58883d5f6965a0","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-9","para":"35-9","html":"
If a contract is reclassified from permanent or temporary equity to an asset or a liability, the change in fair value of the contract during the period the contract was classified as equity shall be accounted for as an adjustment to stockholders' equity. The contract subsequently shall be marked to fair value through earnings. If an embedded feature no longer qualifies for the derivatives scope exception under this Subtopic, the feature shall be separated from its host contract and accounted for as a derivative instrument in accordance with Subtopic 815-10 and Subtopic 815-15 (if all of the criteria in paragraph 815-15-25-1 are met).
","snippet":"If a contract is reclassified from permanent or temporary equity to an asset or a liability, the change in fair value of the contract during the period the contract was classified as equity shall be accounted for as an a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a84bdc2d3eff67fde9e2c12dc5ce5920d618c0ea621bdddffe68529164083ebb","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-10","para":"35-10","html":"
If a contract is reclassified from an asset or a liability to equity, gains or losses recorded to account for the contract at fair value during the period that the contract was classified as an asset or a liability shall not be reversed. The contract shall be marked to fair value immediately before the reclassification. An embedded derivative that qualifies for the derivatives scope exception upon reassessment under this Subtopic that was separated from its host contract and accounted for as a derivative instrument in accordance with Subtopic 815-10 shall be reclassified to equity. The previously bifurcated embedded derivative shall not be recombined with its host contract.
","snippet":"If a contract is reclassified from an asset or a liability to equity, gains or losses recorded to account for the contract at fair value during the period that the contract was classified as an asset or a liability shall…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09d29bfdffb7317dc49eab0ccb200cc276266662d20596e90885a53d34d96709","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-11","para":"35-11","html":"
If a contract permits partial net share settlement and the total notional amount of the contract no longer can be classified as permanent equity, any portion of the contract that could be net share settled as of that balance sheet date shall remain classified in permanent equity. That is, a portion of the contract shall be classified as permanent equity and a portion of the contract shall be classified as an asset, a liability, or temporary equity, as appropriate.
","snippet":"If a contract permits partial net share settlement and the total notional amount of the contract no longer can be classified as permanent equity, any portion of the contract that could be net share settled as of that bal…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4667327f7103be3a4e2fb97a4c8ceb98ac3afb0e4bc6db1013c4457879a8ff21","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-12","para":"35-12","html":"
If an entity has more than one contract subject to this Subtopic, and partial reclassification is required, there may be different methods that could be used to determine which contracts, or portions of contracts, shall be reclassified. Methods that would comply with this Section could include any of the following:
  1. a
    Partial reclassification of all contracts on a proportionate basis
  2. b
    Reclassification of contracts with the earliest inception date first
  3. c
    Reclassification of contracts with the earliest maturity date first
  4. d
    Reclassification of contracts with the latest inception or maturity date first
  5. e
    Reclassification of contracts with the latest maturity date first.
","snippet":"If an entity has more than one contract subject to this Subtopic, and partial reclassification is required, there may be different methods that could be used to determine which contracts, or portions of contracts, shall …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0078e66739dfd0bc0bf0a9452a298fe3bf826f76f19fbf2c5d5b13ebae744a3d","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-13","para":"35-13","html":"
The method of reclassification shall be systematic, rational, and consistently applied.
","snippet":"The method of reclassification shall be systematic, rational, and consistently applied.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9279bac8d9a1c361e72dd8e98291bed8a0d5b9cc65ae9ffbef5710ddf850990c","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5ec1df449bc953aaf41b403e42772c46218e3390226c893810e5a9d4c567e22b","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"block":null,"heading":"Issuer's Accounting for Modifications or Exchanges of Freestanding Equity-Classified Written Call Options","paragraphs":[{"citation":"815-40-35-14","para":"35-14","html":"
The guidance in paragraphs
815-40-35-15 through 35-18
applies to an issuer's accounting for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (for example, a warrant) that remains equity classified in accordance with this Subtopic after the modification or exchange and is not within the scope of another Topic. An entity shall account for the effects of a modification or an exchange in accordance with paragraphs
815-40-35-15 through 35-18
. The disclosure requirements in paragraphs
815-40-50-5 through 50-6
and 505-10-50-3 shall apply to a modification or an exchange of a freestanding equity-classified written call option. The guidance in paragraphs
815-40-35-16 through 35-17
does not apply to freestanding equity-classified written call options that are modified or exchanged to compensate grantees in a share-based payment arrangement. An entity shall recognize the effect of such modifications of freestanding equity-classified written call options by applying the requirements in Topic 718; however, classification of the instrument will remain subject to the requirements in this Subtopic.
","snippet":"The guidance in paragraphs 815-40-35-15 through 35-18 applies to an issuer's accounting for a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option (for example, a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:46b7d883819c9a79aa21319e710b96dfd9db244987618dfd956d422fe5c79b49","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-15","para":"35-15","html":"
An entity shall consider the circumstances of the modification or exchange of a freestanding equity-classified written call option to determine whether the modification or exchange is related to a financing or other arrangement or a multiple-element arrangement (for example, an arrangement involving both debt financing and equity financing). In making that determination, an entity shall consider all of the terms and conditions of the modification or exchange, other transactions entered into contemporaneously or in contemplation of the modification or exchange, other rights and privileges obtained or obligations incurred (including services) as a result of the modification or exchange, and the overall economic effects of the modification or exchange. If the modification or exchange is not within the scope of another Topic, an entity shall apply the guidance in paragraphs
815-40-35-16 through 35-18
.
","snippet":"An entity shall consider the circumstances of the modification or exchange of a freestanding equity-classified written call option to determine whether the modification or exchange is related to a financing or other arra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0faf6b744ec3d52f26354f24bb38614053b230cabd12aade49d3ebde4ad232b8","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-16","para":"35-16","html":"
An entity shall treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option as an exchange of the original instrument for a new instrument. In substance, the entity repurchases the original instrument by issuing a new instrument. For transactions recognized in accordance with paragraph 815-40-35-17(c), the effect of a modification or an exchange shall be measured as the difference between the fair value of the modified or exchanged instrument and the fair value of that instrument immediately before it is modified or exchanged. For all other transactions recognized in accordance with paragraph 815-40-35-17, the effect of a modification or an exchange shall be measured as the excess, if any, of the fair value of the modified or exchanged instrument over the fair value of that instrument immediately before it is modified or exchanged. In a multiple-element transaction, the total effect of the modification or exchange shall be allocated to the respective elements in the transaction.
","snippet":"An entity shall treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option as an exchange of the original instrument for a new instrument. In substance, the ent…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a10363145a8de49570c3f0c6b9fa642bf4c68a05ade07f39a8de2d732d791d4","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-17","para":"35-17","html":"
An entity shall recognize the effect of a modification or an exchange (calculated in accordance with paragraph 815-40-35-16) in the same manner as if cash had been paid as consideration, as follows:
  1. a
    Equity issuance. An entity shall recognize the effect of a modification or an exchange that is directly attributable to a proposed or actual equity offering as an equity issuance cost. For additional guidance see SAB Topic 5.A, Expenses of Offering (paragraph 340-10-S99-1).
  2. b
    Debt origination. An entity shall recognize the effect of a modification or an exchange that is a part of or directly related to an issuance of a debt instrument as a debt discount or debt issuance cost in accordance with the guidance in Topic 835 on interest.
  3. c
    Debt modification. An entity shall recognize the effect of a modification or an exchange that is a part of or directly related to a modification or an exchange of an existing debt instrument in accordance with the guidance in Subtopic 470-50 on debt modifications and extinguishments and Subtopic 470-60 on troubled debt restructurings by debtors.
  4. d
    Other. An entity shall recognize the effect of a modification or an exchange that is not related to a financing transaction in (a) through (c) and is not within the scope of any other Topics (such as Topic 718) as a dividend. Additionally, for an entity that presents earnings per share (EPS) in accordance with Topic 260, that effect shall be treated as a reduction of income available to common stockholders in basic earnings per share in accordance with the guidance in paragraph 260-10-45-15.
","snippet":"An entity shall recognize the effect of a modification or an exchange (calculated in accordance with paragraph 815-40-35-16) in the same manner as if cash had been paid as consideration, as follows:\n(a) Equity issuance. …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:956e4ccb879416d0c628652dc7e5448a5cb869b0b9c9e920dc92e5ae531822f7","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"citation":"815-40-35-18","para":"35-18","html":"
Example 22 (see paragraphs
815-40-55-49 through 55-52
) illustrates the application of the guidance in paragraphs
815-40-35-14 through 35-17
.
","snippet":"Example 22 (see paragraphs 815-40-55-49 through 55-52) illustrates the application of the guidance in paragraphs 815-40-35-14 through 35-17.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9ef000bc4641435603e46bf3c7ffd4072abc58de388600cd52bb23b531b7533f","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:649f6cd30511e1d90fe9063a23e1177a18755a112821721ed08ed8e14e3a4c84","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a86877d4ddf724e4578c9d1c7f48c3c3d7ed8bad10d85eed6ad205cf66ab50b","downloaded_from":"2026-09-10T01:39:05.251Z","last_downloaded_at":"2026-09-10T01:39:05.251Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480299","source_sha256":"ae21077f19bf3607325b992d2dbdcfd59caedf239e8273b145c887f6b6d721da"}},{"number":"40","label":"40 Derecognition","anchor":"40-derecognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-40-40-1","para":"40-1","html":"
If contracts classified as permanent equity are ultimately settled in a manner that requires that the entity deliver cash, the amount of cash paid or received shall be reported as a reduction of, or an addition to, contributed capital.
","snippet":"If contracts classified as permanent equity are ultimately settled in a manner that requires that the entity deliver cash, the amount of cash paid or received shall be reported as a reduction of, or an addition to, contr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d3dfe3a848f0155a37237dbf71132aeb6feea74e3c297b0965e4532212e0cc27","downloaded_from":"2026-09-10T01:39:07.707Z","last_downloaded_at":"2026-09-10T01:39:07.707Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480268","source_sha256":"f6d42e43a442c7ece563ef0bfd98a49cfb0494064ed6f05b2bc7db35fb85ef39"}},{"citation":"815-40-40-2","para":"40-2","html":"
If contracts classified as assets or liabilities are ultimately settled in shares, any gains or losses on those contracts shall continue to be included in earnings.
","snippet":"If contracts classified as assets or liabilities are ultimately settled in shares, any gains or losses on those contracts shall continue to be included in earnings.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f87359898369ff07df9ac0cdbc703d1ec5ec5d057e672ffb9287d0a12489312e","downloaded_from":"2026-09-10T01:39:07.707Z","last_downloaded_at":"2026-09-10T01:39:07.707Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480268","source_sha256":"f6d42e43a442c7ece563ef0bfd98a49cfb0494064ed6f05b2bc7db35fb85ef39"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2014463b7728635186af829cbb042feb4900ecea8bb269186ee6676c16ca9dcb","downloaded_from":"2026-09-10T01:39:07.707Z","last_downloaded_at":"2026-09-10T01:39:07.707Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480268","source_sha256":"f6d42e43a442c7ece563ef0bfd98a49cfb0494064ed6f05b2bc7db35fb85ef39"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:38394e5f45ecab0063a0766ad75b6b80dcca313ccd11fbd0272d8c34438d5547","downloaded_from":"2026-09-10T01:39:07.707Z","last_downloaded_at":"2026-09-10T01:39:07.707Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480268","source_sha256":"f6d42e43a442c7ece563ef0bfd98a49cfb0494064ed6f05b2bc7db35fb85ef39"}},{"number":"50","label":"50 Disclosure","anchor":"50-disclosure","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-40-50-1","para":"50-1","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:336e1aec179a4e48a63ea1020a616addd8b332747981b4231dc0623acd5d8bd6","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}},{"citation":"815-40-50-1A","para":"50-1A","html":"
The disclosure guidance in this Section should help a user of financial statements understand the following:
  1. a
    Information about the terms and features of contracts in an entity's own equity within the scope of this Subtopic
  2. b
    How those instruments have been reflected in the issuer's statement of financial position and statement of financial performance
  3. c
    Information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity's future cash flows but has not yet been reflected in the financial statements.
","snippet":"The disclosure guidance in this Section should help a user of financial statements understand the following:\n(a) Information about the terms and features of contracts in an entity's own equity within the scope of this Su…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1232b7b6c27bfcf86acb3eb12ce863a8eaeff48062fc16a0c41252e31633d278","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}},{"citation":"815-40-50-2","para":"50-2","html":"
The disclosure guidance in this Subtopic applies to freestanding instruments that are potentially indexed to, and potentially settled in, an entity's own equity, regardless of whether the contract meets the criteria to qualify for the scope exception in Sections 815-40-15 and 815-40-25. Some contracts that are classified as assets or liabilities meet the definition of a derivative instrument under the provisions of Subtopic 815-10. The related disclosures that are required by Sections 815-10-50, 815-25-50, 815-30-50, and 815-35-50 also are required for those contracts. Equity-classified contracts under the provisions of this Subtopic are not required to provide the disclosures required by Section 505-10-50, other than those described in paragraph 815-40-50-5.
","snippet":"The disclosure guidance in this Subtopic applies to freestanding instruments that are potentially indexed to, and potentially settled in, an entity's own equity, regardless of whether the contract meets the criteria to q…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0b70edb3e0f6c10bcf96fba56afbf3bcca81bfe6d7b263a9530c5ca2efde5c5d","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eccc0c4770210e439351576045e4e68c15a8a1dd947b3ed2e80a442cfe8d6899","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}},{"block":null,"heading":"Fair Value Disclosures","paragraphs":[{"citation":"815-40-50-2A","para":"50-2A","html":"
Changes in the fair value of all contracts classified as assets or liabilities shall be disclosed in the financial statements as long as the contracts remain classified as assets or liabilities.
Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance:
270-10-65-1For interim and annual reporting periods, changes in the fair value of all contracts classified as assets or liabilities shall be disclosed in the financial statements as long as the contracts remain classified as assets or liabilities.
","snippet":"Changes in the fair value of all contracts classified as assets or liabilities shall be disclosed in the financial statements as long as the contracts remain classified as assets or liabilities. Transition date:(P) Decem…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a5304671941b5d1598658355ee6ae1e6979500760a3b1ef1e63119915bc55439","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:90bf907ecf7411ad884ece58d5f7dd57e4f25d266768e56ec65a7f91f344e82c","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}},{"block":null,"heading":"Reclassifications and Related Accounting Policy Disclosures","paragraphs":[{"citation":"815-40-50-3","para":"50-3","html":"
Contracts within the scope of this Subtopic may be required to be reclassified into (or out of) equity during the life of the instrument (in whole or in part) pursuant to the provisions of paragraphs
815-40-35-8 through 35-13
. An issuer shall disclose contract reclassifications (including partial reclassifications), the reason for the reclassification, and the effect on the issuer's financial statements.
","snippet":"Contracts within the scope of this Subtopic may be required to be reclassified into (or out of) equity during the life of the instrument (in whole or in part) pursuant to the provisions of paragraphs 815-40-35-8 through …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1243a4accbcc8f05b7b6961515bae7a3c85b42adc685bf240bd51c9504e0fabf","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}},{"citation":"815-40-50-4","para":"50-4","html":"
The determination of how to partially reclassify contracts subject to this Subtopic is an accounting policy decision that shall be disclosed pursuant to Topic 235.
","snippet":"The determination of how to partially reclassify contracts subject to this Subtopic is an accounting policy decision that shall be disclosed pursuant to Topic 235.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a0fa071c33d4c0c5109b35bf1c47126c30c3738a3db4c20f0e13b4b107b3aced","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:81aaa2ed0ccd11b9a99cdb860f913062704112df9081506f303165f7e327df61","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}},{"block":null,"heading":"Interaction with Disclosures about Capital Structure","paragraphs":[{"citation":"815-40-50-5","para":"50-5","html":"
The disclosures required by Section 505-10-50 apply to all contracts within the scope of this Subtopic as follows:
  1. a
    In the case of an option or forward contract indexed to the issuer's equity, the pertinent information to be disclosed under Section 505-10-50 about the contract includes all of the following:
    1. 1
      The forward rate
    2. 2
      The option strike price
    3. 3
      The number of issuer's shares to which the contract is indexed
    4. 4
      The settlement date or dates of the contract
    5. 5
      The issuer's accounting for the contract (that is, as an asset, liability, or equity).
  2. b
    If the terms of the contract provide settlement alternatives, those settlement alternatives shall be disclosed under Section 505-10-50, including all of the following:
    1. 1
      Who controls the settlement alternatives and a description of those alternatives
    2. 2
      The maximum number of shares that could be required to be issued to net share settle a contract, if applicable. Paragraph 505-10-50-3 requires additional disclosures for actual issuances and settlements that occurred during the accounting period.
  3. c
    If a contract does not have a fixed or determinable maximum number of shares that may be required to be issued, the fact that a potentially infinite number of shares could be required to be issued to settle the contract shall be disclosed under Section 505-10-50.
  4. d
    For each settlement alternative, the amount that would be paid, or the number of shares that would be issued and their fair value, determined under the conditions specified in the contract if the settlement were to occur at the reporting date and how changes in the fair value of the issuer's equity shares affect those settlement amounts (for example, the issuer is obligated to issue an additional X shares or pay an additional Y dollars in cash for each $1 decrease in the fair value of one share) shall be disclosed under Section 505-10-50. (For some issuers, a tabular format may provide the most concise and informative presentation of these data.)
  5. e
    The disclosures required by paragraph 505-10-50-11 shall be made for any equity instrument in the scope of this Subtopic that is (or would be if the issuer were a public entity) classified as temporary equity. (That paragraph applies to redeemable stock issued by nonpublic entities, regardless of whether the private entity chooses to classify those securities as temporary equity.)
  6. f
    The disclosures required by paragraph 505-10-50-18 also shall be made for an equity-classified contract within the scope of this Subtopic that is entered into in connection with the issuance of convertible preferred stock.
","snippet":"The disclosures required by Section 505-10-50 apply to all contracts within the scope of this Subtopic as follows:\n(a) In the case of an option or forward contract indexed to the issuer's equity, the pertinent informatio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b140b83d2b633491398566f6f002c0ba2996d4067f3e7420333cfeeae8af595a","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8249d1722dda0c3dbba480ff71b56b40e38e1e063729e739476b15cdc586b110","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}},{"block":null,"heading":"Issuer's Accounting for Modifications or Exchanges of Freestanding Equity-Classified Written Call Options","paragraphs":[{"citation":"815-40-50-6","para":"50-6","html":"
For a freestanding equity-classified written call option modified or exchanged during any of the periods presented and for which an entity has recognized the effect in accordance with paragraph 815-40-35-17, an entity shall disclose the following:
  1. a
    Information about the nature of the modification or exchange transaction (see paragraph 815-40-35-15)
  2. b
    The amount of the effect of the modification or exchange (see paragraph 815-40-35-16)
  3. c
    The manner in which the effect of the modification or exchange has been recognized (see paragraph 815-40-35-17).
","snippet":"For a freestanding equity-classified written call option modified or exchanged during any of the periods presented and for which an entity has recognized the effect in accordance with paragraph 815-40-35-17, an entity sh…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:059f453f34be91e1226a3dfd758b1144f4626b1840984d1f067050b68bcdb321","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2319ed93a64346ebfb2330c20d0d7a1e77ff1d283a9ab80224efa50ab12015b0","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:319aedb64b1d8287d0a0c38c51961a52ded5ce9ea5ae37f1f42eb2c5146737c6","downloaded_from":"2026-09-10T01:39:11.732Z","last_downloaded_at":"2026-09-10T01:39:11.732Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480237","source_sha256":"3a71bc3114a790546cf5d8f287aaed3d4f77b26059ab3bb8bcb05f2302f536ad"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Implementation Guidance","paragraphs":[{"citation":"815-40-55-1","para":"55-1","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3701c4a2a12a60f6dcddd994825a85b3cfe87df37c1a2d868a2ca33a6c682da6","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-2","para":"55-2","html":"
An event that causes a change in control of an entity is not within the entity's control and, therefore, if a contract requires net cash settlement upon a change in control, the contract generally must be classified as an asset or a liability.
","snippet":"An event that causes a change in control of an entity is not within the entity's control and, therefore, if a contract requires net cash settlement upon a change in control, the contract generally must be classified as a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9da6f9639ad2438c3e051c344f5adf521ba250fcc8505169a1e648cc58953338","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-3","para":"55-3","html":"
However, if a change-in-control provision requires that the counterparty receive, or permits the counterparty to deliver upon settlement, the same form of consideration (for example, cash, debt, or other assets) as holders of the shares underlying the contract, permanent equity classification would not be precluded as a result of the change-in-control provision. In that circumstance, if the holders of the shares underlying the contract were to receive cash in the transaction causing the change in control, the counterparty to the contract could also receive cash based on the value of its position under the contract.
","snippet":"However, if a change-in-control provision requires that the counterparty receive, or permits the counterparty to deliver upon settlement, the same form of consideration (for example, cash, debt, or other assets) as holde…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30cef142dae2677ff5159946e0fb290a0e279b99b4859ecb3302fdf3ae0c2c40","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-4","para":"55-4","html":"
If, instead of cash, holders of the shares underlying the contract receive other forms of consideration (for example, debt), the counterparty also must receive debt (cash in an amount equal to the fair value of the debt would not be considered the same form of consideration as debt).
","snippet":"If, instead of cash, holders of the shares underlying the contract receive other forms of consideration (for example, debt), the counterparty also must receive debt (cash in an amount equal to the fair value of the debt …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:185c3029f28b2ac089ce27a9d97d5ce95e0804374a3aa8329feee74734a7dfe7","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-5","para":"55-5","html":"
Similarly, a change-in-control provision could specify that if all stockholders receive stock of an acquiring entity upon a change in control, the contract will be indexed to the shares of the purchaser (or issuer in a business combination accounted for as a pooling of interests) specified in the business combination agreement, without affecting classification of the contract.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
105-10-65-10Similarly, a change-in-control provision could specify that if all stockholders receive stock of an acquiring entity upon a change in control, the contract will be indexed to the shares of the purchaser specified in the business combination agreement, without affecting classification of the contract.
","snippet":"Similarly, a change-in-control provision could specify that if all stockholders receive stock of an acquiring entity upon a change in control, the contract will be indexed to the shares of the purchaser (or issuer in a b…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1b6d6f3c44f7dc33b34591021dc9f5df1762cd813df727e2085e45da89eda9ab","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-6","para":"55-6","html":"
In the event of nationalization, cash compensation would be the consideration for the expropriated assets and, as a result, a counterparty to the contract could receive only cash, as is the case for a holder of the stock underlying the contract. Because the contract counterparty would receive the same form of consideration as a stockholder, a contract provision requiring net cash settlement in the event of nationalization does not preclude equity classification of the contract.
","snippet":"In the event of nationalization, cash compensation would be the consideration for the expropriated assets and, as a result, a counterparty to the contract could receive only cash, as is the case for a holder of the stock…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:290fc11045fc39150d7e06a4cf2d1af1413d2c8acd7da4d93f4ced42e3d7adc2","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-7","para":"55-7","html":"
The following guidance reflects the application of this Subtopic to certain freestanding derivative financial instruments that are indexed to, and potentially settled in, an entity's own stock, specifically:
  1. a
    Subparagraph superseded by Accounting Standards Update No. 2020-06.
  2. b
    Forward sale contracts, written call options or warrants, and purchased put options
  3. c
    Purchased call options
  4. d
    Detachable stock purchase warrants
  5. e
    Put warrants.
","snippet":"The following guidance reflects the application of this Subtopic to certain freestanding derivative financial instruments that are indexed to, and potentially settled in, an entity's own stock, specifically:\n(a) Subparag…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8edf2055301747a17865b6edf6800dee8278c2be15e696f455b4abb6484e94b2","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-8","para":"55-8","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d2467bf79581db905da0441f4478cf6a03d8f081fed496cf674c3aef8b87a53c","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-9","para":"55-9","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
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Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8aece15d9c1df77c3c20c4555024d7978f38f8b223e4b49076e57c5b3f1900ff","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-11","para":"55-11","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6034f7d464de5580efdec91e99e385334df13eee2fd15ba9fd5501a3ef290194","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-12","para":"55-12","html":"
Paragraph superseded by Accounting Standards Update No. 2020-06.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2020-06.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f4bfff43e19060ea05daad407970db07fe3c918941533e80a214cbc438367acf","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-13","para":"55-13","html":"
The issuing entity (the seller) agrees to sell shares of its stock to the buyer of the contract at a specified price at some future date. The contract may be settled by physical settlement, net share settlement, or net cash settlement, or the issuing entity or counterparty may have a choice of settlement methods. The guidance in this Subtopic would be applied as follows.
","snippet":"The issuing entity (the seller) agrees to sell shares of its stock to the buyer of the contract at a specified price at some future date. The contract may be settled by physical settlement, net share settlement, or net c…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7b94837ac17b34c56ac514430af1d56dc1d3b89a9a45287b88f5f5ec92458bf1","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-14","para":"55-14","html":"
The entity (the buyer) purchases call options that provide it with the right, but not the obligation, to buy from the seller, shares of the entity's stock at a specified price. If the options are exercised, the contract may be settled by physical settlement, net share settlement, or net cash settlement, or the issuing entity or the counterparty may have a choice of settlement methods. The entity should follow the preceding table in accounting for purchased call options.
","snippet":"The entity (the buyer) purchases call options that provide it with the right, but not the obligation, to buy from the seller, shares of the entity's stock at a specified price. If the options are exercised, the contract …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3833fc5d3fed0f565845cdfdc679612f45116db4825d238c0b4cd7c6c949a40b","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-15","para":"55-15","html":"
An entity issues senior subordinated notes with a detachable warrant that gives the holder both the right to purchase 6,250 shares of the entity's stock for $75 per share and the right (that is, a put) to require that the entity repurchase all or any portion of the warrant for at least $2,010 per share at a date several months after the maturity of the notes in about 7 years. The proceeds should be allocated between the debt liability and the warrant based on their relative fair values, and the resulting discount should be amortized in accordance with Subtopic 835-30. The warrants should be considered, in substance, debt and accounted for as a liability because the settlement alternatives for the warrants do not have the same economic value attached to them and they provide the holder with a guaranteed return in cash that is significantly in excess of the value of the share-settlement alternative on the issuance date.
","snippet":"An entity issues senior subordinated notes with a detachable warrant that gives the holder both the right to purchase 6,250 shares of the entity's stock for $75 per share and the right (that is, a put) to require that th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e307134de704b2164702da9a1af624149890c8bc81e25fcf3299738e118616a2","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-16","para":"55-16","html":"
Put warrants are frequently issued concurrently with debt securities of the entity, are detachable from the debt, and may be exercisable only under specified conditions. The put feature of the instrument may expire under varying circumstances, for example, with the passage of time or if the entity has a public stock offering. Under Subtopic 470-20, a portion of the proceeds from the issuance of debt with detachable warrants must be allocated to those warrants.
","snippet":"Put warrants are frequently issued concurrently with debt securities of the entity, are detachable from the debt, and may be exercisable only under specified conditions. The put feature of the instrument may expire under…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1e3c1248be8c0f855acf2e0744dd3315bee94f3e4185143d4f645c8cc2e83c2d","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-17","para":"55-17","html":"
Put warrants are instruments with characteristics of both warrants and put options. The holder of the instrument is entitled to do any of the following:
  1. a
    Exercise the warrant feature to acquire the common stock of the entity at a specified price
  2. b
    Exercise the put option feature to put the instrument back to the entity for a cash payment
  3. c
    Exercise both the warrant feature to acquire the common stock and the put option feature to put that stock back to the entity for a cash payment.
","snippet":"Put warrants are instruments with characteristics of both warrants and put options. The holder of the instrument is entitled to do any of the following:\n(a) Exercise the warrant feature to acquire the common stock of the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d31f7c4408578337689bee1c0e8435f62691031b0226b08a978ff29a40202d76","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-18","para":"55-18","html":"
Because the contract gives the counterparty the choice of cash settlement or settlement in shares, entities should report the proceeds from the issuance of put warrants as liabilities and subsequently measure the put warrants at fair value with changes in fair value reported in earnings as required by Topic 480. That is, a put warrant that embodies an obligation to repurchase the issuer's equity shares, or is indexed to such an obligation, and that requires or may require a transfer of assets is within the scope of that Topic and therefore is to be recognized as a liability.
","snippet":"Because the contract gives the counterparty the choice of cash settlement or settlement in shares, entities should report the proceeds from the issuance of put warrants as liabilities and subsequently measure the put war…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f24c6631f0370a574aa30106c138d9bbcb4043b89498c16df24392034fe2c205","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-19","para":"55-19","html":"
Paragraphs 815-40-55-19 through 55-25 not used.
","snippet":"Paragraphs 815-40-55-19 through 55-25 not used.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ef359b2f7c28691908d71df90b9c7bbff1973d098a0ce932136bc2462813fc81","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:98d27ff79bc723fe7d364556ce71c81368a0c5f7d46a873da7fde49ad3341bfb","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"815-40-55-25A","para":"55-25A","html":"
The Examples in paragraphs
815-40-55-26 through 55-48
illustrate the application of the guidance beginning in paragraph 815-40-15-5.
","snippet":"The Examples in paragraphs 815-40-55-26 through 55-48 illustrate the application of the guidance beginning in paragraph 815-40-15-5.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:01d01555ff65a035c997f38d56a606a10c6a75d741cb792ab6752ba3b0185df4","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-26","para":"55-26","html":"
Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms; however, they only become exercisable if Entity A completes an initial public offering.The warrants are considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The exercise contingency (that is, the initial public offering) is not an observable market or an observable index, so the evaluation of Step 1 does not preclude the warrants from being considered indexed to the entity's own stock. Proceed to Step 2.
  2. b
    Upon exercise, the settlement amount would equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price ($10 per share).
","snippet":"Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms; however, they only become exercisable if Entity A completes an initial public offe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:367aa5560700a48081a0835f2c5dbf26cbf01fc8763d7b78c525322c2e19a248","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-27","para":"55-27","html":"
Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms; however, they only become exercisable after Entity A accumulates $100 million in sales to third parties. The warrants are considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The exercise contingency (that is, the accumulation of $100 million in sales to third parties) is an observable index. However, it can only be calculated or measured by reference to Entity A's sales, so the evaluation of Step 1 does not preclude the warrants from being considered indexed to the entity's own stock. Proceed to Step 2.
  2. b
    Step 2. Upon exercise, the settlement amount would equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price ($10 per share).
","snippet":"Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms; however, they only become exercisable after Entity A accumulates $100 million in s…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2b9dda3b8f0e1b2269c49fa53f5d0ca099d0d1c9849dcb164a88336a5729d1e7","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-28","para":"55-28","html":"
Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms; however, they only become exercisable if the Standard & Poor's S&P 500 Index increases 500 points within any given calendar year during that 10-year period.The warrants are not considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The exercise contingency (that is, the increase of 500 points in Standard & Poor's S&P 500 Index) is based on an observable index that is not measured solely by reference to the issuer's own operations.
  2. b
    Step 2. It is not necessary to evaluate Step 2.
","snippet":"Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms; however, they only become exercisable if the Standard & Poor's S&P 500 Index incre…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ffc3c8a52d9480144c4d8688f216c64835f05d5834e9e6567bdc482c275a29c7","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-29","para":"55-29","html":"
Entity A issues warrants that permit the holder to buy 100 shares of its common stock in exchange for one ounce of gold. The warrants have 10-year terms; however, they only become exercisable if Entity A completes an initial public offering. The warrants are not considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The exercise contingency (that is, the initial public offering) is not an observable market or an observable index, so the evaluation of Step 1 does not preclude the warrants from being considered indexed to the entity's own stock. Proceed to Step 2.
  2. b
    Step 2. The settlement amount would not equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price. Although the number of shares that would be issued at settlement is fixed, the strike price varies based on the price of one ounce of gold. The price of gold is not an input to the fair value of a fixed-for-fixed option on equity shares.
","snippet":"Entity A issues warrants that permit the holder to buy 100 shares of its common stock in exchange for one ounce of gold. The warrants have 10-year terms; however, they only become exercisable if Entity A completes an ini…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a44fdf19506fbea36f42c0a4f6a4b86def7c1a618e8cdd19ca004a9c882431fd","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-30","para":"55-30","html":"
Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms and are exercisable at any time. However, the terms of the warrants specify that if there is an announcement of a merger involving Entity A, the strike price of the warrants will be adjusted to offset the effect of the merger announcement on the net change in the fair value of the warrants and of an offsetting hedge position in the underlying shares. The strike price adjustment must be determined using commercially reasonable means based on an assumption that the counterparty has entered into a hedge position in the underlying shares to offset the share price exposure from the warrants. That strike price adjustment is not affected by the counterparty's actual hedging position (for example, the strike price adjustment does not differ in circumstances when the counterparty is over-hedged or under-hedged). The warrants are considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instruments do not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The settlement amount would equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price ($10 per share), unless there is a merger announcement. If there is a merger announcement, the settlement amount would be adjusted to offset the effect of the merger announcement on the fair value of the warrants. In that circumstance, the only variables that could affect the settlement amount would be inputs to the fair value of a fixed-for-fixed option on equity shares. For further discussion, see paragraphs 815-40-15-7E and 815-40-15-7G.
","snippet":"Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms and are exercisable at any time. However, the terms of the warrants specify that if…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:76c84c5e8db3237109d1686768ff3c6e2806275652601d3c70f60ffb07376c83","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-31","para":"55-31","html":"
Entity A issues warrants that permit the holder to buy 100 shares of its common stock for an initial price of $10 per share. The warrants have 10-year terms and are exercisable at any time. However, the terms of the warrants specify that the strike price is reduced by $0.50 after any year in which Entity A does not achieve revenues of at least $100 million. The warrants are not considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instruments do not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The settlement amount would not equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price. Although the number of shares that would be issued at settlement is fixed, the strike price would be adjusted after any year in which Entity A does not achieve revenues of at least $100 million. The amount of an entity's annual revenues is not an input to the fair value of a fixed-for-fixed option on equity shares.
","snippet":"Entity A issues warrants that permit the holder to buy 100 shares of its common stock for an initial price of $10 per share. The warrants have 10-year terms and are exercisable at any time. However, the terms of the warr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c4a3a9eb92ab147fe0b08619af7219c54a9e8d973c7efe62e22eceda2dee880a","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-32","para":"55-32","html":"
Entity A purchases net-settled call options that permit it to buy 100 shares of its common stock for $10 per share. However, the maximum appreciation on the call options is capped when Entity A's stock price reaches $15 per share (that is, the counterparty's maximum obligation is $500 [($15 − $10) x 100 shares]). The call options have 10-year terms and are exercisable at any time. The call options are considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instruments do not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The settlement amount would equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price when Entity A's stock price is between the $10 stated exercise price and the $15 price cap. However, whenever Entity A's stock price exceeds $15, the strike price of the call options increases and decreases in amounts equal to the corresponding increases and decreases in Entity A's stock price, such that the intrinsic value of each call option always equals $5. Because the only variable that can affect the settlement amount is the entity's stock price, which is an input to the fair value of a fixed-for-fixed option contract, the call options are considered indexed to the entity's own stock.
","snippet":"Entity A purchases net-settled call options that permit it to buy 100 shares of its common stock for $10 per share. However, the maximum appreciation on the call options is capped when Entity A's stock price reaches $15 …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fda922babb932b6a45aed8dacadc39c9206fe3d41504843c175dfbd446d2d124","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-33","para":"55-33","html":"
This Example illustrates the application of the guidance beginning in paragraph 815-40-15-5for a financial instrument that includes a down round feature. Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms and are exercisable at any time. However, the terms of the warrants specify both of the following:
  1. a
    If the entity sells shares of its common stock for an amount less than $10 per share, the strike price of the warrants is reduced to equal the issuance price of those shares.
  2. b
    If the entity issues an equity-linked financial instrument with a strike price below $10 per share, the strike price of the warrants is reduced to equal the strike price of the newly issued equity-linked financial instrument.
","snippet":"This Example illustrates the application of the guidance beginning in paragraph 815-40-15-5for a financial instrument that includes a down round feature. Entity A issues warrants that permit the holder to buy 100 shares …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f0c05d11983152a5e0cd8fcd500b2003ec9a6c6743cb75956137f33dcca3fd9b","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-34","para":"55-34","html":"
The warrants are considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instruments do not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. In accordance with paragraph 815-40-15-5D, when classifying a financial instrument with a down round feature, an entity shall exclude that feature when considering whether the instrument is indexed to the entity's own stock for the purposes of applying paragraphs
    815-40-15-7C through 15-7I
    (Step 2). The instrument does not contain any other features to be assessed under Step 2.
","snippet":"The warrants are considered indexed to Entity A's own stock based on the following evaluation:\n(a) Step 1. The instruments do not contain an exercise contingency. Proceed to Step 2.\n(b) Step 2. In accordance with paragra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09f7e9f69ec1c43a0b3b6242c6590a890a5267eabf6d920325988fcea7ad5b20","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-34A","para":"55-34A","html":"
See paragraph 260-10-45-12B for earnings-per-share considerations, paragraph 260-10-25-1 for recognition considerations, and paragraphs 505-10-50-3 through 50-3A for disclosure considerations.
","snippet":"See paragraph 260-10-45-12B for earnings-per-share considerations, paragraph 260-10-25-1 for recognition considerations, and paragraphs 505-10-50-3 through 50-3A for disclosure considerations.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:818a4b444db6269b2624fb50e34b781f6c8e8dd3d7447f3ef47606dcd391c0ef","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-35","para":"55-35","html":"
Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms and are exercisable at any time. However, the terms of the warrants specify that if Entity A does not obtain regulatory approval of a particular drug compound within 5 years, the holder can surrender the warrants to Entity A for $2 per warrant (settleable in shares). The contingently puttable warrants are not considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instruments do not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The settlement amount would equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price ($10 per share), unless regulatory approval of a particular drug compound is not obtained within 5 years. If that approval is not obtained within the allotted time period, the holder could elect to surrender the warrants to Entity A in exchange for $2 per warrant. The contingent obligation to settle the warrants by transferring consideration with a fixed monetary value if regulatory approval of a particular drug compound is not obtained within a specified time period does not represent an input to the fair value of a fixed-for-fixed option on equity shares. A freestanding equity-linked instrument that provides for a fixed payoff upon the occurrence of a contingent event which is not based on the issuer's share price is not indexed to an entity's own stock.
","snippet":"Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have 10-year terms and are exercisable at any time. However, the terms of the warrants specify that if…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c4fbacb749568d6174b93fd6f90b20fa2b0616eff2931f490e964acfabb14642","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-36","para":"55-36","html":"
Entity A, whose functional currency is U.S. dollars (USD), issues warrants with a strike price denominated in Canadian dollars (CAD). The warrants permit the holder to buy 100 shares of its common stock for CAD 10 per share. Entity A's shares trade on an exchange on which trades are denominated in CAD. The warrants have 10-year terms and are exercisable at any time. The warrants are not considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instruments do not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The strike price of the warrants is denominated in a currency other than the entity's functional currency, so the warrants are not considered indexed to the entity's own stock.
","snippet":"Entity A, whose functional currency is U.S. dollars (USD), issues warrants with a strike price denominated in Canadian dollars (CAD). The warrants permit the holder to buy 100 shares of its common stock for CAD 10 per sh…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0405b06beb5f11aef5ef60c8caf65eee3373bccb4f120799fbf56821d9970563","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-37","para":"55-37","html":"
Entity A enters into a forward contract to sell 100 shares of its common stock for $10 per share in 1 year. Historically, Entity A has paid a dividend of $0.10 per quarter on its common shares. Under the terms of the forward contract, if dividends per common share differ from $0.10 during any 3-month period, the strike price of the forward contract will be adjusted to offset the effect of the dividend differential (actual dividend versus $0.10) on the fair value of the instrument. Additionally, the terms of the forward contract provide for an adjustment to the strike price, using commercially reasonable means, to offset the effect of any increased cost of borrowing Entity A's shares in the stock loan market on the fair value of the instrument. The forward contract is considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instrument does not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The only circumstances in which the settlement amount will not equal the difference between the fair value of 100 shares and $1,000 ($10 per share) are if dividends per common share differ from $0.10 during any 3-month period or if there is an increased cost of borrowing Entity A's shares in the stock loan market. The adjustments to the strike price resulting from those events are intended to offset their effects on the instrument's fair value. In those circumstances, the only variables that could affect the settlement amount (dividends and stock borrow cost) would be inputs to the fair value of a fixed-for-fixed forward contract on equity shares.
","snippet":"Entity A enters into a forward contract to sell 100 shares of its common stock for $10 per share in 1 year. Historically, Entity A has paid a dividend of $0.10 per quarter on its common shares. Under the terms of the for…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:778ed55b33ecf97ede21324da3d2aae4bf5cba07a8f28358653c4298dbd59781","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-38","para":"55-38","html":"
Entity A enters into a net-settleable forward contract to sell 100 shares of its common stock in 1 year for an amount equal to $10 per share plus interest calculated at a variable interest rate (Federal Funds rate plus a fixed spread). The share price used to determine the settlement amount is based on the volume-weighted average daily market price of Entity A's common stock for the 30-day period before the settlement date. The forward contract is considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instrument does not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The settlement amount will not equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price. However, the only variables that cause the settlement amount to differ from a fixed-for-fixed settlement amount are the 30-day volume-weighted average daily market price of Entity A's common stock and an interest rate index. The pricing inputs of a fixed-for-fixed forward contract include the entity's stock price and interest rates. Additionally, the floating interest rate feature does not introduce a leverage factor or otherwise increase the effects of interest rate changes on the instrument's fair value.
","snippet":"Entity A enters into a net-settleable forward contract to sell 100 shares of its common stock in 1 year for an amount equal to $10 per share plus interest calculated at a variable interest rate (Federal Funds rate plus a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb3ff95c65b1696fceb28a31c7dc1a4be08d1eb2da4861b6d41a61c9623c002a","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-39","para":"55-39","html":"
Entity A enters into a forward contract to sell 100 shares of its common stock in 1 year for an amount equal to $10 per share plus interest calculated at a variable interest rate that varies inversely with changes in the London Interbank Offered Rate (LIBOR) (similar to an \"inverse floater,\" as described in paragraphs
815-15-55-170 through 55-172
). The forward contract is not considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instrument does not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The settlement amount will not equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price. Although the number of shares that would be issued at settlement is fixed, the strike price varies inversely with changes in an interest rate index. The inverse floating interest rate feature increases the effects of interest rate changes on the instrument's fair value (that is, the feature increases the instrument's fair value exposure to interest rate changes) when compared to the exposure to interest rate changes of a fixed-for-fixed forward contract.
","snippet":"Entity A enters into a forward contract to sell 100 shares of its common stock in 1 year for an amount equal to $10 per share plus interest calculated at a variable interest rate that varies inversely with changes in the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:da9af95f5ccd24aadc0b4aca87d7d43de749fc36293ff4f3308b2db851b1f182","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-40","para":"55-40","html":"
Entity A enters into a net-settled forward contract to sell 100 shares of its common stock in 1 year for $1,000. However, the maximum amount payable to the counterparty at maturity is capped when Entity A's stock price is greater than or equal to $15 per share (that is, Entity A's maximum obligation is $500 [($15 − $10) x 100 shares]). Additionally, the maximum amount receivable from the counterparty at maturity is capped when Entity A's stock price is less than or equal to $5 per share (that is, the counterparty's maximum obligation is $500 [($5 − $10) x 100 shares]). The forward contract is considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instrument does not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The settlement amount would equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price ($1,000) when Entity A's stock price is between $5 and $15. However, whenever Entity A's stock price is greater than or equal to $15 at maturity, the amount payable to the counterparty always equals $500. Additionally, whenever Entity A's stock price is less than or equal to $5 at maturity, the amount receivable from the counterparty always equals $500. Because the only variable that can affect the settlement amount is the entity's stock price, which is an input to the fair value of a fixed-for-fixed forward contract, the instrument is considered indexed to the entity's own stock.
","snippet":"Entity A enters into a net-settled forward contract to sell 100 shares of its common stock in 1 year for $1,000. However, the maximum amount payable to the counterparty at maturity is capped when Entity A's stock price i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6bdef05f90e7286f412c52fa10d4a2c5800ca51de3babc8349661e72fefd313","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-41","para":"55-41","html":"
Entity A enters into a forward contract to sell a variable number of its common shares in 1 year for $1,000. If Entity A's stock price is equal to or less than $10 at maturity, Entity A will issue 100 shares of its common stock to the counterparty. If Entity A's stock price is greater than $10 but equal to or less than $12 at maturity, Entity A will issue a variable number of its common shares worth $1,000. Finally, if the share price is greater than $12 at maturity, Entity A will issue 83.33 shares of its common stock. The forward contract is considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instrument does not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The settlement amount will not equal the difference between the fair value of a fixed number of the entity's equity shares and a fixed strike price ($1,000). Although the strike price to be received at settlement is fixed, the number of shares to be issued to the counterparty varies based on the entity's stock price on the settlement date. Because the only variable that can affect the settlement amount is the entity's stock price, which is an input to the fair value of a fixed-for-fixed forward contract on equity shares, the instrument is considered indexed to the entity's own stock.
","snippet":"Entity A enters into a forward contract to sell a variable number of its common shares in 1 year for $1,000. If Entity A's stock price is equal to or less than $10 at maturity, Entity A will issue 100 shares of its commo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d509c8c0e4a5159fa63ad250ef5665da27889c7fbd76d9fca00f05fad40a93c3","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-42","para":"55-42","html":"
Entity A enters into a forward contract to sell 100 shares of its common stock for $10 per share in 1 year. Under the terms of the forward contract, the strike price of the forward contract would be adjusted to offset the resulting dilution (except for issuances and repurchases that occur upon settlement of outstanding option or forward contracts on equity shares) if Entity A does any of the following:
  1. a
    Distributes a stock dividend or ordinary cash dividend
  2. b
    Executes a stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend
  3. c
    Issues shares for an amount below the then-current market price
  4. d
    Repurchases shares for an amount above the then-current market price.
The contractual terms that adjust the forward contract's strike price are eliminating the dilution to the forward contract counterparty that would otherwise result from the occurrence of those specified dilutive events. The adjustment to the strike price of the forward contract is based on a mathematical calculation that determines the direct effect that the occurrence of such dilutive events should have on the price of the underlying shares; it does not adjust for the actual change in the market price of the underlying shares upon the occurrence of those events, which may increase or decrease for other reasons.
","snippet":"Entity A enters into a forward contract to sell 100 shares of its common stock for $10 per share in 1 year. Under the terms of the forward contract, the strike price of the forward contract would be adjusted to offset th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:64b48fa2be1e59ebe81dddbfb604f8ccdf1d8bed33c7d7d6dcfc474af3caac6a","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-43","para":"55-43","html":"
The forward contract is considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instrument does not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The only circumstances in which the settlement amount will not equal the difference between the fair value of 100 shares and $1,000 ($10 per share) are upon the occurrence of any of the following:
    1. 1
      The distribution of a stock dividend or ordinary cash dividend
    2. 2
      The execution of a stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend
    3. 3
      The issuance of shares for an amount below the then-current market price
    4. 4
      The repurchase of shares for an amount above the then-current market price.
An implicit assumption in standard pricing models for equity-linked financial instruments is that such events will not occur (or that the strike price of the instrument will be adjusted to offset the dilution caused by such events). Therefore, the only variables that could affect the settlement amount in this example would be inputs to the fair value of a fixed-for-fixed option on equity shares.
","snippet":"The forward contract is considered indexed to Entity A's own stock based on the following evaluation:\n(a) Step 1. The instrument does not contain an exercise contingency. Proceed to Step 2.\n(b) Step 2. The only circumsta…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d50a87cc78acea4235eda53add669bcddc1d0090f835ffa57715fe7785f8bce7","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-44","para":"55-44","html":"
Entity A, whose functional currency is US$, enters into a forward contract that requires Entity A to sell 100 shares of its common stock for 120 euros per share in 1 year. The forward contract is not considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The instrument does not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. The strike price of the forward contract is denominated in a currency other than the entity's functional currency, so the forward contract is not considered indexed to the entity's own stock.
","snippet":"Entity A, whose functional currency is US$, enters into a forward contract that requires Entity A to sell 100 shares of its common stock for 120 euros per share in 1 year. The forward contract is not considered indexed t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9cd2bc8ac1c00dc2146804f6de2289a87568bf12bd7f9803c4e2ad8258087059","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-45","para":"55-45","html":"
Entity A issues a contingently convertible debt instrument with a par value of $1,000 that is convertible into 100 shares of its common stock. The convertible debt instrument has a 10-year term and is convertible at any time after any of the following events occurs:
  1. a
    Entity A's stock price exceeds $13 per share (market price trigger).
  2. b
    The convertible debt instrument trades for an amount that is less than 98 percent of its if-converted value (parity provision).
  3. c
    There is an announcement of a merger involving Entity A.
","snippet":"Entity A issues a contingently convertible debt instrument with a par value of $1,000 that is convertible into 100 shares of its common stock. The convertible debt instrument has a 10-year term and is convertible at any …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:34ffdf1cae22578c460e59fd9ca6cb1b8cb629fc633ee2d3b3dd606dbe5b5a99","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-46","para":"55-46","html":"
The terms of the convertible debt instrument also include a make-whole provision. Under that provision, if Entity A is acquired for cash before a specified date, the holder of the convertible debt instrument can convert into a number of shares equal to the sum of the fixed conversion ratio (100 shares per bond) and the make-whole shares. The number of make-whole shares is determined by reference to a table with axes of stock price and time. That table was designed such that the aggregate fair value of the shares deliverable (that is, the fair value of 100 shares per bond plus the make-whole shares) would be expected to approximate the fair value of the convertible debt instrument at the settlement date, assuming no change in relevant pricing inputs (other than stock price and time) since the instrument's inception. The embedded conversion option is considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The market price trigger and parity provision exercise contingencies are based on observable markets; however, those contingencies relate solely to the market prices of the entity's own stock and its own convertible debt. Also, the merger announcement exercise contingency is not an observable market or an index. Therefore, Step 1 does not preclude the warrants from being considered indexed to the entity's own stock. Proceed to Step 2.
  2. b
    Step 2. An acquisition for cash before the specified date is the only circumstance in which the settlement amount will not equal the difference between the fair value of 100 shares and a fixed strike price ($1,000 fixed par value of the debt). The settlement amount if Entity A is acquired for cash before the specified date is equal to the sum of the fixed conversion ratio (100 shares per bond) and the make-whole shares. The number of make-whole shares is determined based on a table with axes of stock price and time, which would both be inputs in a fair value measurement of a fixed-for-fixed option on equity shares.
","snippet":"The terms of the convertible debt instrument also include a make-whole provision. Under that provision, if Entity A is acquired for cash before a specified date, the holder of the convertible debt instrument can convert …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:43154530d53d1ab104347b1b024e8480338cb16192295da04d15a2757568354b","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-47","para":"55-47","html":"
Entity A, whose functional currency is the Chinese yuan (CNY), issues a debt instrument denominated in CNY with a par value of CNY 1,000 that is convertible into 100 shares of its common stock. Entity A's shares only trade on an exchange in which trades are denominated in US$. Those shares do not trade on an exchange (or other established marketplace) in which trades are denominated in CNY. The convertible debt instrument has a 10-year term and is convertible at any time. The embedded conversion option is considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The embedded conversion option does not contain an exercise contingency. Proceed to Step 2.
  2. b
    Step 2. Upon exercise of the embedded conversion option, the settlement amount would equal the difference between the fair value of a fixed number of the entity's equity shares (100 shares) and a fixed strike price denominated in its functional currency (CNY 1,000 fixed par value of the debt). The determination of whether the embedded conversion option is indexed to the entity's own stock is not affected by the currency (or currencies) in which the underlying shares trade.
","snippet":"Entity A, whose functional currency is the Chinese yuan (CNY), issues a debt instrument denominated in CNY with a par value of CNY 1,000 that is convertible into 100 shares of its common stock. Entity A's shares only tra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7eb9fd3b2c7f4d03cbc9735a9f9127e9563de9422fd151be51f4248452e8a772","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-48","para":"55-48","html":"
Entity A issues a security to investors for purposes of establishing a market-based measure of the grant-date fair value of a grant of stock options issued in a share-based payment transaction. Under the terms of that market-based stock option valuation instrument, Entity A is obligated to make variable quarterly payments to the investors that are a function of the net intrinsic value received by a pool of Entity A's grantees, based on actual stock option exercises by those grantees each period. The market-based stock option valuation instrument has a 10-year term, consistent with the contractual term of the underlying stock options. The market-based stock option valuation instrument is not considered indexed to Entity A's own stock based on the following evaluation:
  1. a
    Step 1. The analysis of the exercise contingency (or contingencies) depends on the particular terms and features of the instrument. However, as indicated in Step 2 below, a market-based stock option valuation instrument would not be considered indexed to the entity's own stock.
  2. b
    Step 2. The settlement amount will not equal the difference between the fair value of a fixed number of the entity's equity shares and a fixed strike price. The instrument provides for variable quarterly payments to investors that are based on actual stock option exercises for the period. Because a variable that affects the instrument's settlement amount is stock option exercise behavior, which is not an input to the fair value of a fixed-for-fixed option or forward contract on equity shares, the instrument is not considered indexed to the entity's own stock.
","snippet":"Entity A issues a security to investors for purposes of establishing a market-based measure of the grant-date fair value of a grant of stock options issued in a share-based payment transaction. Under the terms of that ma…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb625c3484316d03e0a927aa40025043bb351ee3cf1b7739e022cd4f4da5fdcd","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-49","para":"55-49","html":"
This Example illustrates the application of the guidance in paragraphs
815-40-35-14 through 35-17
. Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants have a 10-year term and are exercisable at any time. At issuance, Entity A determines that the warrants are equity classified in accordance with this Subtopic. Prior to the modifications described in Cases A, B, and C, the warrants have not been modified since issuance and remain equity classified.
","snippet":"This Example illustrates the application of the guidance in paragraphs 815-40-35-14 through 35-17. Entity A issues warrants that permit the holder to buy 100 shares of its common stock for $10 per share. The warrants hav…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f407269d6d35eff1b80b7930e0346d47120c1a4ea22eb7e616c203362d55d2c5","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-50","para":"55-50","html":"
Entity A reduces the exercise price of the warrants to $9 per share for a 60-day period to induce exercise of the outstanding warrants. Entity A determines that the warrants remain equity classified in accordance with this Subtopic after the modification. Entity A considers the guidance in paragraphs
815-40-35-14 through 35-15
and determines that the circumstances of the warrant modification indicate that the modification is executed in contemplation of an equity offering (that is, to induce the imminent exercise of the outstanding warrants and raise equity capital). Entity A concludes that the incremental fair value of the outstanding warrants is an incremental cost directly attributable to a proposed equity offering. Entity A recognizes the incremental fair value of the outstanding warrants as an equity issuance cost in accordance with paragraph 815-40-35-17(a). At the date on which the modification is executed by Entity A and the warrant holder, Entity A recognizes deferred costs of an offering (calculated in accordance with paragraph 815-40-35-16) to be charged against the gross proceeds of the offering. See paragraphs
815-40-50-5 through 50-6
and 505-10-50-3 for disclosure guidance.
","snippet":"Entity A reduces the exercise price of the warrants to $9 per share for a 60-day period to induce exercise of the outstanding warrants. Entity A determines that the warrants remain equity classified in accordance with th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:904ef6c29fb921dcff4b7e873e5a57b6929cf09e16c59fec3643d8c81db6b28c","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-51","para":"55-51","html":"
Entity A extends the term of the outstanding warrants, which results in an increase in the fair value of the outstanding warrants. Entity A determines that the warrants remain equity classified in accordance with this Subtopic after the modification. The warrant holder is a nonemployee investor that has no other commercial relationship with Entity A. The modification is not executed in contemplation of an imminent equity offering or a financing transaction. Entity A considers the guidance in paragraphs
815-40-35-14 through 35-15
and determines that the circumstances of the warrant modification do not indicate that there are other transactions entered into contemporaneously or in contemplation of the warrant modification or other rights and privileges obtained or obligations incurred to achieve an overall economic effect. Entity A concludes that the warrant modification is not related to a financing or compensation for goods and services and is not within the scope of another Topic. At the date on which Entity A and the warrant holder execute the modification, Entity A recognizes the incremental fair value of the outstanding warrants as a dividend to the warrant holder in accordance with paragraph 815-40-35-17(d). See paragraphs 260-10-45-15 and
260-10-45-22 through 45-27
for earnings-per-share guidance and paragraphs
815-40-50-5 through 50-6
and 505-10-50-3 for disclosure guidance.
","snippet":"Entity A extends the term of the outstanding warrants, which results in an increase in the fair value of the outstanding warrants. Entity A determines that the warrants remain equity classified in accordance with this Su…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:085ca1e8a0075a9aed40742266c3fcb3d1862a9c98340fab058b851d4042f731","downloaded_from":"2026-09-10T01:39:14.482Z","last_downloaded_at":"2026-09-10T01:39:14.482Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480206","source_sha256":"e6f925c0777ba9cc4780978fe3b4b69e67f6008587c4640acc8080255986a118"}},{"citation":"815-40-55-52","para":"55-52","html":"
Entity A reduces the exercise price of the warrants to $8 per share for the remaining term as a consideration for certain services received from the warrant holder. Entity A determines that the warrants remain equity classified in accordance with this Subtopic after the modification. Entity A considers the guidance in paragraphs
815-40-35-14 through 35-15
and determines that the circumstances of the warrant modification indicate that the modification is executed to compensate the warrant holder for the services provided to Entity A. Because the warrant modification is executed to compensate the warrant holder in a share-based payment arrangement, Entity A accounts for that modification by applying the requirements in Topic 718 (that is, the guidance in paragraphs
815-40-35-16 through 35-17
is not applicable).
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Paragraph superseded on 06/30/2025 after the end of the transition period stated in Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity.
","snippet":"Paragraph superseded on 06/30/2025 after the end of the transition period stated in Accounting Standards Update No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:17789a94b9f82bd0528aae17670a45382d863b87bd54f373510892662762adb3","downloaded_from":"2026-09-10T01:39:16.663Z","last_downloaded_at":"2026-09-10T01:39:16.663Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480175","source_sha256":"22ca2d704b2502e5c8111db9f9df579d7868249d8318b35b90bb55dd37200d15"}},{"citation":"815-40-65-2","para":"65-2","html":"
Paragraph superseded on 07/10/2023 after the end of the transition period stated in Accounting Standards Update No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options.
","snippet":"Paragraph superseded on 07/10/2023 after the end of the transition period stated in Accounting Standards Update No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compe…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1d6b033fc046fc0de79c350f1e4b02b64a84cbfa652eb41984a0520f47403e40","downloaded_from":"2026-09-10T01:39:16.663Z","last_downloaded_at":"2026-09-10T01:39:16.663Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480175","source_sha256":"22ca2d704b2502e5c8111db9f9df579d7868249d8318b35b90bb55dd37200d15"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ed42c176ff6c7b01ac4a51a46efee4580cd0352af622420bcabaa19b4dfefea3","downloaded_from":"2026-09-10T01:39:16.663Z","last_downloaded_at":"2026-09-10T01:39:16.663Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480175","source_sha256":"22ca2d704b2502e5c8111db9f9df579d7868249d8318b35b90bb55dd37200d15"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:08c4113bea962a4f959d7165def19b8e958c1016af071eeaa2150efa24f62b45","downloaded_from":"2026-09-10T01:39:16.663Z","last_downloaded_at":"2026-09-10T01:39:16.663Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480175","source_sha256":"22ca2d704b2502e5c8111db9f9df579d7868249d8318b35b90bb55dd37200d15"}},{"number":"S50","label":"SEC 50 Disclosure","anchor":"sec-50-disclosure","is_sec":true,"groups":[{"block":null,"heading":"Warrants or Rights Outstanding","paragraphs":[{"citation":"815-40-S50-1","para":"S50-1","html":"
See paragraph 235-10-S99-1, Regulation S-X Rule 4-08(i), for presentation requirements for warrants or rights outstanding.
","snippet":"See paragraph 235-10-S99-1, Regulation S-X Rule 4-08(i), for presentation requirements for warrants or rights outstanding.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d531b38396ed57d4628a3259427abc63d1bb5549116edcd4b0a79560de80051d","downloaded_from":"2026-09-10T01:39:22.945Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479507","source_sha256":"9bb13dcca4adcb4ea3ef754af12f44ecf5ca543c420b035eb895dd34246e0e12"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6f017cf1ba37edd298a9a15abca87672bdae6c20ce9e08f610f8a422e66a17a7","downloaded_from":"2026-09-10T01:39:22.945Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479507","source_sha256":"9bb13dcca4adcb4ea3ef754af12f44ecf5ca543c420b035eb895dd34246e0e12"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:13bf7967942d0cdca3ae83ebb8664039117e688bee84e728f4ecf32c8529d96e","downloaded_from":"2026-09-10T01:39:22.945Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479507","source_sha256":"9bb13dcca4adcb4ea3ef754af12f44ecf5ca543c420b035eb895dd34246e0e12"}}],"enrichment":{"summary":"ASC 815-40 governs contracts (freestanding or embedded) that are indexed to, and potentially settled in, an entity's own stock — warrants, written/purchased options, forward sale and purchase contracts, and conversion features. It supplies the two-part test for the derivative scope exception in 815-10-15-74(a): whether the instrument is \"indexed to the entity's own stock\" (two-step analysis in 815-40-15-7 through 15-7I) and whether it would be classified in stockholders' equity (conditions in 815-40-25-7 through 25-30). Equity-classified contracts stay in permanent equity with no remeasurement; contracts failing either part are assets or liabilities measured at fair value through earnings, with classification reassessed every balance sheet date.","key_points":["Indexation is tested in two steps: Step 1 evaluates exercise contingencies, which do not preclude indexation unless based on an observable market other than the market for the issuer's stock or an observable index not measured solely by reference to the issuer's own operations (815-40-15-7A); Step 2 evaluates settlement provisions (815-40-15-7C).","Under Step 2 an instrument is indexed to the entity's own stock if its settlement amount equals the difference between the fair value of a fixed number of shares and a fixed monetary amount, or if the only variables affecting settlement are inputs to the fair value of a fixed-for-fixed forward or option (strike price, term, dividends, stock borrow cost, interest rates, volatility, credit spread, hedgeability) (815-40-15-7D through 15-7F); a strike price denominated in a currency other than the issuer's functional currency precludes indexation (815-40-15-7I), and a down round feature is excluded from the Step 2 analysis (815-40-15-5D).","Classification defaults: contracts requiring net cash settlement, or giving the counterparty a choice of net cash settlement, are assets or liabilities; contracts requiring physical or net share settlement, or giving the entity the choice, are equity — unless settlement alternatives lack the same economic value, in which case economic substance controls (815-40-25-1 through 25-4).","Equity classification requires all of the conditions in 815-40-25-10: sufficient authorized and unissued shares after other commitments, an explicit share limit, no required net cash settlement if the entity fails to make timely SEC filings, and no cash-settled top-off or make-whole provisions; registered-share delivery requirements, superior counterparty rights, and collateral posting do not preclude equity classification (815-40-25-10A).","Any provision that could require net cash settlement precludes equity classification, except where holders of the underlying shares would also receive cash (e.g., certain change-in-control or nationalization provisions) (815-40-25-7 through 25-9; 815-40-55-2 through 55-6); likelihood of the triggering event is irrelevant except for payments due only on final liquidation.","All contracts in scope are initially measured at fair value (815-40-30-1); equity-classified contracts remain in permanent equity with no recognition of fair value changes (815-40-35-2), while asset/liability contracts are remeasured at fair value through earnings (815-40-35-4).","Classification must be reassessed at each balance sheet date with no limit on reclassifications (815-40-35-8); reclassification out of equity adjusts stockholders' equity for the equity-period change, and prior gains/losses are not reversed on reclassification into equity (815-40-35-9 through 35-10); modifications or exchanges of freestanding equity-classified written call options are treated as an exchange of the old instrument for a new one, with the fair value effect recognized as equity issuance cost, debt discount/issuance cost, a debt modification, or a dividend (815-40-35-16 through 35-17)."],"categories":["Derivatives and hedging","Debt and equity","Financial instruments","Presentation"],"audience_level":"advanced","student_note":"This is the gatekeeper for whether warrants, convertible-debt conversion features, and SPAC-style instruments sit in equity or get marked to market through earnings — a frequent source of restatements. The common misunderstanding is treating \"indexed to own stock\" (Section 15) and \"would be classified in equity\" (Section 25) as one test; both parts of the 815-10-15-74(a) scope exception must be satisfied, and any potential adjustment to the strike price or share count — however remote or within the entity's control — defeats \"fixed.\"","related_topics":["815-10","815-15","480-10","470-20","505-10","260-10"],"key_concepts":["indexed to entity's own stock","fixed-for-fixed","exercise contingency","net cash settlement","net share settlement","equity classification conditions","down round feature","warrant modification"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:980809300f0192a0079d79d5771817f50d3adb53309cce941830d092226a0af8","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"480-10","title":"Overall","topic_title":"Distinguishing Liabilities from Equity","score":0.8582,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ed48a12d56b9e78999aa46c3b8684dc7284e2c65debf38b4ce841d8e610d4881","downloaded_from":"2026-09-10T00:35:26.644Z","last_downloaded_at":"2026-09-10T00:36:28.293Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"470-20","title":"Debt with Conversion and Other Options","topic_title":"Debt","score":0.8106,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6ebbac513a72e6f306e515cc4b20f48a06bce96efff304546c462ebb9b5b3815","downloaded_from":"2026-09-10T00:31:05.799Z","last_downloaded_at":"2026-09-10T00:31:53.248Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-15","title":"Embedded Derivatives","topic_title":"Derivatives and Hedging","score":0.8092,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eacd069c73543674ec2845ef1adf9203e5bc1fe2a61a26791997d2c72c945426","downloaded_from":"2026-09-10T01:35:56.033Z","last_downloaded_at":"2026-09-10T01:36:30.992Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"260-10","title":"Overall","topic_title":"Earnings Per Share","score":0.7953,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a7f07e4723a0d65a01826ac632b45d0ce11e149797961539e1df48189aaa288b","downloaded_from":"2026-09-09T23:18:42.116Z","last_downloaded_at":"2026-09-09T23:19:35.348Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"210-20","title":"Offsetting","topic_title":"Balance Sheet","score":0.7827,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:22ae382f95f15f32043b5bfcd11fda5b07218a3e6b17de818178481e61d03e76","downloaded_from":"2026-09-09T22:59:04.667Z","last_downloaded_at":"2026-09-09T22:59:32.460Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"321-10","title":"Overall","topic_title":"Investments—Equity Securities","score":0.778,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b7ca515a88b41da6637ee793374294d93941c95f279844ba9137c85ff9f1c697","downloaded_from":"2026-09-09T23:38:42.777Z","last_downloaded_at":"2026-09-09T23:39:16.979Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}}],"prev":{"number":"815-35","title":"Net Investment Hedges","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0b32a8737cf0f0febdd2fbdb6ade63c51d1611e3d862c1cd290c0814f72c1add","downloaded_from":"2026-09-10T01:38:18.840Z","last_downloaded_at":"2026-09-10T01:38:43.011Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"next":{"number":"815-45","title":"Weather Derivatives","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ebe5835b1ed5590455bbd955f41fec6b6e5a4ef2ee972f43332ceb81d7a54af2","downloaded_from":"2026-09-10T01:39:26.652Z","last_downloaded_at":"2026-09-10T01:39:52.581Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:91c686d0ddf163e1d6ef9091215ded562ae34299ca3ed907e88612cd5fc62aa5","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-45","topic":"815","title":"Weather Derivatives","area":"Broad Transactions","paragraphs":35,"summary":"ASC 815-45 governs the accounting for weather derivatives that are not exchange-traded (exchange-traded weather derivatives fall under ASC 815-10), and excludes insurance contracts that pay only upon an insurable event causing a liability or adverse change in value of a specific asset or liability. If entered into for nontrading purposes, forward-based weather derivatives are accounted for under the intrinsic value method, purchased options are recorded as a premium asset amortized to expense plus intrinsic value measurement, and written options are recorded as a premium liability remeasured to fair value through earnings. All weather derivatives entered into for trading or speculative activities are recognized as assets or liabilities at fair value with subsequent changes in fair value in earnings.","concepts":["weather derivative","intrinsic value method","cumulative strike allocation","heating degree day","trading or speculative activities","option premium amortization","non-exchange-traded contract","embedded premium or discount"],"categories":["Derivatives and hedging","Subsequent measurement","Initial measurement","Fair value"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-45-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
815-45-55-6AmendedAccounting Standards Update No. 2012-0410/01/2012
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\n815-45-55-6 | Amended | Accounting Standards Update No. 2012-04 | 10/01/2012 |","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f83642b52f2c6bf8f886f547bdea0651923194a09703c0ea9206b3638773f569","downloaded_from":"2026-09-10T01:39:26.652Z","last_downloaded_at":"2026-09-10T01:39:26.652Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481086","source_sha256":"f1e7f785dfe7eeb6354d5ab813d7dd309b3a7ea7bd075da14c1ac7b9bcd5138c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c7c12bebe83b05befdab858e3bc4e72560df4125ad39e2040a5e5a637d2714ff","downloaded_from":"2026-09-10T01:39:26.652Z","last_downloaded_at":"2026-09-10T01:39:26.652Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481086","source_sha256":"f1e7f785dfe7eeb6354d5ab813d7dd309b3a7ea7bd075da14c1ac7b9bcd5138c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cec2718cbfe7fd67fd825ccdea2ce6cbd2f9e2bdfaf910464c216b23521800cd","downloaded_from":"2026-09-10T01:39:26.652Z","last_downloaded_at":"2026-09-10T01:39:26.652Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481086","source_sha256":"f1e7f785dfe7eeb6354d5ab813d7dd309b3a7ea7bd075da14c1ac7b9bcd5138c"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-45-05-1","para":"05-1","html":"
This Subtopic addresses the financial accounting and reporting for weather derivatives within its scope.
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The guidance in this Subtopic applies to all entities.
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Except as noted in this paragraph, the guidance in this Subtopic applies to all weather derivatives that are not exchange-traded (and, therefore, not subject to the requirements of Subtopic 815-10). The guidance in this Subtopic does not apply to contracts written by insurance entities that entitle the holder to be compensated only if, as a result of an insurable event, the holder incurs a liability or there is an adverse change in the value of a specific asset or liability for which the holder is at risk.
","snippet":"Except as noted in this paragraph, the guidance in this Subtopic applies to all weather derivatives that are not exchange-traded (and, therefore, not subject to the requirements of Subtopic 815-10). The guidance in this …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d6a2d972272a8939f28d65f473e41b1997062d182f2b653cd31c8d102c7bb550","downloaded_from":"2026-09-10T01:39:32.624Z","last_downloaded_at":"2026-09-10T01:39:32.624Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481025","source_sha256":"8fc76f3c6b20e42e8ce55364475444a1a9e10b50b12d9d8ed382a3990d86c75a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:21d88b1cabc0e2e63b37c7fcd4764381a8ba8694d27d1d5fcfa19cd73f277129","downloaded_from":"2026-09-10T01:39:32.624Z","last_downloaded_at":"2026-09-10T01:39:32.624Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481025","source_sha256":"8fc76f3c6b20e42e8ce55364475444a1a9e10b50b12d9d8ed382a3990d86c75a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9a5758e811a56f2710fd483e06f1f38349a1bb069b6194c2767164afc5de2831","downloaded_from":"2026-09-10T01:39:32.624Z","last_downloaded_at":"2026-09-10T01:39:32.624Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481025","source_sha256":"8fc76f3c6b20e42e8ce55364475444a1a9e10b50b12d9d8ed382a3990d86c75a"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":"Nontrading Activities","paragraphs":[{"citation":"815-45-25-1","para":"25-1","html":"
An entity that enters into a non-exchange-traded forward-based weather derivative in connection with nontrading activities shall account for the contract by applying an intrinsic value method (as discussed in Section 815-45-30). See Example 1 (paragraph 815-45-55-7) for an illustration of the accounting for an example degree-day forward contract.
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An entity that purchases a non-exchange-traded option-based weather derivative in connection with nontrading activities shall recognize an asset.
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An entity that sells or writes a non-exchange-traded option-based weather derivative shall recognize a liability.
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All weather derivative contracts entered into under trading or speculative activities shall be accounted for as assets or liabilities.
","snippet":"All weather derivative contracts entered into under trading or speculative activities shall be accounted for as assets or liabilities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4b228ce4cb4b1df840776b9cfc4e0d73a3fd124c6384101d7338a846c78add7a","downloaded_from":"2026-09-10T01:39:38.579Z","last_downloaded_at":"2026-09-10T01:39:38.579Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480966","source_sha256":"83f5d2a2a964b5968af5b8a601dc5d1a9c14dcb889ece70e97df9dce14c47359"}},{"citation":"815-45-25-6","para":"25-6","html":"
For purposes of this Subtopic, an entity shall be considered to be involved in trading or speculative activities if it enters into weather derivative contracts with the objective of generating profits on or from exposures to shifts or changes in climatic or geological conditions. See paragraphs
815-45-55-1 through 55-6
for specific guidance.
","snippet":"For purposes of this Subtopic, an entity shall be considered to be involved in trading or speculative activities if it enters into weather derivative contracts with the objective of generating profits on or from exposure…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3835aff2527e43cb7b3d6b5a502151454dea54ad50f2ef8cdc97eab705b3aec7","downloaded_from":"2026-09-10T01:39:38.579Z","last_downloaded_at":"2026-09-10T01:39:38.579Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480966","source_sha256":"83f5d2a2a964b5968af5b8a601dc5d1a9c14dcb889ece70e97df9dce14c47359"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d789dd0a9697db9a8fc00e3ff18d45291d8e2722366fa6e5d4a58496dfebadbc","downloaded_from":"2026-09-10T01:39:38.579Z","last_downloaded_at":"2026-09-10T01:39:38.579Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480966","source_sha256":"83f5d2a2a964b5968af5b8a601dc5d1a9c14dcb889ece70e97df9dce14c47359"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:23c985f577e457beb9941dd3909a20addad69c8ab7b4fbff098d67a605d2588b","downloaded_from":"2026-09-10T01:39:38.579Z","last_downloaded_at":"2026-09-10T01:39:38.579Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480966","source_sha256":"83f5d2a2a964b5968af5b8a601dc5d1a9c14dcb889ece70e97df9dce14c47359"}},{"number":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":null,"heading":"Nontrading Activities","paragraphs":[{"citation":"815-45-30-1","para":"30-1","html":"
A purchased non-exchange-traded option-based weather derivative recognized as an asset under paragraph 815-45-25-2 shall be measured initially at the amount of the premium paid.
","snippet":"A purchased non-exchange-traded option-based weather derivative recognized as an asset under paragraph 815-45-25-2 shall be measured initially at the amount of the premium paid.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:69084d72080d9dcf3c8585f2e5b25e52ff230f989101fbc31e4b901e62f0b877","downloaded_from":"2026-09-10T01:39:41.115Z","last_downloaded_at":"2026-09-10T01:39:41.115Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480935","source_sha256":"dc24dd7306ac4caad16f9bc19a5338664eb96884f079099cf72d07ae98eeae61"}},{"citation":"815-45-30-2","para":"30-2","html":"
A sold or written non-exchange-traded option-based weather derivative recognized as a liability under paragraph 815-45-25-3 shall be measured initially at the amount of the premium received.
","snippet":"A sold or written non-exchange-traded option-based weather derivative recognized as a liability under paragraph 815-45-25-3 shall be measured initially at the amount of the premium received.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:27ae3bd2a01cf9fb35bd334d1ce83a50760e041ba69a5fcec75d144c1c969f55","downloaded_from":"2026-09-10T01:39:41.115Z","last_downloaded_at":"2026-09-10T01:39:41.115Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480935","source_sha256":"dc24dd7306ac4caad16f9bc19a5338664eb96884f079099cf72d07ae98eeae61"}},{"citation":"815-45-30-3","para":"30-3","html":"
The intrinsic value method requires that the reporting entity allocate the cumulative strike amount to individual periods within the contract term. That allocation shall reflect reasonable expectations at the beginning of the contract term of normal or expected experience under the contract. That allocation shall be based on data from external statistical sources, such as the National Weather Service. See Example 1 (paragraph 815-45-55-7) for an illustration of the accounting for example contracts.
","snippet":"The intrinsic value method requires that the reporting entity allocate the cumulative strike amount to individual periods within the contract term. That allocation shall reflect reasonable expectations at the beginning o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f95d3740ba404f61ee02aa3ea20a3594414f986d67a3409a9c0dc4e3ab71cca","downloaded_from":"2026-09-10T01:39:41.115Z","last_downloaded_at":"2026-09-10T01:39:41.115Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480935","source_sha256":"dc24dd7306ac4caad16f9bc19a5338664eb96884f079099cf72d07ae98eeae61"}},{"citation":"815-45-30-3A","para":"30-3A","html":"
A purchased or written weather derivative may contain an embedded premium or discount if the contract terms are not consistent with current market terms (for example, the cumulative strike amount referenced in the contract is not consistent with historical weather data, adjusted for expected experience). In those circumstances, the premium or discount shall be quantified, removed from the calculated benchmark strike, and accounted for as discussed in the preceding paragraphs.
","snippet":"A purchased or written weather derivative may contain an embedded premium or discount if the contract terms are not consistent with current market terms (for example, the cumulative strike amount referenced in the contra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4ab8b24ca43dee6a97ea00b83b9bf992dfe73daae751843887d33c344eee5369","downloaded_from":"2026-09-10T01:39:41.115Z","last_downloaded_at":"2026-09-10T01:39:41.115Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480935","source_sha256":"dc24dd7306ac4caad16f9bc19a5338664eb96884f079099cf72d07ae98eeae61"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30b6109c156f8b3d4b11700d67d43c0d74f5ab56be209d083141e9ecf90c6609","downloaded_from":"2026-09-10T01:39:41.115Z","last_downloaded_at":"2026-09-10T01:39:41.115Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480935","source_sha256":"dc24dd7306ac4caad16f9bc19a5338664eb96884f079099cf72d07ae98eeae61"}},{"block":null,"heading":"Trading Activities","paragraphs":[{"citation":"815-45-30-4","para":"30-4","html":"
All weather derivative contracts entered into under trading or speculative activities shall be measured initially at their fair value.
","snippet":"All weather derivative contracts entered into under trading or speculative activities shall be measured initially at their fair value.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:313f7e12748c67d6ec154cc8dfadf9530c3a7ddacc979c8d9d851611571c386d","downloaded_from":"2026-09-10T01:39:41.115Z","last_downloaded_at":"2026-09-10T01:39:41.115Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480935","source_sha256":"dc24dd7306ac4caad16f9bc19a5338664eb96884f079099cf72d07ae98eeae61"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7e0389db35d472e41d80a73d89074ff64a3ba625e506558f0f20b30ac86b6305","downloaded_from":"2026-09-10T01:39:41.115Z","last_downloaded_at":"2026-09-10T01:39:41.115Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480935","source_sha256":"dc24dd7306ac4caad16f9bc19a5338664eb96884f079099cf72d07ae98eeae61"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1db2d5a21603cd9c3d7eea0acc2a4b3e28d27a69f724b639837b02157883109e","downloaded_from":"2026-09-10T01:39:41.115Z","last_downloaded_at":"2026-09-10T01:39:41.115Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480935","source_sha256":"dc24dd7306ac4caad16f9bc19a5338664eb96884f079099cf72d07ae98eeae61"}},{"number":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":"Nontrading Activities","paragraphs":[{"citation":"815-45-35-1","para":"35-1","html":"
An entity that enters into a non-exchange-traded forward-based weather derivative in connection with nontrading activities shall account for the contract by applying the intrinsic value method.
","snippet":"An entity that enters into a non-exchange-traded forward-based weather derivative in connection with nontrading activities shall account for the contract by applying the intrinsic value method.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:164b5b985c36f1041df7cae65102e326f85a6631cca127a320b0f6d60b532a42","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}},{"citation":"815-45-35-2","para":"35-2","html":"
The intrinsic value method computes an amount based on the difference between the expected results from an upfront allocation of the cumulative strike and the actual results during a period, multiplied by the contract price (for example, dollars per heating degree day). The intrinsic value (or intrinsic value measure) of the contract at interim dates shall be calculated based on cumulative differences between actual experience and the allocation through that date. The initial allocation of the cumulative strike amount shall not be adjusted over the term of the contract to reflect actual results.
","snippet":"The intrinsic value method computes an amount based on the difference between the expected results from an upfront allocation of the cumulative strike and the actual results during a period, multiplied by the contract pr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6180e60dc1f9424f93e96c3979aa9be1153a40750c92c05f80b607111d19c7d3","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}},{"citation":"815-45-35-3","para":"35-3","html":"
See Example 1 (paragraph 815-45-55-7) for an illustration of the accounting for an example degree-day forward contract.
","snippet":"See Example 1 (paragraph 815-45-55-7) for an illustration of the accounting for an example degree-day forward contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cbb4f29826512b0c9faef93301fc92b63e98355e233dd54050c6f67445068bdf","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}},{"citation":"815-45-35-4","para":"35-4","html":"
An entity that purchases a non-exchange-traded option-based weather derivative in connection with nontrading activities shall amortize to expense the premium paid (or due) and apply the intrinsic value method described in paragraph 815-45-35-2 to measure the contract at each interim balance sheet date. The premium asset shall be amortized in a rational and systematic manner.
","snippet":"An entity that purchases a non-exchange-traded option-based weather derivative in connection with nontrading activities shall amortize to expense the premium paid (or due) and apply the intrinsic value method described i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:91e3b9af6159d93472b32149ac65a896850ba1e86518c7464f53a7983cabea40","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}},{"citation":"815-45-35-5","para":"35-5","html":"
All entities that sell or write a non-exchange-traded option-based weather derivative shall recognize any subsequent changes in fair value currently in earnings—the premium shall not be amortized.
","snippet":"All entities that sell or write a non-exchange-traded option-based weather derivative shall recognize any subsequent changes in fair value currently in earnings—the premium shall not be amortized.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fb4e538271d40238c420d76fc3d27883eb51b7bd3ecdcf115ddf7ee956746412","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}},{"citation":"815-45-35-6","para":"35-6","html":"
See Example 1 (paragraph 815-45-55-7) for an illustration of the accounting for an example degree-day option contract.
","snippet":"See Example 1 (paragraph 815-45-55-7) for an illustration of the accounting for an example degree-day option contract.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3ce6ca663d80767b9ce93972a6ae74afd179d42c6b88f0a12af9463214097465","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:510ebd94c422e9ee758cdd7185a5fc2be5f8cbd6aa4c3cb13596e402f961c26d","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}},{"block":null,"heading":"Trading Activities","paragraphs":[{"citation":"815-45-35-7","para":"35-7","html":"
All subsequent changes in fair value of weather derivative contracts entered into under trading or speculative activities shall be reported currently in earnings.
","snippet":"All subsequent changes in fair value of weather derivative contracts entered into under trading or speculative activities shall be reported currently in earnings.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d0bb7937fbcd7f2c97392b1731a1495881156e618f08d7e7a7d20708b24ec0ee","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8f47863d5807d4b83a8ffa3c24d1a2621579cef54897bf9c79b0d5b3af7f8c8f","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:22abb146f3a3b52e570635fcdf05aea0aa79873192a9db93d480591e3f33a052","downloaded_from":"2026-09-10T01:39:43.163Z","last_downloaded_at":"2026-09-10T01:39:43.163Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480899","source_sha256":"f90a68263507d4a8bab425f4a08ccfe6571df0acbeb1b7627b555fb70eac301e"}},{"number":"50","label":"50 Disclosure","anchor":"50-disclosure","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-45-50-1","para":"50-1","html":"
Weather derivative contracts within the scope of this Subtopic are financial instruments and, therefore, entities that enter into such contracts shall follow the disclosure requirements under Subtopic 825-10.
","snippet":"Weather derivative contracts within the scope of this Subtopic are financial instruments and, therefore, entities that enter into such contracts shall follow the disclosure requirements under Subtopic 825-10.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:26716e9345d067f5185a761189e04d9229de304487fe91e72454b7e2072dcd81","downloaded_from":"2026-09-10T01:39:45.884Z","last_downloaded_at":"2026-09-10T01:39:45.884Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480865","source_sha256":"a5a3983f13b9442c7e6112523c0f11aac03fd5e32fe5210af5d97e6500f8d124"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:52c9d1dcca9054fb755e06458f7124f8aa612ebd6aa6a6616e0be6e6c80dceaa","downloaded_from":"2026-09-10T01:39:45.884Z","last_downloaded_at":"2026-09-10T01:39:45.884Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480865","source_sha256":"a5a3983f13b9442c7e6112523c0f11aac03fd5e32fe5210af5d97e6500f8d124"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09eee49a336463caacb696d24a71d9d2ffe3950b8f1d6f8f5754c754ae5091ff","downloaded_from":"2026-09-10T01:39:45.884Z","last_downloaded_at":"2026-09-10T01:39:45.884Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480865","source_sha256":"a5a3983f13b9442c7e6112523c0f11aac03fd5e32fe5210af5d97e6500f8d124"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Implementation Guidance","paragraphs":[{"citation":"815-45-55-1","para":"55-1","html":"
Determining whether or when an entity is involved in trading or speculative activities involving weather derivative contracts is a matter of judgment that depends on the relevant facts and circumstances. The framework in which such facts and circumstances are assessed shall be based on an evaluation of the various activities of an entity rather than solely on the terms of the contracts. Inherent in that framework is an evaluation of the entity's intent for entering into a weather derivative contract.
","snippet":"Determining whether or when an entity is involved in trading or speculative activities involving weather derivative contracts is a matter of judgment that depends on the relevant facts and circumstances. The framework in…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3a397d1e61e4b7b8a194144cde8926a772cc3699284190588dc8631537af351e","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"citation":"815-45-55-2","para":"55-2","html":"
It is easier to evaluate the trading activities of an entity if such activities are segregated either organizationally or by legal entity. If an entity conducts both trading activities and nontrading activities and those activities are not segregated either organizationally or by legal entity, it is essential that the entity analyze contracts at inception according to the factors in paragraphs
815-45-55-5 through 55-6
and identify those contracts as either trading or nontrading. However, if an operation's trading activities are not segregated in either of those ways and an evaluation of the indicators identified in paragraphs
815-45-55-4 through 55-6
would conclude that a portion of the operation's activities are trading, then only that portion of the operation's activities that is considered trading shall be accounted for at fair value.
","snippet":"It is easier to evaluate the trading activities of an entity if such activities are segregated either organizationally or by legal entity. If an entity conducts both trading activities and nontrading activities and those…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f94aa34b979012970f38aabb96c680267137bd8017762508e683c4eb196d0ed9","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"citation":"815-45-55-3","para":"55-3","html":"
As used in this Subtopic, operation refers to any identifiable activity of an entity (for example, a subsidiary, a division, or a unit) that enters into the types of weather derivative contracts that are within the scope of this Subtopic.
","snippet":"As used in this Subtopic, operation refers to any identifiable activity of an entity (for example, a subsidiary, a division, or a unit) that enters into the types of weather derivative contracts that are within the scope…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:23bfed428991b54bfb407d30f09b52d16c33b25f2fd52ab6f257a3103930f903","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"citation":"815-45-55-4","para":"55-4","html":"
For purposes of identifying trading activities, the following groups of indicators shall be considered for each identifiable operation (activity) of an entity that enters into weather derivative contracts that are within the scope of this Subtopic. Category A lists the fundamental indicators to be considered for purposes of determining whether the operation of an entity that enters into weather derivative contracts is involved in trading activities. Accordingly, the presence of indicators from Category A may be a strong indication that the operation's activities are trading. The presence of indicators from only Category B may indicate that such activities are trading. The absence of any or all of the indicators in either category, by itself, shall not preclude the operation's activities from being considered trading. Nevertheless, all available evidence shall be considered to determine whether, based on the weight of that evidence, an operation is involved in trading activities.
","snippet":"For purposes of identifying trading activities, the following groups of indicators shall be considered for each identifiable operation (activity) of an entity that enters into weather derivative contracts that are within…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0ae4a52913cdcd11bd3fa3ed387cfc1292d65c6fc4cbeec69e1f1530b2fea5ad","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"citation":"815-45-55-5","para":"55-5","html":"
All of the following are fundamental indicators in Category A:
  1. a
    The operation's primary business is not inherently exposed to the specific weather-related risk stated as a variable (for example, temperature, wind velocity, and humidity) in the weather derivative contracts it holds.
  2. b
    The volume of weather derivative contracts exceeds a reasonable or supportable level of weather-related risk inherent in the operation's primary business.
  3. c
    The change in value of the weather derivative contract (for example, based on a temperature variable) is expected to move in a direction that does not mitigate or offset the risk of the underlying exposure (for example, fuel consumption).
  4. d
    The operation develops and uses its own proprietary models to price the weather derivative contracts it offers or trades.
","snippet":"All of the following are fundamental indicators in Category A:\n(a) The operation's primary business is not inherently exposed to the specific weather-related risk stated as a variable (for example, temperature, wind velo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c662013210fbf1efba689a08c95fb180ed222414dd9de0ce09b0b4bc5483a63","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"citation":"815-45-55-6","para":"55-6","html":"
All of the following are secondary indicators (management and controls) in Category B:
  1. a
    Compensation and/or performance measures are tied to the short-term results generated from weather derivative contracts (that is, the operation is measured based on trading profits or changes in the fair values of its positions as opposed to profitable management of income-producing assets).
  2. b
    The operation communicates internally in terms of trading strategy (that is, management reports identify contractual positions, fair values, risk exposure, and so forth).
  3. c
    The word trading is in the name of the operation for internal or external purposes.
  4. d
    Employees of the operation are referred to as traders or have prior experience in derivative trading or risk-management activities.
  5. e
    Assessment of net market positions of the operation is done on a regular basis.
  6. f
    Infrastructure of the operation is similar to that of a trading operation of a bank or investment bank—front office, middle office, and back office (that is, there is a segregation of back-office processing and front-office trading functions).
  7. g
    An infrastructure exists that enables the operation to capture price and other risks on a real-time basis.
  8. h
    The activities are managed on a portfolio or book basis.
","snippet":"All of the following are secondary indicators (management and controls) in Category B:\n(a) Compensation and/or performance measures are tied to the short-term results generated from weather derivative contracts (that is,…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8e6fd0a4780c6d483d333b08a5dd433c55e3e074af9607ae31add3fc65a2d1d4","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1de74dd385d809c438acd7d4c610fd4d57f67e7a61affd8dcefe4c36c38d12d8","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"815-45-55-7","para":"55-7","html":"
The following Cases illustrate two types of degree-day contracts:
  1. a
    A degree-day swap (Case A)
  2. b
    A degree-day option (Case B).
","snippet":"The following Cases illustrate two types of degree-day contracts:\n(a) A degree-day swap (Case A)\n(b) A degree-day option (Case B).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c581deab527db4ae13674400749fb9454e9413b0c3cb5eac90f9c88d4648e4b9","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"citation":"815-45-55-8","para":"55-8","html":"
Cases A and B share all of the following assumptions:
  1. a
    Entity A is a construction materials entity that has its sales decrease during cold winters or a chemical manufacturer that has its natural gas consumption costs increase during cold winters. Entity B is a natural gas distribution entity that experiences lower revenues during warm winters.
  2. b
    Neither Entity A nor Entity B is a dealer in weather derivatives (that is, the operations of both entities that entered into this contract are nontrading).
  3. c
    At inception of each contract, the reporting entity constructs the allocation (as presented in the table in paragraph 815-45-55-11) of the strike level of heating degree days across the contract period based on historical heating degree day averages (the weather-related index) for the respective months. That allocation is not part of the contract terms. (Heating degree days is the winter measure of average daily temperature below 65 degrees Fahrenheit.)
  4. d
    Actual heating degree days (as presented in the table in paragraph 815-45-55-11) reflect the measure of actual average daily temperatures below 65 degrees Fahrenheit based on weather service readings. If the average of the daily high and the daily low temperatures is 34 degrees Fahrenheit, then there are 31 heating degree days for that day. To determine the number of heating degree days for a period, add heating degree days for each day of the period.
","snippet":"Cases A and B share all of the following assumptions:\n(a) Entity A is a construction materials entity that has its sales decrease during cold winters or a chemical manufacturer that has its natural gas consumption costs …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f798f85a517507035bb8c729d46a4eeae11916a98eca1e9c2caf753be04e4799","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"citation":"815-45-55-9","para":"55-9","html":"
Entity A and Entity B enter into a degree-day swap (that is, a contract with two-directional risk).The contract requires no initial net investment and requires a payment by Entity A to Entity B if cumulative heating degree days are less than 4,500 heating degree days during the period from November 1, 1999, to March 31, 2000. If cumulative heating degree days exceed 4,500 heating degree days during that same period, Entity B will make a payment to Entity A. The contract has a floor of 2,500 heating degree days and a cap of 6,500 heating degree days. The payment under the contract is equal to $10,000 multiplied by the cumulative number of heating degree days above or below 4,500 heating degree days and is made on April 5, 2000. Based on the foregoing terms, this contract carries a maximum payout limitation of $20 million by Entity A and $20 million by Entity B regardless of actual temperature levels experienced. The accounting for the degree-day swap by both parties is presented in the table in paragraph 815-45-55-11.
","snippet":"Entity A and Entity B enter into a degree-day swap (that is, a contract with two-directional risk).The contract requires no initial net investment and requires a payment by Entity A to Entity B if cumulative heating degr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a87a7924080e900284bf480f2d13cd3a87561dbae442a4f40d5e213fc2d528b7","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"citation":"815-45-55-10","para":"55-10","html":"
Entity A purchases on November 1, 1999, a degree-day option from Entity B for a premium payment of $5.85 million. The option requires that Entity B pay Entity A $10,000 for each heating degree day in excess of 4,500 heating degree days (the strike level) cumulative during the period from November 1, 1999, to March 31, 2000. This contract specifies a maximum payout limitation of $20 million regardless of actual temperature levels experienced, thereby effectively stipulating a cap based on 6,500 heating degree days. The contract is settled on April 5, 2000. The accounting for the purchased degree-day option by both parties is presented in the table in the following paragraph. The accounting does not include amounts related to the option premium of $5.85 million.
","snippet":"Entity A purchases on November 1, 1999, a degree-day option from Entity B for a premium payment of $5.85 million. The option requires that Entity B pay Entity A $10,000 for each heating degree day in excess of 4,500 heat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fe2c1aa6bdbc10510118cf2ed77f8f849ea204692125ccf72b4237e7139527e1","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"citation":"815-45-55-11","para":"55-11","html":"
The following table presents the accounting by both parties for the weather derivatives in Cases A and B.
","snippet":"The following table presents the accounting by both parties for the weather derivatives in Cases A and B.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e893d1c93a9e8cef44c98f574eca71ddd39f827ab7024d9a4b38ed112680c0b7","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b458c8f8fff68a78db2bff6a5b8bc89e628d415513ac28fd7e7ac8f75b09a6c3","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e0c5d44f23715635f54bbc5f39523cdb4d20544d627cc2ffa07d7fd4e272f2ab","downloaded_from":"2026-09-10T01:39:50.034Z","last_downloaded_at":"2026-09-10T01:39:50.034Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480836","source_sha256":"0eaa1e91fbf31d924946ff8b2dd55008125f4b64b2d61944908e5df5e6c6f376"}},{"number":"60","label":"60 Relationships","anchor":"60-relationships","is_sec":false,"groups":[{"block":null,"heading":"Fair Value Measurements and Disclosures","paragraphs":[{"citation":"815-45-60-1","para":"60-1","html":"
For a discussion of fair value measurements and related disclosure requirements, see Topic 820.
","snippet":"For a discussion of fair value measurements and related disclosure requirements, see Topic 820.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c449031b8ab8ee87014faa383a820e13b35fe296f6aa2ccfcba4844a43fe279c","downloaded_from":"2026-09-10T01:39:52.581Z","last_downloaded_at":"2026-09-10T01:39:52.581Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480805","source_sha256":"7a666bccbbd1d21f751ecaec8cb087fa681cb9673a2aedf3c1b64457f766b3d8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:727f50ab36d0f8dcba765060f8d9fa7f4dbfd5cf44b4173b372b504bac4e2bad","downloaded_from":"2026-09-10T01:39:52.581Z","last_downloaded_at":"2026-09-10T01:39:52.581Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480805","source_sha256":"7a666bccbbd1d21f751ecaec8cb087fa681cb9673a2aedf3c1b64457f766b3d8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6b891120f050d64db7ec126be94dd19f21ed6b9c894c6f5d53e55120a4258394","downloaded_from":"2026-09-10T01:39:52.581Z","last_downloaded_at":"2026-09-10T01:39:52.581Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480805","source_sha256":"7a666bccbbd1d21f751ecaec8cb087fa681cb9673a2aedf3c1b64457f766b3d8"}}],"enrichment":{"summary":"ASC 815-45 governs the accounting for weather derivatives that are not exchange-traded (exchange-traded weather derivatives fall under ASC 815-10), and excludes insurance contracts that pay only upon an insurable event causing a liability or adverse change in value of a specific asset or liability. If entered into for nontrading purposes, forward-based weather derivatives are accounted for under the intrinsic value method, purchased options are recorded as a premium asset amortized to expense plus intrinsic value measurement, and written options are recorded as a premium liability remeasured to fair value through earnings. All weather derivatives entered into for trading or speculative activities are recognized as assets or liabilities at fair value with subsequent changes in fair value in earnings.","key_points":["Scope: applies to all entities and all non-exchange-traded weather derivatives, but not to insurance contracts that compensate the holder only upon an insurable event causing a liability or adverse change in the value of a specific asset or liability at risk (815-45-15-1 through 15-2).","Nontrading forward-based (e.g., degree-day swap) weather derivatives are accounted for under the intrinsic value method (815-45-25-1; 815-45-35-1).","The intrinsic value method allocates the cumulative strike amount to individual periods at inception using external statistical data (e.g., National Weather Service), and that initial allocation is never adjusted for actual results; interim intrinsic value equals cumulative actual-versus-allocated differences times the contract price (815-45-30-3; 815-45-35-2).","A purchased non-exchange-traded option-based weather derivative is recognized as an asset measured initially at the premium paid, then amortized to expense in a rational and systematic manner while the intrinsic value method is applied at each interim balance sheet date (815-45-25-2; 815-45-30-1; 815-45-35-4).","A written non-exchange-traded option-based weather derivative is recognized as a liability initially measured at the premium received; the premium is not amortized and all subsequent fair value changes go to earnings (815-45-25-3; 815-45-30-2; 815-45-35-5).","Off-market contracts may contain an embedded premium or discount (e.g., a cumulative strike inconsistent with historical weather data); it must be quantified, removed from the benchmark strike, and accounted for separately (815-45-30-3A).","Trading/speculative classification turns on the entity's intent and an evaluation of its activities, assessed via Category A fundamental indicators (815-45-55-5) and Category B management-and-control indicators (815-45-55-6); such contracts are measured initially and subsequently at fair value with changes in earnings (815-45-25-5 through 25-6; 815-45-30-4; 815-45-35-7)."],"categories":["Derivatives and hedging","Subsequent measurement","Initial measurement","Fair value"],"audience_level":"advanced","student_note":"This is the rare corner of ASC 815 where a derivative is NOT measured at fair value: nontrading, non-exchange-traded weather derivatives use the intrinsic value method instead. The common mistake is assuming all derivatives get fair value treatment, or forgetting the asymmetry—purchased option premiums are amortized while written option premiums are not and are simply remeasured to fair value through earnings.","related_topics":["815-10","820","825-10","944"],"key_concepts":["weather derivative","intrinsic value method","cumulative strike allocation","heating degree day","trading or speculative activities","option premium amortization","non-exchange-traded contract","embedded premium or discount"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:388df5ed0ebf46d639c3d3366107f0d74fb0f600dc567d05d15404c86875ec97","downloaded_from":"2026-09-10T01:39:26.652Z","last_downloaded_at":"2026-09-10T01:39:52.581Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"815-25","title":"Fair Value Hedges","topic_title":"Derivatives and Hedging","score":0.7254,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9158f6b52355474e01e28969ade4bf292d8db02101a96c3c9a009a333a9c566f","downloaded_from":"2026-09-10T01:37:04.984Z","last_downloaded_at":"2026-09-10T01:37:31.976Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-10","title":"Overall","topic_title":"Derivatives and Hedging","score":0.6803,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4220a6deb8d90c954d8e8e986a3f69043011762ce167ca5dc569817e39218bc2","downloaded_from":"2026-09-10T01:34:51.547Z","last_downloaded_at":"2026-09-10T01:35:54.090Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-944","title":"Financial Services—Insurance","topic_title":"Derivatives and Hedging","score":0.6718,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:71737bac67888d4eb16d3fbd7c53a347f9b316d56aac5acf89b2775035d0859c","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-932","title":"Extractive Activities—Oil and Gas","topic_title":"Derivatives and Hedging","score":0.6437,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:93e2a1c6926468be959e50e9c2989f588c7dc3555427738eb6d246451589e413","downloaded_from":"2026-09-10T01:40:07.746Z","last_downloaded_at":"2026-09-10T01:40:20.826Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-980","title":"Regulated Operations","topic_title":"Derivatives and Hedging","score":0.6373,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7888e12b5410def15e829463f6fb6b0baafa83bedb51725e3843c3296a0ff773","downloaded_from":"2026-09-10T01:41:23.271Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-30","title":"Cash Flow Hedges","topic_title":"Derivatives and Hedging","score":0.6237,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e8bb338780fcab6c20b934e6b5f670f8d011497cac71dbba6590cde584fca4b2","downloaded_from":"2026-09-10T01:37:35.233Z","last_downloaded_at":"2026-09-10T01:38:16.160Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}}],"prev":{"number":"815-40","title":"Contracts in Entity's Own Equity","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5040a15691413c54042cd79085dde320ab35da0db743b56d286f138a3ba786bf","downloaded_from":"2026-09-10T01:38:46.766Z","last_downloaded_at":"2026-09-10T01:39:22.945Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"next":{"number":"815-924","title":"Entertainment—Casinos","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:023fa269c4543a227a157fc939e47626733dbd965f9ecf574f313a4e88936006","downloaded_from":"2026-09-10T01:39:58.369Z","last_downloaded_at":"2026-09-10T01:40:04.850Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:67de1601a0addae39629aa964a7daf4352e0408784938e5d72672197214a10fa","downloaded_from":"2026-09-10T01:39:26.652Z","last_downloaded_at":"2026-09-10T01:39:52.581Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-924","topic":"815","title":"Entertainment—Casinos","area":"Broad Transactions","paragraphs":4,"summary":"This Subtopic applies the derivatives and hedging guidance of Topic 815 to casinos and to the casino operations of other entities. Its single substantive rule is a scope-out: fixed-odds wagering contracts — bets where the odds of winning are known or knowable when placed (e.g., certain sports and race wagers) — are not accounted for as derivatives by the casino that issues them. Instead, the casino treats them as revenue transactions under Topic 606.","concepts":["fixed-odds wagering contract","sports and race wagers","derivative scope exception","casino operations","revenue from contracts with customers","embedded derivatives","issuer accounting"],"categories":["Derivatives and hedging","Revenue","Industry-specific","Recognition"],"level":"intermediate","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-924-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
924-815-05-1AddedAccounting Standards Update No. 2016-2012/21/2016
924-815-15-1AddedAccounting Standards Update No. 2016-2012/21/2016
924-815-25-1AddedAccounting Standards Update No. 2016-2012/21/2016
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\n924-815-05-1 | Added | Accounting Standards Update No. 2016-20 | 12/21/2016 |\n924-815-15…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:99df021dece3b923df188938d43ee77fca1a576ac3f1c6f84d178724948a77e5","downloaded_from":"2026-09-10T01:39:58.369Z","last_downloaded_at":"2026-09-10T01:39:58.369Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478655","source_sha256":"72c71932e0ffbb318d8be4dbe96dd9f2ae03a6106a69b0e4464b5b529fd88a7a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c66e15f0a00bd14bb1379ac3a0b69a16d979e122a019c5d4ae8f8a78759e01eb","downloaded_from":"2026-09-10T01:39:58.369Z","last_downloaded_at":"2026-09-10T01:39:58.369Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478655","source_sha256":"72c71932e0ffbb318d8be4dbe96dd9f2ae03a6106a69b0e4464b5b529fd88a7a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9a41d2003f42cd0f44412bf79141dbba15361bd84054b10c64bc2dcae68c3252","downloaded_from":"2026-09-10T01:39:58.369Z","last_downloaded_at":"2026-09-10T01:39:58.369Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478655","source_sha256":"72c71932e0ffbb318d8be4dbe96dd9f2ae03a6106a69b0e4464b5b529fd88a7a"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-924-05-1","para":"05-1","html":"
This Subtopic includes the accounting and reporting standards for entities operating as casinos and for the casino operations of other entities, for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities.
","snippet":"This Subtopic includes the accounting and reporting standards for entities operating as casinos and for the casino operations of other entities, for derivative instruments, including certain derivative instruments embedd…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:447a7a4567fa3cc3c21c6e9d0587d626c7b51b15551e96164e7ad82143cdfb8a","downloaded_from":"2026-09-10T01:40:00.662Z","last_downloaded_at":"2026-09-10T01:40:00.662Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478464","source_sha256":"f144fee68e2da210237b8feb5f401067b4481d4f260d4affcee361e4077202d0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e91b12f9eb245732ce9abf63048076f5deea40028f23e7e96f3e496676844a4a","downloaded_from":"2026-09-10T01:40:00.662Z","last_downloaded_at":"2026-09-10T01:40:00.662Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478464","source_sha256":"f144fee68e2da210237b8feb5f401067b4481d4f260d4affcee361e4077202d0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1ab2122669fbb4f78ed2cc62437ecbf7ca41a990a49d2ab02aa88445d974a23a","downloaded_from":"2026-09-10T01:40:00.662Z","last_downloaded_at":"2026-09-10T01:40:00.662Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478464","source_sha256":"f144fee68e2da210237b8feb5f401067b4481d4f260d4affcee361e4077202d0"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-924-15-1","para":"15-1","html":"
The scope of this Subtopic is the same as Scope and Scope Exceptions as outlined in the Overall Subtopic (see Section 924-10-15).
","snippet":"The scope of this Subtopic is the same as Scope and Scope Exceptions as outlined in the Overall Subtopic (see Section 924-10-15).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fd6720c1a6747f649f3eecf7a6ab50f9e379caa9b855ca511e31c3919305928f","downloaded_from":"2026-09-10T01:40:03.172Z","last_downloaded_at":"2026-09-10T01:40:03.172Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478424","source_sha256":"be2f0859141582acaa9c71328e5c71e113e0577994d36b52c2e3c5cf8add86d1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:42e36ec994ab07728f207abc1a3a5163fae22ab782174d384484026693d6b22b","downloaded_from":"2026-09-10T01:40:03.172Z","last_downloaded_at":"2026-09-10T01:40:03.172Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478424","source_sha256":"be2f0859141582acaa9c71328e5c71e113e0577994d36b52c2e3c5cf8add86d1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:64d5c1095624852c24c4ae813382075b58e22b3a177d4d8b65a5dcc1989e3551","downloaded_from":"2026-09-10T01:40:03.172Z","last_downloaded_at":"2026-09-10T01:40:03.172Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478424","source_sha256":"be2f0859141582acaa9c71328e5c71e113e0577994d36b52c2e3c5cf8add86d1"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-924-25-1","para":"25-1","html":"
Wagering contracts placed by bettors for which the odds of winning at the time the bets are placed with a casino are known or knowable (for example, certain sports and race wagers) are fixed-odds wagering contracts. The issuer of those contracts shall not account for such contracts under the guidance in Topic 815 on derivatives and hedging. Rather, those contracts are revenue transactions for a casino and shall be recognized in accordance with Topic 606 on revenue from contracts with customers.
","snippet":"Wagering contracts placed by bettors for which the odds of winning at the time the bets are placed with a casino are known or knowable (for example, certain sports and race wagers) are fixed-odds wagering contracts. The …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e839a23defe9e5efc07b86b13da8935b8450bf7f4fe27e3f0e674f18105a5f1","downloaded_from":"2026-09-10T01:40:04.850Z","last_downloaded_at":"2026-09-10T01:40:04.850Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478309","source_sha256":"59475d7cf3509672bc5366963b5b459508e2d9f66d1da4cd7b89c07b4fcd3f86"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a88d2bc43ed1eba1ceeb66025ce1cc6f27225187cf67b41f243a1701645446db","downloaded_from":"2026-09-10T01:40:04.850Z","last_downloaded_at":"2026-09-10T01:40:04.850Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478309","source_sha256":"59475d7cf3509672bc5366963b5b459508e2d9f66d1da4cd7b89c07b4fcd3f86"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:48a62bb960a3a64399a9343bf0eabe93e4bc14c78c45953fa51479c482ec7205","downloaded_from":"2026-09-10T01:40:04.850Z","last_downloaded_at":"2026-09-10T01:40:04.850Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478309","source_sha256":"59475d7cf3509672bc5366963b5b459508e2d9f66d1da4cd7b89c07b4fcd3f86"}}],"enrichment":{"summary":"This Subtopic applies the derivatives and hedging guidance of Topic 815 to casinos and to the casino operations of other entities. Its single substantive rule is a scope-out: fixed-odds wagering contracts — bets where the odds of winning are known or knowable when placed (e.g., certain sports and race wagers) — are not accounted for as derivatives by the casino that issues them. Instead, the casino treats them as revenue transactions under Topic 606.","key_points":["The Subtopic covers derivative instruments, including certain embedded derivatives, and hedging activities of casinos and casino operations of other entities (815-924-05-1).","Scope is the same as the Overall Entertainment—Casinos Subtopic, Section 924-10-15 (815-924-15-1).","A wagering contract is a 'fixed-odds wagering contract' if the odds of winning are known or knowable at the time the bettor places the bet with the casino (815-924-25-1).","The issuer (casino) shall not apply Topic 815 derivative accounting to fixed-odds wagering contracts (815-924-25-1).","Fixed-odds wagering contracts are revenue transactions for the casino and shall be recognized under Topic 606, Revenue from Contracts with Customers (815-924-25-1)."],"categories":["Derivatives and hedging","Revenue","Industry-specific","Recognition"],"audience_level":"intermediate","student_note":"Exam-relevant point: a sports bet looks like a derivative (underlying, notional, net settlement), but GAAP expressly routes fixed-odds wagers to Topic 606 revenue accounting for the casino. The common mistake is assuming the exception applies to the bettor or to all wagering contracts — it is stated for the issuer and for wagers whose odds are known or knowable when placed.","related_topics":["924-10","924-605","815-10","606-10"],"key_concepts":["fixed-odds wagering contract","sports and race wagers","derivative scope exception","casino operations","revenue from contracts with customers","embedded derivatives","issuer accounting"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3135521d493b5b43631d53e894eac1a4756183bfa020c8a30e92299b9efe06c5","downloaded_from":"2026-09-10T01:39:58.369Z","last_downloaded_at":"2026-09-10T01:40:04.850Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"924-10","title":"Overall","topic_title":"Entertainment—Casinos","score":0.7172,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7040d08fc007371eb74da912fb0c3d3136a3700d7fb625a01afaf18cf0e1b136","downloaded_from":"2026-09-10T02:11:02.015Z","last_downloaded_at":"2026-09-10T02:11:22.837Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"720-924","title":"Entertainment—Casinos","topic_title":"Other Expenses","score":0.715,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6b78070c80cdff4325ee682cf059c3e7d46557722e3aff34a5c65cfe42b86e4e","downloaded_from":"2026-09-10T01:09:57.559Z","last_downloaded_at":"2026-09-10T01:10:03.676Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"280-924","title":"Entertainment—Casinos","topic_title":"Segment Reporting","score":0.7048,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:014ab9f7ed359990b43007ebf1083a889fd2aaa75652fab819a013b47d0e2655","downloaded_from":"2026-09-09T23:23:20.429Z","last_downloaded_at":"2026-09-09T23:23:26.099Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not 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Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30bce534954b5ba5a6a0200ec7dba435802c5cc92abf47a5cba7d5bda656ed47","downloaded_from":"2026-09-10T01:40:07.746Z","last_downloaded_at":"2026-09-10T01:40:20.826Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c42145aa43cae71cae70c306f09147acecb61fbd811fb56ba224a28e02d7873d","downloaded_from":"2026-09-10T01:39:58.369Z","last_downloaded_at":"2026-09-10T01:40:04.850Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-932","topic":"815","title":"Extractive Activities—Oil and Gas","area":"Broad Transactions","paragraphs":5,"summary":"This subtopic addresses whether gas-balancing arrangements between working-interest partners in a gas well are derivative instruments under Topic 815. When one partner (the overtaker) takes more than its share of production, the undertaken partner has a right to make up the imbalance in kind, with gas from another well, or in cash; the terms of each arrangement must be analyzed against the definition of a derivative. Even where the arrangement is a derivative whose settlement price leaves it at a fair value of zero, the Section 815-10-50 disclosures still apply, and the option feature cannot use the normal purchases and normal sales exception.","concepts":["gas-balancing arrangement","overtake and makeup gas","definition of a derivative instrument","notional amount","net settlement","readily convertible to cash","normal purchases and normal sales exception","fair value of zero"],"categories":["Derivatives and hedging","Industry-specific","Disclosure","Recognition"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-932-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
ProductionAmendedAccounting Standards Update No. 2010-0301/06/2010
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nProduction | Amended | Accounting Standards Update No. 2010-03 | 01/06/2010 |","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:65ff2bf25ad3cd93611daa629c81e92ce9f8df83921566214a1d15bd1b653dc0","downloaded_from":"2026-09-10T01:40:07.746Z","last_downloaded_at":"2026-09-10T01:40:07.746Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478221","source_sha256":"ceb68610fc3554214d3c4c8521f2590577fb31bc0470fb1aefdfe59c1e4a3fec"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6641441386d6397f2f36e2a0d7fe644d0311515e5ebe4a60cd1f7cfe99a3b0a1","downloaded_from":"2026-09-10T01:40:07.746Z","last_downloaded_at":"2026-09-10T01:40:07.746Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478221","source_sha256":"ceb68610fc3554214d3c4c8521f2590577fb31bc0470fb1aefdfe59c1e4a3fec"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:70ffe7f966ae0d17639ae21309b823c5ba2ed0be02cce9d47a6396b772e86499","downloaded_from":"2026-09-10T01:40:07.746Z","last_downloaded_at":"2026-09-10T01:40:07.746Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478221","source_sha256":"ceb68610fc3554214d3c4c8521f2590577fb31bc0470fb1aefdfe59c1e4a3fec"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-932-05-1","para":"05-1","html":"
This Subtopic provides guidance on gas-balancing arrangements.
","snippet":"This Subtopic provides guidance on gas-balancing arrangements.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9e1f9f79ec87053bc76005ff50977685aa21c7660b74a36ac7f7ce976c797236","downloaded_from":"2026-09-10T01:40:09.964Z","last_downloaded_at":"2026-09-10T01:40:09.964Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479212","source_sha256":"1c63ef71fb249f9183aaaf1b96f75aa38638654c1c9a36111dfa42c14975cb86"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:87a190990a8ce4b2215e650241a26d1f569c2e14c2ee1044c9cbf902754e6830","downloaded_from":"2026-09-10T01:40:09.964Z","last_downloaded_at":"2026-09-10T01:40:09.964Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479212","source_sha256":"1c63ef71fb249f9183aaaf1b96f75aa38638654c1c9a36111dfa42c14975cb86"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:92ff8d7671e8fe4c3fc161a45725c5dd5006c7ff41bd3796549360738000a4c4","downloaded_from":"2026-09-10T01:40:09.964Z","last_downloaded_at":"2026-09-10T01:40:09.964Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479212","source_sha256":"1c63ef71fb249f9183aaaf1b96f75aa38638654c1c9a36111dfa42c14975cb86"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Overall Guidance","paragraphs":[{"citation":"815-932-15-1","para":"15-1","html":"
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 932-10-15.
","snippet":"This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 932-10-15.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8a577dbde0775854b87fbfd04d0601ab2b1251f55190cc51744b9aa4efcb74e9","downloaded_from":"2026-09-10T01:40:12.705Z","last_downloaded_at":"2026-09-10T01:40:12.705Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478733","source_sha256":"22dfd2665f48baae149177bc92a2766d80f30867882249d2824bf4ef427b16fa"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:76e1754a2566878e72ec0ee6ff0abc5609255368c1b682e44c39be910d636c02","downloaded_from":"2026-09-10T01:40:12.705Z","last_downloaded_at":"2026-09-10T01:40:12.705Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478733","source_sha256":"22dfd2665f48baae149177bc92a2766d80f30867882249d2824bf4ef427b16fa"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:de253e60a44c549663f1e6f591697c23a77759fefda5f1dbececfd37e675ec0b","downloaded_from":"2026-09-10T01:40:12.705Z","last_downloaded_at":"2026-09-10T01:40:12.705Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478733","source_sha256":"22dfd2665f48baae149177bc92a2766d80f30867882249d2824bf4ef427b16fa"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Gas-Balancing Arrangements","paragraphs":[{"citation":"815-932-55-1","para":"55-1","html":"
A gas-balancing arrangement is a situation where Entities A and B are partners in a gas well. During the current period, Entity B may decide not to sell any gas because it does not have a purchaser or because market conditions are unfavorable. Accordingly, Entity A (the overtaker) agrees to take all the gas production for the period and sells it to its customer. In the future, Entity B has the right to take more gas than its interest would otherwise allow to make up for Entity A's overtake. Alternatively, A may make payment in kind (using gas from a different well) or pay cash to Entity B.
","snippet":"A gas-balancing arrangement is a situation where Entities A and B are partners in a gas well. During the current period, Entity B may decide not to sell any gas because it does not have a purchaser or because market cond…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0f5609ef08d972f10e08aa5f0a29fa27f2bcb7acbea844f61855930d8724217a","downloaded_from":"2026-09-10T01:40:19.151Z","last_downloaded_at":"2026-09-10T01:40:19.151Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477816","source_sha256":"0320039e53c7af22dc43e4c21e922377fcc19c0389645c8b378f52df3d381f86"}},{"citation":"815-932-55-2","para":"55-2","html":"
The terms of a gas-balancing arrangement should be analyzed to determine whether it meets the definition of a derivative instrument under Topic 815. In particular, the option in the agreement may not meet the criterion in paragraph 815-10-15-83 (as further clarified by the guidance in paragraphs
815-10-55-5 through 55-7
) with respect to a notional amount, even though it may meet the criterion in paragraph 815-10-15-99, in part because the gas is readily convertible to cash. Even if the gas-balancing arrangement meets the definition of a derivative instrument, the cash price used in settlement may result in the derivative instrument always having a fair value of zero. Nevertheless, the disclosures specified in Section 815-10-50 would still be required. The option feature of the agreement, if it meets the definition of a derivative instrument, could not qualify for the normal purchases and normal sales exception in paragraph 815-10-15-15 because the gas-balancing arrangement is an option contract and it is not probable at inception and throughout the term of the arrangement that the contract will not always settle net and will always result in physical delivery.
","snippet":"The terms of a gas-balancing arrangement should be analyzed to determine whether it meets the definition of a derivative instrument under Topic 815. In particular, the option in the agreement may not meet the criterion i…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0c5ecef2fa2f6a204c87493535a27b14b1745974d6ffd9e9c72e60bbf420bf48","downloaded_from":"2026-09-10T01:40:19.151Z","last_downloaded_at":"2026-09-10T01:40:19.151Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477816","source_sha256":"0320039e53c7af22dc43e4c21e922377fcc19c0389645c8b378f52df3d381f86"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:404089383026acc08dfbff8e24c82ac1efdfc3cf61f7676f1b4b0eeb24184011","downloaded_from":"2026-09-10T01:40:19.151Z","last_downloaded_at":"2026-09-10T01:40:19.151Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477816","source_sha256":"0320039e53c7af22dc43e4c21e922377fcc19c0389645c8b378f52df3d381f86"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:403a133f0e2a068dc950951b34d09c72d68e0bcd6292e039a2b5e0f917a86f99","downloaded_from":"2026-09-10T01:40:19.151Z","last_downloaded_at":"2026-09-10T01:40:19.151Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477816","source_sha256":"0320039e53c7af22dc43e4c21e922377fcc19c0389645c8b378f52df3d381f86"}}],"enrichment":{"summary":"This subtopic addresses whether gas-balancing arrangements between working-interest partners in a gas well are derivative instruments under Topic 815. When one partner (the overtaker) takes more than its share of production, the undertaken partner has a right to make up the imbalance in kind, with gas from another well, or in cash; the terms of each arrangement must be analyzed against the definition of a derivative. Even where the arrangement is a derivative whose settlement price leaves it at a fair value of zero, the Section 815-10-50 disclosures still apply, and the option feature cannot use the normal purchases and normal sales exception.","key_points":["A gas-balancing arrangement arises when one well partner (the overtaker) takes all production for a period and the other partner later has the right to take makeup gas, receive gas in kind from another well, or receive cash (815-932-55-1).","The arrangement's terms must be analyzed to determine whether it meets the definition of a derivative instrument under Topic 815 (815-932-55-2).","The option in the agreement may fail the notional amount criterion in paragraph 815-10-15-83 (as clarified by 815-10-55-5 through 55-7), even though it may satisfy 815-10-15-99 because the gas is readily convertible to cash (815-932-55-2).","Even if the arrangement is a derivative, the cash price used in settlement may cause it to always have a fair value of zero, but the Section 815-10-50 disclosures are still required (815-932-55-2).","The option feature cannot qualify for the normal purchases and normal sales exception in paragraph 815-10-15-15 because it is an option contract and it is not probable at inception and throughout the term that the contract will not settle net and will always result in physical delivery (815-932-55-2).","Scope follows the Overall Subtopic scope in Section 932-10-15 (815-932-15-1)."],"categories":["Derivatives and hedging","Industry-specific","Disclosure","Recognition"],"audience_level":"advanced","student_note":"This is a narrow but classic illustration of applying the three-part derivative definition (underlying/notional, no or small initial net investment, net settlement) to a physical commodity arrangement. The common mistake is assuming that a zero fair value means no accounting consequence — the instrument still must be disclosed, and the option feature can never be scoped out as a normal purchase or normal sale.","related_topics":["815-10","932-10","932-360","815-10-50","815-10-15"],"key_concepts":["gas-balancing arrangement","overtake and makeup gas","definition of a derivative instrument","notional amount","net settlement","readily convertible to cash","normal purchases and normal sales exception","fair value of zero"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0e07e0b93049d84dda82017c155b80c12d5947c6a7ec621306eb3fbf24e5a7e0","downloaded_from":"2026-09-10T01:40:07.746Z","last_downloaded_at":"2026-09-10T01:40:20.826Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"470-932","title":"Extractive Activities—Oil and Gas","topic_title":"Debt","score":0.6754,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7ae64e56afdabe07f28c7c82f50935fdcfe921709a86fc95f1ac8418dc341f0b","downloaded_from":"2026-09-10T00:33:36.319Z","last_downloaded_at":"2026-09-10T00:33:48.351Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-980","title":"Regulated Operations","topic_title":"Derivatives and Hedging","score":0.6709,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:64e45007ae3ca1b0136b54f7b88009b81faa63535f18a83a8560fa8131e0e7db","downloaded_from":"2026-09-10T01:41:23.271Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"330-932","title":"Extractive Activities—Oil and Gas","topic_title":"Inventory","score":0.6648,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6b61a12256a330bb1094663ffb85cac6d5a97a50acf6c38b16a8588e3ba60525","downloaded_from":"2026-09-09T23:53:09.584Z","last_downloaded_at":"2026-09-09T23:53:22.955Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not 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Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50754e1a5af4e6dd54c1511f20f1d42cf2292270888a959f1f7d11697426434d","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8cbd4da8cdd50f709ec781cd4b92f081ed0e7340140fbe439c2263c995d9f0e7","downloaded_from":"2026-09-10T01:40:07.746Z","last_downloaded_at":"2026-09-10T01:40:20.826Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-944","topic":"815","title":"Financial Services—Insurance","area":"Broad Transactions","paragraphs":27,"summary":"This Subtopic applies Topic 815's derivative and hedging guidance to insurance entities, chiefly for long-duration contracts such as variable annuities. Its core rules are that a traditional variable annuity contract is not a hybrid instrument containing an embedded derivative requiring bifurcation (815-944-25-1 through 25-2), that the traditional variable annuity serves as the host contract for a nontraditional variable annuity whose other features (excluding market risk benefits) may be embedded derivatives (815-944-25-5), and that these conclusions are exceptions that may not be analogized to other structures (815-944-25-3, 25-6). It also illustrates when an insurer may apply cash flow hedge accounting to forecasted interest credited on surrenderable fixed-rate contracts.","concepts":["embedded derivative","traditional variable annuity","nontraditional variable annuity","separate account","host contract","cash flow hedge","long-duration contract","market risk benefit"],"categories":["Derivatives and hedging","Industry-specific","Financial instruments","Recognition"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-944-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Market Risk BenefitAddedAccounting Standards Update No. 2018-1208/15/2018
944-815-25-2AmendedAccounting Standards Update No. 2012-0410/01/2012
944-815-25-4SupersededAccounting Standards Update No. 2018-1208/15/2018
944-815-25-5AmendedAccounting Standards Update No. 2018-1208/15/2018
944-815-60-3SupersededAccounting Standards Update No. 2018-1208/15/2018
944-815-60-6AmendedAccounting Standards Update No. 2018-1208/15/2018
944-815-60-7SupersededAccounting Standards Update No. 2018-1208/15/2018
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nMarket Risk Benefit | Added | Accounting Standards Update No. 2018-12 | 08/15/2018 |\n| |…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cf86dab2ff3bef024a94881dafa94fd84e37df5fb3cefc7d3a9cf27955c9372e","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:24.221Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478932","source_sha256":"49ee0a99a6b6236f80f6b78a0033c3cee9c3f3e0b3cd8fd7aec84d6c152b1e86"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fe5f802d4b13bd71f37ecc347577b1133892c53b2c14cc88dfdf5687b2507d4b","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:24.221Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478932","source_sha256":"49ee0a99a6b6236f80f6b78a0033c3cee9c3f3e0b3cd8fd7aec84d6c152b1e86"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d93fec9f5030f1077632e1a4dfd2da20a67e0d19faddbc77613719e54a0ffc75","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:24.221Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478932","source_sha256":"49ee0a99a6b6236f80f6b78a0033c3cee9c3f3e0b3cd8fd7aec84d6c152b1e86"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-944-05-1","para":"05-1","html":"
Topic 815 provides guidance on accounting for and financial reporting of derivative instruments and hedging activities. This Subtopic includes guidance on some specific issues. The guidance in this Subtopic is presented in the following two Subsections:
  1. a
    General
  2. b
    Long-Duration Contracts.
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The Short-Duration Contracts Subsections of this Subtopic provide insurance entities with references in Section 944-815-60 to guidance on accounting for and financial reporting of derivative instruments and hedging activities involving short-duration contracts.
","snippet":"The Short-Duration Contracts Subsections of this Subtopic provide insurance entities with references in Section 944-815-60 to guidance on accounting for and financial reporting of derivative instruments and hedging activ…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7d18eeb15da026e34acbfbbe86b5a4714076bffd06c8008cb889690c37e57cf6","downloaded_from":"2026-09-10T01:40:28.000Z","last_downloaded_at":"2026-09-10T01:40:28.000Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477606","source_sha256":"16b80c5bce830ebaab2ec4850c895faf00d772138f81b7447842e39da66917d0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:91df83a01bf7d94cd85e8579fa5d507e22bee079593bab71d8d51c2364179069","downloaded_from":"2026-09-10T01:40:28.000Z","last_downloaded_at":"2026-09-10T01:40:28.000Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477606","source_sha256":"16b80c5bce830ebaab2ec4850c895faf00d772138f81b7447842e39da66917d0"}},{"block":"Long-Duration Contracts","heading":null,"paragraphs":[{"citation":"815-944-05-2","para":"05-2","html":"
The Long-Duration Contracts Subsections of this Subtopic provide insurance entities guidance on accounting for and financial reporting of derivative instruments and hedging activities involving long-duration contracts.
","snippet":"The Long-Duration Contracts Subsections of this Subtopic provide insurance entities guidance on accounting for and financial reporting of derivative instruments and hedging activities involving long-duration contracts.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:72e60204a441bb4f43aea5d4fa191a4b9431d37637af1c44a740773b30253529","downloaded_from":"2026-09-10T01:40:28.000Z","last_downloaded_at":"2026-09-10T01:40:28.000Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477606","source_sha256":"16b80c5bce830ebaab2ec4850c895faf00d772138f81b7447842e39da66917d0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:02bc9e72525f70bd4480621fe8648ff1f38b7f758e9ad09bf955bbf924a43a11","downloaded_from":"2026-09-10T01:40:28.000Z","last_downloaded_at":"2026-09-10T01:40:28.000Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477606","source_sha256":"16b80c5bce830ebaab2ec4850c895faf00d772138f81b7447842e39da66917d0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6d3764d95520b5b550e2bc2bba5e6bbc9b4b8a77c26c983e1a8d27dd4fefb81c","downloaded_from":"2026-09-10T01:40:28.000Z","last_downloaded_at":"2026-09-10T01:40:28.000Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477606","source_sha256":"16b80c5bce830ebaab2ec4850c895faf00d772138f81b7447842e39da66917d0"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Overall Guidance","paragraphs":[{"citation":"815-944-15-1","para":"15-1","html":"
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 944-10-15.
","snippet":"This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 944-10-15.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:77f0b3c71f94930328429f052c2840628e1bc0b15c3d97ff9487c7c500833801","downloaded_from":"2026-09-10T01:40:30.197Z","last_downloaded_at":"2026-09-10T01:40:30.197Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478435","source_sha256":"638c279a0660560134e146a1898d8abf7cb7fc3f8fc7bd78aa17192d44e2769d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4ea9cf2e8b5101b9c36ff7c820f25b49d57f9e4e8456e00ca409295445a8b041","downloaded_from":"2026-09-10T01:40:30.197Z","last_downloaded_at":"2026-09-10T01:40:30.197Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478435","source_sha256":"638c279a0660560134e146a1898d8abf7cb7fc3f8fc7bd78aa17192d44e2769d"}},{"block":"Long-Duration Contracts","heading":"Overall Guidance","paragraphs":[{"citation":"815-944-15-2","para":"15-2","html":"
The Long-Duration Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Section, with specific instrument qualifications noted below.
","snippet":"The Long-Duration Contracts Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Section, with specific instrument qualifications noted below.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f962740bd173420442c71682a0a27625a83e3e79ef930c624a7e79418668ad5b","downloaded_from":"2026-09-10T01:40:30.197Z","last_downloaded_at":"2026-09-10T01:40:30.197Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478435","source_sha256":"638c279a0660560134e146a1898d8abf7cb7fc3f8fc7bd78aa17192d44e2769d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8e7381f78b75c691d9e38c4badcb839639815f0d94ec5d8c6dd6c3dd8fea97d6","downloaded_from":"2026-09-10T01:40:30.197Z","last_downloaded_at":"2026-09-10T01:40:30.197Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478435","source_sha256":"638c279a0660560134e146a1898d8abf7cb7fc3f8fc7bd78aa17192d44e2769d"}},{"block":"Long-Duration Contracts","heading":"Instruments","paragraphs":[{"citation":"815-944-15-3","para":"15-3","html":"
The guidance in the Long-Duration Contracts Subsections of this Subtopic applies only to long-duration insurance contracts. For guidance on identifying a long-duration insurance contract, see the Long-Duration Contracts Subsection of Section 944-20-15.
","snippet":"The guidance in the Long-Duration Contracts Subsections of this Subtopic applies only to long-duration insurance contracts. For guidance on identifying a long-duration insurance contract, see the Long-Duration Contracts …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4858c19a6c70d9c0a561b05fcfad4a26f3d40bcb2433cab797a18dcce172ec36","downloaded_from":"2026-09-10T01:40:30.197Z","last_downloaded_at":"2026-09-10T01:40:30.197Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478435","source_sha256":"638c279a0660560134e146a1898d8abf7cb7fc3f8fc7bd78aa17192d44e2769d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d4ff0cf6ed27f646e6bbd08bdefd8ab550f46db1dd5efdeffc22d2805647a3e4","downloaded_from":"2026-09-10T01:40:30.197Z","last_downloaded_at":"2026-09-10T01:40:30.197Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478435","source_sha256":"638c279a0660560134e146a1898d8abf7cb7fc3f8fc7bd78aa17192d44e2769d"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30163d88db1b4f0c1a252554b5ec85a6798527168d2ad4ca96e73844077a657c","downloaded_from":"2026-09-10T01:40:30.197Z","last_downloaded_at":"2026-09-10T01:40:30.197Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478435","source_sha256":"638c279a0660560134e146a1898d8abf7cb7fc3f8fc7bd78aa17192d44e2769d"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":"Long-Duration Contracts","heading":"Traditional Variable Annuity Product Structures","paragraphs":[{"citation":"815-944-25-1","para":"25-1","html":"
In concluding that certain traditional variable annuity product structures (see paragraph 944-20-05-18) do not contain embedded derivatives, paragraph 815-15-55-55(b) through (c) does not refer to ownership of the assets specifically resting with either the policyholder or the insurer. While the policyholder is entitled to direct the investment of premiums into various approved funds, the insurance entity actually owns the investments. The guidance in (b) and (c) in that paragraph that a traditional variable annuity contract contains no embedded derivatives that warrant separate accounting under Subtopic 815-15 remains valid even though the insurer, rather than the policyholder, actually owns the assets.
","snippet":"In concluding that certain traditional variable annuity product structures (see paragraph 944-20-05-18) do not contain embedded derivatives, paragraph 815-15-55-55(b) through (c) does not refer to ownership of the assets…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ef1d734700b04a046744c48ad223eda910151372a9f9994d83b71038f82d7ce6","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"citation":"815-944-25-2","para":"25-2","html":"
The following indicators provide the basis for concluding that a traditional variable annuity contract is not a hybrid instrument to be accounted for under paragraph 815-15-25-1:
  1. a
    The variable annuity contract is established, approved, and regulated under special rules applicable to variable annuities, such as state insurance laws, securities laws, and tax laws.
  2. b
    The assets underlying the contract are insulated from the general account liabilities of the insurance entity; that is, the policyholder is not subject to insurer default risk to the extent of the assets held in the separate account.
  3. c
    The policyholder's premium is invested in contract-approved separate accounts at the policyholder's direction.
  4. d
    The insurer must invest in the assets on which the account values are based.
  5. e
    The policyholder may redirect its investment among the contract-approved investment options.
  6. f
    The account values are based entirely on the performance of those directed investments.
  7. g
    All investment returns are passed through to the policyholder, including dividends, interest, gains, and losses.
  8. h
    The policyholder may redeem its interests at any time; however, it may be subject to surrender charges.
  9. i
    The policyholder has voting rights in certain separate account structures.
In addition, although the liability to policyholders is not specifically required by the Financial Services—Insurance Topic to be remeasured at fair value with changes reported in earnings, paragraphs 944-80-25-3, 944-80-30-1, and 944-80-35-2 require that an entity record a liability for traditional variable annuity contracts equal to the summary total of the fair value of the assets held in the separate account for the policyholders.
","snippet":"The following indicators provide the basis for concluding that a traditional variable annuity contract is not a hybrid instrument to be accounted for under paragraph 815-15-25-1:\n(a) The variable annuity contract is esta…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50bcf94ee99454b12d440b3c7aa7f57de8e06d44c53323389bf91eaab7992c42","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"citation":"815-944-25-3","para":"25-3","html":"
In determining the accounting for other seemingly similar structures, an entity shall not analogize to the guidance in the preceding paragraph due to the unique attributes of traditional variable annuity contracts and the fact that the guidance in that paragraph can be viewed as an exception for traditional variable annuity contracts issued by insurance entities.
","snippet":"In determining the accounting for other seemingly similar structures, an entity shall not analogize to the guidance in the preceding paragraph due to the unique attributes of traditional variable annuity contracts and th…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5acdf7789bdf88407c00daaa07503f8df11028c54c87674278b1b2914bec6531","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"citation":"815-944-25-4","para":"25-4","html":"
Paragraph superseded by Accounting Standards Update No. 2018-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:25fc58ed70851c3f4288b86a6b1ec594306bd36d7f414371770a30b5649728d9","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c192c8eb9052c585225b5fb30088d181d3203ca6a9d0877c0ab3da15ea60ca88","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"block":"Long-Duration Contracts","heading":"Nontraditional Variable Annuity Contracts","paragraphs":[{"citation":"815-944-25-5","para":"25-5","html":"
The host contract in a nontraditional variable annuity contract would be considered the traditional variable annuity that, as described in paragraph 944-815-25-1, does not contain an embedded derivative that warrants separate accounting. Certain nontraditional features other than market risk benefits may be considered embedded derivatives subject to the requirements of Subtopic 815-15.
","snippet":"The host contract in a nontraditional variable annuity contract would be considered the traditional variable annuity that, as described in paragraph 944-815-25-1, does not contain an embedded derivative that warrants sep…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4c57e2b01ddc96becf78f7f76ff9bd52d8cbe38f51115bf599d685f259608aa1","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"citation":"815-944-25-6","para":"25-6","html":"
In determining the accounting for other seemingly similar structures, an entity shall not analogize to the guidance in the preceding paragraph due to the unique attributes of nontraditional variable annuity contracts and the fact that the guidance in that paragraph can be viewed as an exception for nontraditional variable annuity contracts issued by insurance entities.
","snippet":"In determining the accounting for other seemingly similar structures, an entity shall not analogize to the guidance in the preceding paragraph due to the unique attributes of nontraditional variable annuity contracts and…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a25695d07113c665e17f77b078c58729ce39280460812ae0c084cd07d993863","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:961f24fc127e4f35ea42d867cb520ed2931c038dea74a5b5fbc786498ac1b8f1","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:830d82adf2929a724435525fdcf07d2b2e2273f86fb3e82eba583a90c2d80e89","downloaded_from":"2026-09-10T01:40:37.969Z","last_downloaded_at":"2026-09-10T01:40:37.969Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478212","source_sha256":"322a0adcf35b2b18e4c2a0f61ddc8a62b245e41596ffbcd3d22615c6456039f6"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":"Long-Duration Contracts","heading":"Implementation Guidance","paragraphs":[{"citation":"815-944-55-1","para":"55-1","html":"
Some insurance contracts (for example, certain whole life policies, universal life policies, repetitive premium variable annuities, and single premium deferred annuities) contain an option allowing the policyholder to put (surrender) the contract to the issuer at contract value. Those contracts, which are not carried at fair value by the issuer, bear interest at a fixed rate.
","snippet":"Some insurance contracts (for example, certain whole life policies, universal life policies, repetitive premium variable annuities, and single premium deferred annuities) contain an option allowing the policyholder to pu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d7c730404d47ad8ca7c0e9a6f382c473c11993c38fce3774239280cdceb71f9f","downloaded_from":"2026-09-10T01:40:41.496Z","last_downloaded_at":"2026-09-10T01:40:41.496Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478924","source_sha256":"a470c2f339b72087288d0d27c033c198a231a0e2fcb3f9f12cb21fe8870f7784"}},{"citation":"815-944-55-2","para":"55-2","html":"
The issuer is exposed to the risk that an increase in market interest rates will cause the policyholder to exercise its put. Accordingly, the issuer may voluntarily increase the contractual rate on the contract to forestall the policyholder's exercising its put. As a result, the issuer wants to hedge the risk of an increase in future interest cash flows due to an increase in interest rates associated with either of the following circumstances:
  1. a
    The issuer's voluntary increase in the contractual interest rate on existing fixed-rate contracts
  2. b
    The policyholder's exercise of its put option and the insurance entity's issuance of new higher fixed-rate contracts to new policyholders.
","snippet":"The issuer is exposed to the risk that an increase in market interest rates will cause the policyholder to exercise its put. Accordingly, the issuer may voluntarily increase the contractual rate on the contract to forest…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cc6e10f9e29a8f1aff9c991cde6368f1a201ec26ff24d9d921513ad2c06950b2","downloaded_from":"2026-09-10T01:40:41.496Z","last_downloaded_at":"2026-09-10T01:40:41.496Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478924","source_sha256":"a470c2f339b72087288d0d27c033c198a231a0e2fcb3f9f12cb21fe8870f7784"}},{"citation":"815-944-55-3","para":"55-3","html":"
Subtopic 815-20 would permit an insurance entity to qualify for cash flow hedge accounting if it is hedging the possibility that it may need to voluntarily increase the interest rate used to credit interest on certain contract liabilities. Under the cash flow hedging model, the hedged forecasted transactions would be the future interest credited on its then-existing contracts. The hedged forecasted transactions for each interest crediting date could include both the future interest credited on older contracts whose contractual rate has been voluntarily increased and the future interest credited on new contracts with the current higher interest rate issued to new policyholders (which will have replaced older contracts that have been surrendered). In defining the forecasted transactions, the insurance entity shall ensure that the hedged interest relates to a volume of contracts whose existence at the future interest crediting dates is probable.
","snippet":"Subtopic 815-20 would permit an insurance entity to qualify for cash flow hedge accounting if it is hedging the possibility that it may need to voluntarily increase the interest rate used to credit interest on certain co…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0cccab471a1d7237da7ebee56472c66c98f20ba4dc51953284956768fa52b260","downloaded_from":"2026-09-10T01:40:41.496Z","last_downloaded_at":"2026-09-10T01:40:41.496Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478924","source_sha256":"a470c2f339b72087288d0d27c033c198a231a0e2fcb3f9f12cb21fe8870f7784"}},{"citation":"815-944-55-4","para":"55-4","html":"
In designating the hedged risk, the insurance entity should decide whether it is hedging the total variability in those future interest payments or just the variability in the future interest attributable to changes in the designated benchmark interest rate. Although the occurrence of the forecasted transactions (that is, the crediting of interest) must be probable, paragraph 815-20-25-16 states that the cash flow hedging model does not require that it be probable that any variability in the hedged transaction will actually occur—that is, in a cash flow hedge, the variability in future cash flows must be a possibility, but not necessarily a probability. However, paragraph 815-20-25-16 states that the hedging derivative must be highly effective at achieving offsetting cash flows attributable to the hedged risk whenever that variability in future interest does occur.
","snippet":"In designating the hedged risk, the insurance entity should decide whether it is hedging the total variability in those future interest payments or just the variability in the future interest attributable to changes in t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1326c51e4ef3f373b66a44f856cea8b4e39b89338c5c0c66b3451270146c614c","downloaded_from":"2026-09-10T01:40:41.496Z","last_downloaded_at":"2026-09-10T01:40:41.496Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478924","source_sha256":"a470c2f339b72087288d0d27c033c198a231a0e2fcb3f9f12cb21fe8870f7784"}},{"citation":"815-944-55-5","para":"55-5","html":"
An insurance entity may find it difficult to identify a derivative instrument that will qualify for cash flow hedge accounting, which requires that the hedging relationship be expected to be highly effective in achieving offsetting cash flows attributable to the hedged risk. Because the decision to adjust the interest rate to match the change in interest rates is at the discretion of the insurance entity, it may be difficult to conclude that the changes in the hedged interest payments attributable to the hedged risk will be sufficiently correlated with changes in the cash flows of the hedging derivative.
","snippet":"An insurance entity may find it difficult to identify a derivative instrument that will qualify for cash flow hedge accounting, which requires that the hedging relationship be expected to be highly effective in achieving…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:eb97863633688d1b6492180db6e9726f8d8208213e1ce6ade20b79ea6d5f1d3b","downloaded_from":"2026-09-10T01:40:41.496Z","last_downloaded_at":"2026-09-10T01:40:41.496Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478924","source_sha256":"a470c2f339b72087288d0d27c033c198a231a0e2fcb3f9f12cb21fe8870f7784"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e69addc81a333891b57f1fb9711400c7d008eac6cdddc29d57b47fead49fadba","downloaded_from":"2026-09-10T01:40:41.496Z","last_downloaded_at":"2026-09-10T01:40:41.496Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478924","source_sha256":"a470c2f339b72087288d0d27c033c198a231a0e2fcb3f9f12cb21fe8870f7784"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:47a6d3737ca5b637665b3dbb19edf716432ca99e9fd76cfc8b2b3535e6e5e648","downloaded_from":"2026-09-10T01:40:41.496Z","last_downloaded_at":"2026-09-10T01:40:41.496Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478924","source_sha256":"a470c2f339b72087288d0d27c033c198a231a0e2fcb3f9f12cb21fe8870f7784"}},{"number":"60","label":"60 Relationships","anchor":"60-relationships","is_sec":false,"groups":[{"block":"Short-Duration Contracts","heading":"Derivatives and Hedging","paragraphs":[{"citation":"815-944-60-1","para":"60-1","html":"
For guidance on property and casualty insurance contracts for which payment of a benefit or claim is triggered by the occurrence of both an insurable event and changes in a separate pre-identified variable that contain an embedded derivative instrument, see paragraphs
815-10-55-37 through 55-40
.
","snippet":"For guidance on property and casualty insurance contracts for which payment of a benefit or claim is triggered by the occurrence of both an insurable event and changes in a separate pre-identified variable that contain a…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7476040a69f70a6c6a07c2159973ae9f4481af6902dba7d9916fe9c04e045782","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}},{"citation":"815-944-60-2","para":"60-2","html":"
For guidance on applying the scope exception in paragraph 815-15-15-10 during the period between the inception of the contract and the loss occurrence, see paragraphs
815-15-55-1 through 55-4
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","snippet":"For guidance on applying the scope exception in paragraph 815-15-15-10 during the period between the inception of the contract and the loss occurrence, see paragraphs 815-15-55-1 through 55-4.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c225d7f04d3225a50e799eb382bab141220d8566bebe64c46fac1fd1e3a0924a","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a4894006b27b245b0f2ef634674413c606677ef1ff1e6152c1a1ee31f06e14d0","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}},{"block":"Long-Duration Contracts","heading":"Derivatives and Hedging","paragraphs":[{"citation":"815-944-60-3","para":"60-3","html":"
Paragraph superseded by Accounting Standards Update No. 2018-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66a5381795822647b89b71bcc1fa080dd5ec10e95eea86637309fe87573b94ba","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}},{"citation":"815-944-60-4","para":"60-4","html":"
For guidance on synthetic guaranteed investment contracts, see paragraph 815-10-55-63.
","snippet":"For guidance on synthetic guaranteed investment contracts, see paragraph 815-10-55-63.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fb24b152bc8a3c9faa9877a985f58d5944ec2cb39e2f5b178a9b89cecaed0b34","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}},{"citation":"815-944-60-5","para":"60-5","html":"
For guidance on the economic characteristics and risks of the market adjusted value prepayment option in a market value annuity contract, see paragraphs
815-15-55-120 through 55-127
.
","snippet":"For guidance on the economic characteristics and risks of the market adjusted value prepayment option in a market value annuity contract, see paragraphs 815-15-55-120 through 55-127.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:508c8685eabc131abb8df2b84bd97171d97fff85abc5ad9f759cc3331d8cc7a2","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}},{"citation":"815-944-60-6","para":"60-6","html":"
For guidance on common annuity payment alternatives, see paragraph 815-15-55-58.
","snippet":"For guidance on common annuity payment alternatives, see paragraph 815-15-55-58.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1a34f76115e1f91fb59ea54067aa399667698fa8f4f1c2128aea22b05c282b1c","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}},{"citation":"815-944-60-7","para":"60-7","html":"
Paragraph superseded by Accounting Standards Update No. 2018-12.
","snippet":"Paragraph superseded by Accounting Standards Update No. 2018-12.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:36868a0d74c581e6e6508e31a953e2555bf6818c0b95bcb26fb91c6787f59014","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}},{"citation":"815-944-60-8","para":"60-8","html":"
For guidance on a reinsurer's receivable arising from a modified coinsurance arrangement, see paragraphs
815-15-55-107 through 55-109
.
","snippet":"For guidance on a reinsurer's receivable arising from a modified coinsurance arrangement, see paragraphs 815-15-55-107 through 55-109.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:95cb379ba3e4260f277d152db8d68026302c8f36cbdaae9ce49ca9fcb1b8a0d3","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:85b04a804f3a59aed9c6e00d775e951c81205de80506a92cd1b6cfb073e3d823","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}},{"block":"Financial Guarantee Insurance Contracts","heading":"Derivatives and Hedging","paragraphs":[{"citation":"815-944-60-9","para":"60-9","html":"
For guidance on the payment of a claim under a dual-trigger financial guarantee insurance contract, see paragraphs
815-10-55-32 through 55-36
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","snippet":"For guidance on the payment of a claim under a dual-trigger financial guarantee insurance contract, see paragraphs 815-10-55-32 through 55-36.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66e2305277dc982f9db6b48fc74f630debe6037beacc90b9a10b6cc13c78bb69","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f00582d9776bb245479215e4a0d12fe3088b4911e4a9f232ea7ea6c36937ee09","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2c151cc0daa1358ee54fc73ef61c07df43bd92e8244c177eddd3961aa0163035","downloaded_from":"2026-09-10T01:40:44.205Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477577","source_sha256":"398692a503a26037436f659c8d1ed4bb43fee3fee73fe6eed881685c41562d18"}}],"enrichment":{"summary":"This Subtopic applies Topic 815's derivative and hedging guidance to insurance entities, chiefly for long-duration contracts such as variable annuities. Its core rules are that a traditional variable annuity contract is not a hybrid instrument containing an embedded derivative requiring bifurcation (815-944-25-1 through 25-2), that the traditional variable annuity serves as the host contract for a nontraditional variable annuity whose other features (excluding market risk benefits) may be embedded derivatives (815-944-25-5), and that these conclusions are exceptions that may not be analogized to other structures (815-944-25-3, 25-6). It also illustrates when an insurer may apply cash flow hedge accounting to forecasted interest credited on surrenderable fixed-rate contracts.","key_points":["Paragraph 815-944-25-1 confirms that traditional variable annuity structures contain no embedded derivatives warranting separate accounting under Subtopic 815-15, even though the insurer (not the policyholder) legally owns the separate account assets.","Paragraph 815-944-25-2 lists indicators supporting non-hybrid treatment: special regulation of variable annuities, separate account assets insulated from general account liabilities, policyholder-directed investment and redirection, insurer required to invest in the referenced assets, account values based entirely on and all returns passed through from those investments, redeemability (subject to surrender charges), and voting rights in certain structures; and notes 944-80-25-3, 944-80-30-1, and 944-80-35-2 require a liability equal to the total fair value of separate account assets.","Under 815-944-25-3 and 25-6, entities shall not analogize the traditional or nontraditional variable annuity conclusions to other seemingly similar structures because they are exceptions for insurance entities.","Paragraph 815-944-25-5 treats the traditional variable annuity as the host contract of a nontraditional variable annuity; nontraditional features other than market risk benefits may be embedded derivatives subject to Subtopic 815-15.","Paragraphs 815-944-55-1 through 55-3 permit cash flow hedge accounting for the forecasted future interest credited on fixed-rate surrenderable contracts (including voluntarily increased rates on existing contracts and rates on replacement contracts), provided the hedged interest relates to a volume of contracts whose existence at future crediting dates is probable.","Per 815-944-55-4 (citing 815-20-25-16), the forecasted crediting of interest must be probable but the variability need only be possible; the derivative must still be highly effective at offsetting cash flows attributable to the hedged risk when variability occurs, and 815-944-55-5 warns effectiveness is hard to demonstrate because rate increases are discretionary.","Section 60 cross-references other guidance, including dual-trigger property and casualty and financial guarantee contracts (815-10-55-37 through 55-40; 815-10-55-32 through 55-36), synthetic GICs (815-10-55-63), market value annuity prepayment options (815-15-55-120 through 55-127), annuity payment alternatives (815-15-55-58), and modified coinsurance receivables (815-15-55-107 through 55-109)."],"categories":["Derivatives and hedging","Industry-specific","Financial instruments","Recognition"],"audience_level":"advanced","student_note":"The exam trap is assuming the variable annuity \"no embedded derivative\" conclusion is a general principle: it is an explicit exception that cannot be analogized to lookalike products, and nontraditional features layered on top of the traditional annuity host still require bifurcation analysis (other than market risk benefits, which follow Topic 944).","related_topics":["815-15","815-20","944-20","944-80","944-40","815-10"],"key_concepts":["embedded derivative","traditional variable annuity","nontraditional variable annuity","separate account","host contract","cash flow hedge","long-duration contract","market risk benefit"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8275a64e71f9803b2e209c2dc888ef98d565701f08185fc9854b29712e72172c","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"944-20","title":"Insurance Activities","topic_title":"Financial Services—Insurance","score":0.8324,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb49273ad0bcc866774f8e3cb6905731a4e9eba8e3d3fab81bc32f4f407277e1","downloaded_from":"2026-09-10T02:14:58.695Z","last_downloaded_at":"2026-09-10T02:15:47.018Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"825-944","title":"Financial Services—Insurance","topic_title":"Financial Instruments","score":0.7929,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4a29bf27e3feb534edc3ee7390291556dc327ea04bb3b6938b841f4acfb6d9fd","downloaded_from":"2026-09-10T01:45:26.659Z","last_downloaded_at":"2026-09-10T01:45:54.729Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"944-80","title":"Separate Accounts","topic_title":"Financial Services—Insurance","score":0.7761,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:09e7c3ec5673adfcc9446c80eb6d5c86351b07aac93c9d9715c25ac45404644e","downloaded_from":"2026-09-10T02:18:08.530Z","last_downloaded_at":"2026-09-10T02:18:42.131Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"605-944","title":"Financial Services—Insurance","topic_title":"Revenue Recognition","score":0.7748,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:327d5867e817a55cd16f7214f431e35ce35096e40e27d2ef525811de969268af","downloaded_from":"2026-09-10T00:49:17.918Z","last_downloaded_at":"2026-09-10T00:49:46.481Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"944-30","title":"Acquisition Costs","topic_title":"Financial 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Costs","score":0.7657,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f71fad5560878b6d72b68bc5fc700ff4c4a97e4c0a7f92fe5a1c3abb5ab854e5","downloaded_from":"2026-09-09T23:55:41.723Z","last_downloaded_at":"2026-09-09T23:56:05.098Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}}],"prev":{"number":"815-932","title":"Extractive Activities—Oil and Gas","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:30bce534954b5ba5a6a0200ec7dba435802c5cc92abf47a5cba7d5bda656ed47","downloaded_from":"2026-09-10T01:40:07.746Z","last_downloaded_at":"2026-09-10T01:40:20.826Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"next":{"number":"815-954","title":"Health Care Entities","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:71043dd41f1159a43b5022d54d1834a900a42d28ee058ad9d8f836649408edae","downloaded_from":"2026-09-10T01:40:48.280Z","last_downloaded_at":"2026-09-10T01:41:05.239Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:99d41acd81edcceea29a379ffb4eccff948d1b6df67047101cfa21fb8a830203","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-954","topic":"815","title":"Health Care Entities","area":"Broad Transactions","paragraphs":9,"summary":"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.","concepts":["performance indicator","not-for-profit business-oriented health care entity","cash flow hedge","fair value hedge","accumulated derivative gain or loss","other comprehensive income","reclassification into performance indicator","amounts excluded from assessment of effectiveness"],"categories":["Derivatives and hedging","Not-for-profit","Disclosure","Presentation"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-954-00-1","para":"00-1","html":"
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
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nComprehensive Income | Added | Maintenance Update 2014-20 | 09/29/2014 |\nOther Comprehen…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:11f1df396c77386d4f8245b2dd7fc953ff654e7ab21c211ec17c09ae3d44f0b5","downloaded_from":"2026-09-10T01:40:48.280Z","last_downloaded_at":"2026-09-10T01:40:48.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478491","source_sha256":"cd1ebe663b675185ae0199b17398ad2ede24d2b892b2a42beeb3446c8911e3a7"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:90175f86420383a57ae0b04f9762cfe58de163d24314dd7b46042f9759d493a8","downloaded_from":"2026-09-10T01:40:48.280Z","last_downloaded_at":"2026-09-10T01:40:48.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478491","source_sha256":"cd1ebe663b675185ae0199b17398ad2ede24d2b892b2a42beeb3446c8911e3a7"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:161364239a063d1d40c235435e3ee7ccb00805a79e3d36d1b36c68a02380ae0a","downloaded_from":"2026-09-10T01:40:48.280Z","last_downloaded_at":"2026-09-10T01:40:48.280Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478491","source_sha256":"cd1ebe663b675185ae0199b17398ad2ede24d2b892b2a42beeb3446c8911e3a7"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-954-05-1","para":"05-1","html":"
This Subtopic provides guidance on accounting for derivative instruments and hedging activities for not-for-profit, business-oriented health care entities.
","snippet":"This Subtopic provides guidance on accounting for derivative instruments and hedging activities for not-for-profit, business-oriented health care entities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1889e003442fd6b54fa9f584e8040ad9f265bab7ba63319f3535ff95864ef242","downloaded_from":"2026-09-10T01:40:50.773Z","last_downloaded_at":"2026-09-10T01:40:50.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477541","source_sha256":"1ee49a07d757d6babf3c0ae5666f5480b67598fddda543df823b53eeed715135"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7b2108caa172c89d4fe768a737de54db9d20b1a831221d64ff5484bed5d35b55","downloaded_from":"2026-09-10T01:40:50.773Z","last_downloaded_at":"2026-09-10T01:40:50.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477541","source_sha256":"1ee49a07d757d6babf3c0ae5666f5480b67598fddda543df823b53eeed715135"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0870b501e59d68b975f417c358db503bb49c73540fb985d6fe0cbfc2195161a1","downloaded_from":"2026-09-10T01:40:50.773Z","last_downloaded_at":"2026-09-10T01:40:50.773Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477541","source_sha256":"1ee49a07d757d6babf3c0ae5666f5480b67598fddda543df823b53eeed715135"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Overall Guidance","paragraphs":[{"citation":"815-954-15-1","para":"15-1","html":"
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.
","snippet":"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.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d9143c62ab2f0580efb9b19c5324517172b157352268e6b3079cccd6f1b64f0d","downloaded_from":"2026-09-10T01:40:53.157Z","last_downloaded_at":"2026-09-10T01:40:53.157Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478410","source_sha256":"ffd251e5b0f8daa1f6b2390d8fc3883e15efbd62d80798a505cc8ffe10256a6a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c30705af90d33c0d715514945e54fa9b2676837dc72ea67e5e5d8543ba1f8917","downloaded_from":"2026-09-10T01:40:53.157Z","last_downloaded_at":"2026-09-10T01:40:53.157Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478410","source_sha256":"ffd251e5b0f8daa1f6b2390d8fc3883e15efbd62d80798a505cc8ffe10256a6a"}},{"block":null,"heading":"Entity","paragraphs":[{"citation":"815-954-15-2","para":"15-2","html":"
The guidance in this Subtopic applies only to not-for-profit, business-oriented health care entities.
","snippet":"The guidance in this Subtopic applies only to not-for-profit, business-oriented health care entities.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:639a55ab1fc5ce874a9c57b5c6c5e9db165a41b3bda771ca8a1c8073e008c9d2","downloaded_from":"2026-09-10T01:40:53.157Z","last_downloaded_at":"2026-09-10T01:40:53.157Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478410","source_sha256":"ffd251e5b0f8daa1f6b2390d8fc3883e15efbd62d80798a505cc8ffe10256a6a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c57fd36d12395b1ea8892692d00f853be014768794ddaecd2f527fee74988ed9","downloaded_from":"2026-09-10T01:40:53.157Z","last_downloaded_at":"2026-09-10T01:40:53.157Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478410","source_sha256":"ffd251e5b0f8daa1f6b2390d8fc3883e15efbd62d80798a505cc8ffe10256a6a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e34c38438c362e37141115ccbb34343584b64edfcc675144d6eeb3df051d952a","downloaded_from":"2026-09-10T01:40:53.157Z","last_downloaded_at":"2026-09-10T01:40:53.157Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478410","source_sha256":"ffd251e5b0f8daa1f6b2390d8fc3883e15efbd62d80798a505cc8ffe10256a6a"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-954-25-1","para":"25-1","html":"
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.
","snippet":"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.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7556883732f4b6c7662bf5f78f4af47a2388f69bc5b1bf6b89bfb5cbad2f938e","downloaded_from":"2026-09-10T01:40:58.420Z","last_downloaded_at":"2026-09-10T01:40:58.420Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478799","source_sha256":"d505a32232fd674f6e8aae70238d19d4500c4e3e6b0e0ac4ab65129204a470e0"}},{"citation":"815-954-25-2","para":"25-2","html":"
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.
","snippet":"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-prof…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d0cde807bc530e90182111298658b4446c9dbc794f9c07e96759d2ee7922ddc7","downloaded_from":"2026-09-10T01:40:58.420Z","last_downloaded_at":"2026-09-10T01:40:58.420Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478799","source_sha256":"d505a32232fd674f6e8aae70238d19d4500c4e3e6b0e0ac4ab65129204a470e0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e4d02aaf897f76b6b1f25c9bfed920e2c1beffe66f1f77eb2681e6ceb5db11ac","downloaded_from":"2026-09-10T01:40:58.420Z","last_downloaded_at":"2026-09-10T01:40:58.420Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478799","source_sha256":"d505a32232fd674f6e8aae70238d19d4500c4e3e6b0e0ac4ab65129204a470e0"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f1674c6af1c93ea08ea0171ce3ec893db35f27c56186def62124a79b359ac4ad","downloaded_from":"2026-09-10T01:40:58.420Z","last_downloaded_at":"2026-09-10T01:40:58.420Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478799","source_sha256":"d505a32232fd674f6e8aae70238d19d4500c4e3e6b0e0ac4ab65129204a470e0"}},{"number":"45","label":"45 Other Presentation Matters","anchor":"45-other-presentation-matters","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-954-45-1","para":"45-1","html":"
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.
","snippet":"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 repor…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c3d5640165d9dae660e4ac7e7d82f33f34a3c6bd5dec7ec3ae704650f6006f60","downloaded_from":"2026-09-10T01:41:01.728Z","last_downloaded_at":"2026-09-10T01:41:01.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478473","source_sha256":"a02036494f79090905a09c0a4712aab26704ace4ade7f944883059d5ea68a006"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:db0a2b93a8828d141d4019012fedc5d49752b6de1a06f75498365c71bc0f6a24","downloaded_from":"2026-09-10T01:41:01.728Z","last_downloaded_at":"2026-09-10T01:41:01.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478473","source_sha256":"a02036494f79090905a09c0a4712aab26704ace4ade7f944883059d5ea68a006"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3458504d4e2137d9616484b7287069e3e6213c5de7b18fb526fa63e5d20442c2","downloaded_from":"2026-09-10T01:41:01.728Z","last_downloaded_at":"2026-09-10T01:41:01.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478473","source_sha256":"a02036494f79090905a09c0a4712aab26704ace4ade7f944883059d5ea68a006"}},{"number":"50","label":"50 Disclosure","anchor":"50-disclosure","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-954-50-1","para":"50-1","html":"
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.
","snippet":"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…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e74868662fb85390e61fa169d9057e4e64e50cb35269f4694fe4830bdd953251","downloaded_from":"2026-09-10T01:41:05.239Z","last_downloaded_at":"2026-09-10T01:41:05.239Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477230","source_sha256":"1197362c440c5b569257b1e112bb6b29aeb2e9d1894f097c2b26f1d82a33d3cf"}},{"citation":"815-954-50-2","para":"50-2","html":"
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.
","snippet":"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.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c95d77528b92ac7a46ab5f42eaa06a6023dcd02f85b3e6363b21f4295e82ca0a","downloaded_from":"2026-09-10T01:41:05.239Z","last_downloaded_at":"2026-09-10T01:41:05.239Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477230","source_sha256":"1197362c440c5b569257b1e112bb6b29aeb2e9d1894f097c2b26f1d82a33d3cf"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:239604ad46ec0f5a3c9570960ffea5e5d77931735292a584fcdb10e44f91a82d","downloaded_from":"2026-09-10T01:41:05.239Z","last_downloaded_at":"2026-09-10T01:41:05.239Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477230","source_sha256":"1197362c440c5b569257b1e112bb6b29aeb2e9d1894f097c2b26f1d82a33d3cf"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7172b1df529be1ee36a7b0e34a269a57348eae89bd481f19da110416f83ebb1f","downloaded_from":"2026-09-10T01:41:05.239Z","last_downloaded_at":"2026-09-10T01:41:05.239Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477230","source_sha256":"1197362c440c5b569257b1e112bb6b29aeb2e9d1894f097c2b26f1d82a33d3cf"}}],"enrichment":{"summary":"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":["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)."],"categories":["Derivatives and hedging","Not-for-profit","Disclosure","Presentation"],"audience_level":"advanced","student_note":"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.","related_topics":["815-20","815-30","815-35","954-815","954-220","220-10"],"key_concepts":["performance indicator","not-for-profit business-oriented health care entity","cash flow hedge","fair value hedge","accumulated derivative gain or loss","other comprehensive income","reclassification into performance indicator","amounts excluded from assessment of 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established by retrieval timestamps"}},{"number":"220-954","title":"Health Care Entities","topic_title":"Income Statement—Reporting Comprehensive Income","score":0.7997,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:532c49f66534a47c3b9dba7bed1b859e73d541182840cea34017fcec36a8cd88","downloaded_from":"2026-09-09T23:06:55.321Z","last_downloaded_at":"2026-09-09T23:07:12.667Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"810-954","title":"Health Care Entities","topic_title":"Consolidation","score":0.7968,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d3b2c1ab9c83192e107bdc7db73649766daa16bcf2ef0e8b642507fc78b7a2b1","downloaded_from":"2026-09-10T01:32:41.551Z","last_downloaded_at":"2026-09-10T01:33:00.907Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"205-954","title":"Health Care Entities","topic_title":"Presentation of Financial Statements","score":0.7905,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:19dc5c62fb7f685f30f79d03969fa1c146ac095d102b4f1248098041a488016a","downloaded_from":"2026-09-09T22:55:29.204Z","last_downloaded_at":"2026-09-09T22:55:43.454Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"805-954","title":"Health Care Entities","topic_title":"Business Combinations","score":0.7685,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fcebdd05a43995ff6130cebed174fcde2bcf8f241726082cc95840108c5283ee","downloaded_from":"2026-09-10T01:27:13.331Z","last_downloaded_at":"2026-09-10T01:27:35.856Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"210-954","title":"Health Care Entities","topic_title":"Balance Sheet","score":0.7667,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:863738dd53e73a2df6489447df8a74904c56831b6311d1101884f46d06f1a435","downloaded_from":"2026-09-09T23:02:01.873Z","last_downloaded_at":"2026-09-09T23:02:21.878Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}}],"prev":{"number":"815-944","title":"Financial Services—Insurance","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:50754e1a5af4e6dd54c1511f20f1d42cf2292270888a959f1f7d11697426434d","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"next":{"number":"815-958","title":"Not-for-Profit Entities","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c52cc4b273172c04b067b7929702ad7288cda51a6b3bd5221f1afb248588d01e","downloaded_from":"2026-09-10T01:41:09.248Z","last_downloaded_at":"2026-09-10T01:41:21.202Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ce7fc766c3148fe769135c78f20194b349dbc44116d8575f78b600dc7144de58","downloaded_from":"2026-09-10T01:40:48.280Z","last_downloaded_at":"2026-09-10T01:41:05.239Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-958","topic":"815","title":"Not-for-Profit Entities","area":"Broad Transactions","paragraphs":6,"summary":"ASC 815-958 is a link-only subtopic: it contains no substantive rules of its own but points not-for-profit entities to the derivatives guidance that applies to them. It directs readers to 958-30-25-7 through 25-14 to decide whether an obligation arising from an irrevocable split-interest agreement contains an embedded derivative requiring bifurcation under 815-15-25-1, and (upon transition) to 815-20-25-3A and 815-20-25-143 for the timing of hedge documentation and hedge effectiveness assessments by certain NFPs.","concepts":["embedded derivative","irrevocable split-interest agreement","bifurcation","hedge documentation","hedge effectiveness assessment","not-for-profit entity","link-only subtopic"],"categories":["Derivatives and hedging","Not-for-profit","Recognition","Financial instruments"],"level":"intermediate","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-958-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
Paragraph Action Accounting Standards Update Date
958-815-05-1 Amended Accounting Standards Update No. 2025-12 12/17/2025
958-815-25-1 Amended Accounting Standards Update No. 2025-12 12/17/2025
958-815-25-2 Added Accounting Standards Update No. 2025-12 12/17/2025
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\n958-815-05-1 | Amended | Accounting Standards Update No. 2025-12 | 12/17/2025 |\n958-815-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:58aa1e1abf37606e934b1fd910e7e26093a0bf726b3042d84a57a26956e6181b","downloaded_from":"2026-09-10T01:41:09.248Z","last_downloaded_at":"2026-09-10T01:41:09.248Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476136","source_sha256":"c8cab4bff82da6b06102118794a1ccf22b64e9ce3516a040b2b0c4492a2a6243"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9378d81abfdbd68219fa2c6bb2aced174f537180f20365474bd2932ffa3118d5","downloaded_from":"2026-09-10T01:41:09.248Z","last_downloaded_at":"2026-09-10T01:41:09.248Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476136","source_sha256":"c8cab4bff82da6b06102118794a1ccf22b64e9ce3516a040b2b0c4492a2a6243"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:91a7ffbd89aed241b39ed4ef66a4eb8ec00553e0a4d49b81d96cbc3d214d672f","downloaded_from":"2026-09-10T01:41:09.248Z","last_downloaded_at":"2026-09-10T01:41:09.248Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147476136","source_sha256":"c8cab4bff82da6b06102118794a1ccf22b64e9ce3516a040b2b0c4492a2a6243"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-958-05-1","para":"05-1","html":"
This Subtopic only provides a link to guidance on embedded derivatives in an obligation arising from an irrevocable split-interest agreement.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
105-10-65-10This Subtopic provides a link to guidance on embedded derivatives in an obligation arising from an irrevocable split-interest agreement and guidance on hedge documentation and hedge effectiveness assessments for certain not-for-profit entities.
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This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic (see Section 958-10-15).
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See paragraphs
958-30-25-7 through 25-14
to determine whether an obligation arising from an irrevocable split-interest agreement contains an embedded derivative that warrants separate accounting under paragraph 815-15-25-1.
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
105-10-65-10
Editor's Note: The heading noted below will be added upon transition to precede paragraph 958-815-25-1. The content of the paragraph will not change.
> Embedded Derivatives
See paragraphs
958-30-25-7 through 25-14
to determine whether an obligation arising from an irrevocable split-interest agreement contains an embedded derivative that warrants separate accounting under paragraph 815-15-25-1.
","snippet":"See paragraphs 958-30-25-7 through 25-14 to determine whether an obligation arising from an irrevocable split-interest agreement contains an embedded derivative that warrants separate accounting under paragraph 815-15-25…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5989292a7e38c0f3c1cda36a245e91179f21d3f6a5848061a192913d798a5360","downloaded_from":"2026-09-10T01:41:17.922Z","last_downloaded_at":"2026-09-10T01:41:17.922Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478186","source_sha256":"963c398f5b57169738b6d646e9c80bc9cc458b79c3a14a0f0d78e6f22a0f3179"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f439db4798755d7d8f025ac1cef8b164313f17abf5e93d22be6fb1f6bcc58b13","downloaded_from":"2026-09-10T01:41:17.922Z","last_downloaded_at":"2026-09-10T01:41:17.922Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478186","source_sha256":"963c398f5b57169738b6d646e9c80bc9cc458b79c3a14a0f0d78e6f22a0f3179"}},{"block":null,"heading":"Hedge Documentation and Effectiveness","paragraphs":[{"citation":"815-958-25-2","para":"25-2","html":"
Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:
105-10-65-10See paragraphs 815-20-25-3A and 815-20-25-143 about the timing of hedge documentation and hedge effectiveness assessments for certain not-for-profit entities.
","snippet":"Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance:105-10-65-10See paragraphs 815-20-25-3A and 815-20-25-143 about the timing of hedge documentation and hedge effectiveness assessments for ce…","pending":true,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:290c192c8be4a41660c45b3faff51693f0ffc5aa413e220d0f3b99d70808e8b2","downloaded_from":"2026-09-10T01:41:17.922Z","last_downloaded_at":"2026-09-10T01:41:17.922Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478186","source_sha256":"963c398f5b57169738b6d646e9c80bc9cc458b79c3a14a0f0d78e6f22a0f3179"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:632aa97e652bae1a5b08fefbc0fa0bcd589db6d2db5f0128dd3c87d5d64db8c3","downloaded_from":"2026-09-10T01:41:17.922Z","last_downloaded_at":"2026-09-10T01:41:17.922Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478186","source_sha256":"963c398f5b57169738b6d646e9c80bc9cc458b79c3a14a0f0d78e6f22a0f3179"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:84f8c7ce56030ca2858cad11b4d8853867aa9c853b8bd6d4ee089743646a363f","downloaded_from":"2026-09-10T01:41:17.922Z","last_downloaded_at":"2026-09-10T01:41:17.922Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478186","source_sha256":"963c398f5b57169738b6d646e9c80bc9cc458b79c3a14a0f0d78e6f22a0f3179"}},{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-958-55-1","para":"55-1","html":"
See Example 2 (paragraphs
958-30-55-6 through 55-29
) for 8 cases that provide an understanding of the applicability of paragraphs
958-30-25-7 through 25-14
to various split-interest agreements.
","snippet":"See Example 2 (paragraphs 958-30-55-6 through 55-29) for 8 cases that provide an understanding of the applicability of paragraphs 958-30-25-7 through 25-14 to various split-interest agreements.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6e47e43d2bfdf9f314aa4aaf5dfbebf7451920b6d84e25700e59323c21502130","downloaded_from":"2026-09-10T01:41:21.202Z","last_downloaded_at":"2026-09-10T01:41:21.202Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478033","source_sha256":"f40ebf3df9e8da2e8fdf83e539c1968ba111533bd7ba73920ff30dd2a4f301f8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:594ebfc2e613d1ea28f1ee13636d9304bbf427fad7cd868581f7dfacab8a69de","downloaded_from":"2026-09-10T01:41:21.202Z","last_downloaded_at":"2026-09-10T01:41:21.202Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478033","source_sha256":"f40ebf3df9e8da2e8fdf83e539c1968ba111533bd7ba73920ff30dd2a4f301f8"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6b1fafd2afc617f0fa77af606d6b7ba7b76f138784fbd73b0a3514cfdbf3784d","downloaded_from":"2026-09-10T01:41:21.202Z","last_downloaded_at":"2026-09-10T01:41:21.202Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478033","source_sha256":"f40ebf3df9e8da2e8fdf83e539c1968ba111533bd7ba73920ff30dd2a4f301f8"}}],"enrichment":{"summary":"ASC 815-958 is a link-only subtopic: it contains no substantive rules of its own but points not-for-profit entities to the derivatives guidance that applies to them. It directs readers to 958-30-25-7 through 25-14 to decide whether an obligation arising from an irrevocable split-interest agreement contains an embedded derivative requiring bifurcation under 815-15-25-1, and (upon transition) to 815-20-25-3A and 815-20-25-143 for the timing of hedge documentation and hedge effectiveness assessments by certain NFPs.","key_points":["The Subtopic's stated purpose is only to provide links to other guidance — on embedded derivatives in irrevocable split-interest agreement obligations and, upon transition, on NFP hedge documentation/effectiveness timing (815-958-05-1).","Scope follows the Overall Not-for-Profit Subtopic, Section 958-10-15 (815-958-15-1).","To determine whether an obligation arising from an irrevocable split-interest agreement contains an embedded derivative warranting separate accounting under 815-15-25-1, apply 958-30-25-7 through 25-14 (815-958-25-1).","Upon transition, see 815-20-25-3A and 815-20-25-143 regarding the timing of hedge documentation and hedge effectiveness assessments for certain not-for-profit entities (815-958-25-2).","Example 2 at 958-30-55-6 through 55-29 provides eight cases illustrating how 958-30-25-7 through 25-14 apply to various split-interest agreements (815-958-55-1).","The transition date for the added hedging-link content is December 16, 2026, with transition guidance in 105-10-65-10."],"categories":["Derivatives and hedging","Not-for-profit","Recognition","Financial instruments"],"audience_level":"intermediate","student_note":"This subtopic is a signpost, not a rulebook — the real analysis lives in 958-30 (split-interest agreements) and 815-15 (bifurcation). A common mistake is to assume NFPs have special derivative measurement rules; the only NFP-specific relief here is the deferred timing of hedge documentation and effectiveness assessments.","related_topics":["958-30","815-15","815-20","958-10","815-10"],"key_concepts":["embedded derivative","irrevocable split-interest agreement","bifurcation","hedge documentation","hedge effectiveness assessment","not-for-profit entity","link-only subtopic"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1177808749531878f13ec0717a8333d77d4a590a490dc7e72b355b7cdf0212b9","downloaded_from":"2026-09-10T01:41:09.248Z","last_downloaded_at":"2026-09-10T01:41:21.202Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"815-944","title":"Financial Services—Insurance","topic_title":"Derivatives and Hedging","score":0.7601,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2761e2f9ae922c4c7714636b843352bd702bf304d868155069b08061bd0eae82","downloaded_from":"2026-09-10T01:40:24.221Z","last_downloaded_at":"2026-09-10T01:40:44.205Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-954","title":"Health Care Entities","topic_title":"Derivatives and Hedging","score":0.7492,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9426f4279758c91e352999952e6f0db1f7cebd16a40224da27c359da5a1435a","downloaded_from":"2026-09-10T01:40:48.280Z","last_downloaded_at":"2026-09-10T01:41:05.239Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not 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Combinations","score":0.7035,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:66a03a98eafd7c378a3215aed8d48a862c0720c18148bfdb29cf6ff85b876eb1","downloaded_from":"2026-09-10T01:27:13.331Z","last_downloaded_at":"2026-09-10T01:27:35.856Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"325-958","title":"Not-for-Profit Entities","topic_title":"Investments—Other","score":0.7005,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e5b2a98a6855d1e30be9a073c40cee0752aba6d26f3d35cf7aa980f1b56df59e","downloaded_from":"2026-09-09T23:47:13.039Z","last_downloaded_at":"2026-09-09T23:47:39.630Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not 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Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:71043dd41f1159a43b5022d54d1834a900a42d28ee058ad9d8f836649408edae","downloaded_from":"2026-09-10T01:40:48.280Z","last_downloaded_at":"2026-09-10T01:41:05.239Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"next":{"number":"815-980","title":"Regulated Operations","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:86f1fd4b49fd8608b1c85ca99d15b19d2f50ca6c4fe633e322a74b694ac7f26c","downloaded_from":"2026-09-10T01:41:23.271Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dd846be6223607636c150fe1380a7cb7123286bdcb7913eaf2b12b3e5763cc44","downloaded_from":"2026-09-10T01:41:09.248Z","last_downloaded_at":"2026-09-10T01:41:21.202Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},{"number":"815-980","topic":"815","title":"Regulated Operations","area":"Broad Transactions","paragraphs":11,"summary":"ASC 815-980 addresses long-term power sales contracts, including those entered into by nonutility generators that sell power (often to rate-regulated utilities) under contracts with stated prices, formula-based prices, or a combination. The core rule is that if such a contract meets the definition of a derivative, it is marked to fair value through earnings unless designated in a qualifying hedging relationship; otherwise Topic 606 applies. Contracts that qualify for the normal purchases and normal sales scope exception in 815-10-15-13(b) are accounted for under this Section rather than as derivatives.","concepts":["long-term power sales contract","nonutility generator","regulated operations","normal purchases and normal sales scope exception","derivative definition","all-in-one hedge","fair value through earnings","embedded lease"],"categories":["Derivatives and hedging","Industry-specific","Recognition","Revenue"],"level":"advanced","topic_title":"Derivatives and Hedging","sections":[{"number":"00","label":"00 Status","anchor":"00-status","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-980-00-1","para":"00-1","html":"
The following table identifies the changes made to this Subtopic.
Paragraph Action Accounting Standards Update Date
All-in-One Hedge Added Accounting Standards Update No. 2014-09 05/28/2014
Contract Added Accounting Standards Update No. 2014-09 05/28/2014
Nonutility Generators Added Accounting Standards Update No. 2014-09 05/28/2014
980-815-05-1 Added Accounting Standards Update No. 2014-09 05/28/2014
980-815-15-1 through 15-3
 Added Accounting Standards Update No. 2014-09 05/28/2014
980-815-15-3 Amended Accounting Standards Update No. 2016-02 02/25/2016
980-815-25-1 through 25-6
 Added Accounting Standards Update No. 2014-09 05/28/2014
","snippet":"The following table identifies the changes made to this Subtopic.\nParagraph | Action | Accounting Standards Update | Date |\n| | | |\nAll-in-One Hedge | Added | Accounting Standards Update No. 2014-09 | 05/28/2014 |\nContra…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:db5177a611d5260a1ac30194260e59371cc80d505632e9a4e9679a5479151db3","downloaded_from":"2026-09-10T01:41:23.271Z","last_downloaded_at":"2026-09-10T01:41:23.271Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478431","source_sha256":"a86d439996fb00425ea14a28745f3e35f17de85a6c89e6513d678c466e399077"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c13a0cf5bb44b696d19d909d2f7145133e6a981854c19165664757749b6fd61","downloaded_from":"2026-09-10T01:41:23.271Z","last_downloaded_at":"2026-09-10T01:41:23.271Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478431","source_sha256":"a86d439996fb00425ea14a28745f3e35f17de85a6c89e6513d678c466e399077"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f38366abe17036885b15b3413ad31fdf02fb29619b4e3aea50d3b7249adf2a92","downloaded_from":"2026-09-10T01:41:23.271Z","last_downloaded_at":"2026-09-10T01:41:23.271Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147478431","source_sha256":"a86d439996fb00425ea14a28745f3e35f17de85a6c89e6513d678c466e399077"}},{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"815-980-05-1","para":"05-1","html":"
This Subtopic provides guidance for long-term power sales contracts.
","snippet":"This Subtopic provides guidance for long-term power sales contracts.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e7fa09862298d0f0a8d22a478ee3e48b90d093f02c63c318eaf92d7f4d0f72d","downloaded_from":"2026-09-10T01:41:26.671Z","last_downloaded_at":"2026-09-10T01:41:26.671Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477581","source_sha256":"dd3b8cda19871936eb9c5ddec4704aa7993c225b39c7c2007ce0de331799425a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb9305b323af859ba7573cfecf7b9cfd9cf7a58368aa8312578ae031ece8ea74","downloaded_from":"2026-09-10T01:41:26.671Z","last_downloaded_at":"2026-09-10T01:41:26.671Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477581","source_sha256":"dd3b8cda19871936eb9c5ddec4704aa7993c225b39c7c2007ce0de331799425a"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7fde0b510976f4d9683d6c1c4d07e2e4c7ad51fa81ee1d076bf6e437ac6c512e","downloaded_from":"2026-09-10T01:41:26.671Z","last_downloaded_at":"2026-09-10T01:41:26.671Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477581","source_sha256":"dd3b8cda19871936eb9c5ddec4704aa7993c225b39c7c2007ce0de331799425a"}},{"number":"15","label":"15 Scope and Scope Exceptions","anchor":"15-scope-and-scope-exceptions","is_sec":false,"groups":[{"block":null,"heading":"Overall Guidance","paragraphs":[{"citation":"815-980-15-1","para":"15-1","html":"
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic; see Section 980-10-15, with specific qualifications and exceptions noted below.
","snippet":"This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic; see Section 980-10-15, with specific qualifications and exceptions noted below.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:90e145a4b4a39338c9e6008b61c3fce9aa374a2fd23cb482f754854d0a1658a3","downloaded_from":"2026-09-10T01:41:29.350Z","last_downloaded_at":"2026-09-10T01:41:29.350Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477022","source_sha256":"8abd595274033131319c123346c1ed16b2b4758f6c6f9999a110b18b69a71e39"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ceeac2f0c0c7996e3d85852495ef2842f96e55bb71661d29e79a0fe0ea86b9e1","downloaded_from":"2026-09-10T01:41:29.350Z","last_downloaded_at":"2026-09-10T01:41:29.350Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477022","source_sha256":"8abd595274033131319c123346c1ed16b2b4758f6c6f9999a110b18b69a71e39"}},{"block":null,"heading":"Entities","paragraphs":[{"citation":"815-980-15-2","para":"15-2","html":"
The guidance in this Subtopic applies to nonutility generators as they provide many of the services of entities with regulated operations.
","snippet":"The guidance in this Subtopic applies to nonutility generators as they provide many of the services of entities with regulated operations.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9c1a9090dcb85189d7274f3b140533d015677313b0141fab32927d585ffc6994","downloaded_from":"2026-09-10T01:41:29.350Z","last_downloaded_at":"2026-09-10T01:41:29.350Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477022","source_sha256":"8abd595274033131319c123346c1ed16b2b4758f6c6f9999a110b18b69a71e39"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:741bd50fb8a25358a5463138e3ca03d89df5ff30a9d0578a9189c9b74bf9a678","downloaded_from":"2026-09-10T01:41:29.350Z","last_downloaded_at":"2026-09-10T01:41:29.350Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477022","source_sha256":"8abd595274033131319c123346c1ed16b2b4758f6c6f9999a110b18b69a71e39"}},{"block":null,"heading":"Transactions","paragraphs":[{"citation":"815-980-15-3","para":"15-3","html":"
The scope of this Subtopic excludes long-term power supply contracts if they are within the scope of Topic 842 on leases. For the considerations required to determine whether a long-term power sales contract arrangement contains a lease, see Subtopic 842-10.
","snippet":"The scope of this Subtopic excludes long-term power supply contracts if they are within the scope of Topic 842 on leases. For the considerations required to determine whether a long-term power sales contract arrangement …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:258ef06bee1f4e2c230114771a2c1460c505828bbb27a2bc127300e4cb17a883","downloaded_from":"2026-09-10T01:41:29.350Z","last_downloaded_at":"2026-09-10T01:41:29.350Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477022","source_sha256":"8abd595274033131319c123346c1ed16b2b4758f6c6f9999a110b18b69a71e39"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:042bc77513eedbaa8740040a770d9c5585dc747e5b21d9845f519c56087a26e0","downloaded_from":"2026-09-10T01:41:29.350Z","last_downloaded_at":"2026-09-10T01:41:29.350Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477022","source_sha256":"8abd595274033131319c123346c1ed16b2b4758f6c6f9999a110b18b69a71e39"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:02f895b24e6588708835d2d0ab972b314fbec5d6703e97b0d38e965894614170","downloaded_from":"2026-09-10T01:41:29.350Z","last_downloaded_at":"2026-09-10T01:41:29.350Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477022","source_sha256":"8abd595274033131319c123346c1ed16b2b4758f6c6f9999a110b18b69a71e39"}},{"number":"25","label":"25 Recognition","anchor":"25-recognition","is_sec":false,"groups":[{"block":null,"heading":"Long-Term Power Sales Contracts","paragraphs":[{"citation":"815-980-25-1","para":"25-1","html":"
In general, nonutility generators are not regulated and do not meet the criteria of an entity with regulated operations as provided in paragraph 980-10-15-2. However, since nonutility generators provide many of the same services as entities with regulated operations, the guidance for nonutility generators on accounting for contracts that meet the definition of a derivative is included in paragraphs
980-815-25-4 through 25-6
. That portion of this Subsection assumes the seller of power under the long-term contract does not meet the criteria for application of this Topic.
","snippet":"In general, nonutility generators are not regulated and do not meet the criteria of an entity with regulated operations as provided in paragraph 980-10-15-2. However, since nonutility generators provide many of the same …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:25158167647b95dd71f316f00b52e0c6d699add1f46842a9e2c0c742fd38dbaf","downloaded_from":"2026-09-10T01:41:34.252Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477622","source_sha256":"beb24ff890972eff97472f713327ac1c4740ec60e06d7d71aaf0d039dd14454c"}},{"citation":"815-980-25-2","para":"25-2","html":"
Nonutility generators provide a significant percentage of new electric generating capacity in the United States. Some of these generating plants are built by users primarily for their own energy needs while others are built specifically to sell power, usually to rate-regulated utilities, under long-term power sales contracts. Those contracts price the power sold under a wide variety of terms and arrangements.
","snippet":"Nonutility generators provide a significant percentage of new electric generating capacity in the United States. Some of these generating plants are built by users primarily for their own energy needs while others are bu…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d3e1e862332df6265bec2324433b816a7104dcccba731ec8e1950716648e6e2b","downloaded_from":"2026-09-10T01:41:34.252Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477622","source_sha256":"beb24ff890972eff97472f713327ac1c4740ec60e06d7d71aaf0d039dd14454c"}},{"citation":"815-980-25-3","para":"25-3","html":"
The long-term power sales contracts may provide for any of the following:
  1. a
    Stated prices per kilowatt hour that increase, decrease, or remain level over the term of the contract
  2. b
    Formula-based prices per kilowatt hour
  3. c
    Billings that are a combination of stated prices and formula-based prices per kilowatt hour.
","snippet":"The long-term power sales contracts may provide for any of the following:\n(a) Stated prices per kilowatt hour that increase, decrease, or remain level over the term of the contract\n(b) Formula-based prices per kilowatt h…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:96c9ca0e5860f452ccbc5f691001d5608ead44c6c0d67e3b3b1da9f4b5148879","downloaded_from":"2026-09-10T01:41:34.252Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477622","source_sha256":"beb24ff890972eff97472f713327ac1c4740ec60e06d7d71aaf0d039dd14454c"}},{"citation":"815-980-25-4","para":"25-4","html":"
If a long-term power sales contract meets the definition of a derivative under Topic 815, then it would be marked to fair value through earnings, unless designated as a hedging instrument in certain types of hedging relationships. Otherwise, the guidance in Topic 606 on revenue from contracts with customers would apply. Some long-term power sales contracts that meet the definition of a derivative may qualify for the normal purchases and normal sales scope exception contained in paragraph 815-10-15-13(b), in which case the long-term power sales contract would be accounted for under this Section.
","snippet":"If a long-term power sales contract meets the definition of a derivative under Topic 815, then it would be marked to fair value through earnings, unless designated as a hedging instrument in certain types of hedging rela…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:41d36f077ac80b0d00edf40ae17867358f88bbf0fecd84b42283a6ded05e189f","downloaded_from":"2026-09-10T01:41:34.252Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477622","source_sha256":"beb24ff890972eff97472f713327ac1c4740ec60e06d7d71aaf0d039dd14454c"}},{"citation":"815-980-25-5","para":"25-5","html":"
Long-term power sales contracts that are accounted for as derivatives may possibly qualify as hedging instruments in all-in-one hedges. The guidance in Section 815-10-55 may be relevant.
","snippet":"Long-term power sales contracts that are accounted for as derivatives may possibly qualify as hedging instruments in all-in-one hedges. The guidance in Section 815-10-55 may be relevant.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a4af8b088cbe6c6f125c000a985662b67a975636873fe041dbea9f9afd06c668","downloaded_from":"2026-09-10T01:41:34.252Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477622","source_sha256":"beb24ff890972eff97472f713327ac1c4740ec60e06d7d71aaf0d039dd14454c"}},{"citation":"815-980-25-6","para":"25-6","html":"
For a discussion of issues involved in accounting for derivative contracts held for trading purposes and contracts involved in energy trading and risk management activities, see paragraph 815-10-45-9.
","snippet":"For a discussion of issues involved in accounting for derivative contracts held for trading purposes and contracts involved in energy trading and risk management activities, see paragraph 815-10-45-9.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a0eebb844161902a9fd40aa233f196a23ba525fb067b3603f3dcb3b952f169b7","downloaded_from":"2026-09-10T01:41:34.252Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477622","source_sha256":"beb24ff890972eff97472f713327ac1c4740ec60e06d7d71aaf0d039dd14454c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:59874fc3412266e676c9121a50f5fc32c97eff1f3af452cd760de2bbf1027fa1","downloaded_from":"2026-09-10T01:41:34.252Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477622","source_sha256":"beb24ff890972eff97472f713327ac1c4740ec60e06d7d71aaf0d039dd14454c"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0df0092e3b8e9405d073124d977e28c5a31779ee699f40a2ce00a391587ae262","downloaded_from":"2026-09-10T01:41:34.252Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147477622","source_sha256":"beb24ff890972eff97472f713327ac1c4740ec60e06d7d71aaf0d039dd14454c"}}],"enrichment":{"summary":"ASC 815-980 addresses long-term power sales contracts, including those entered into by nonutility generators that sell power (often to rate-regulated utilities) under contracts with stated prices, formula-based prices, or a combination. The core rule is that if such a contract meets the definition of a derivative, it is marked to fair value through earnings unless designated in a qualifying hedging relationship; otherwise Topic 606 applies. Contracts that qualify for the normal purchases and normal sales scope exception in 815-10-15-13(b) are accounted for under this Section rather than as derivatives.","key_points":["This Subtopic provides guidance for long-term power sales contracts (815-980-05-1) and applies to nonutility generators because they provide many of the services of entities with regulated operations (815-980-15-2).","Long-term power supply contracts within the scope of Topic 842 on leases are excluded; see Subtopic 842-10 to determine whether the arrangement contains a lease (815-980-15-3).","Nonutility generators generally are not regulated and do not meet the criteria of an entity with regulated operations in paragraph 980-10-15-2, yet guidance for them is provided in paragraphs 980-815-25-4 through 25-6 (815-980-25-1).","Long-term power sales contracts may provide for stated prices per kilowatt hour that increase, decrease, or remain level, formula-based prices, or a combination of both (815-980-25-3).","A long-term power sales contract meeting the definition of a derivative is marked to fair value through earnings unless designated as a hedging instrument in certain hedging relationships; otherwise Topic 606 applies (815-980-25-4).","Contracts meeting the derivative definition may qualify for the normal purchases and normal sales scope exception in paragraph 815-10-15-13(b), in which case they are accounted for under this Section (815-980-25-4).","Long-term power sales contracts accounted for as derivatives may possibly qualify as hedging instruments in all-in-one hedges, with guidance in Section 815-10-55 potentially relevant (815-980-25-5); for trading and energy risk management activities see paragraph 815-10-45-9 (815-980-25-6)."],"categories":["Derivatives and hedging","Industry-specific","Recognition","Revenue"],"audience_level":"advanced","student_note":"This is a narrow, industry-specific bridge between the derivative rules and the utility/energy sector: the practical question is almost always whether a power contract is a lease (842), a derivative (815), a normal purchase/normal sale, or just a revenue contract (606). A common misunderstanding is assuming nonutility generators are outside this guidance because they are not rate-regulated — the Subtopic expressly extends to them.","related_topics":["980-10","815-10","842-10","606","980-815"],"key_concepts":["long-term power sales contract","nonutility generator","regulated operations","normal purchases and normal sales scope exception","derivative definition","all-in-one hedge","fair value through earnings","embedded lease"],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b851bb4c2286279c109f6dab0ce4fd789226f5be0232002d8ceca7323b5e741b","downloaded_from":"2026-09-10T01:41:23.271Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"related":[{"number":"980-10","title":"Overall","topic_title":"Regulated 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retrieval timestamps"}},{"number":"815-932","title":"Extractive Activities—Oil and Gas","topic_title":"Derivatives and Hedging","score":0.6709,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5ee5edc1b38dce2a7e1f39e49310ff57305ba5022d7688d53673cd10d8d2a56b","downloaded_from":"2026-09-10T01:40:07.746Z","last_downloaded_at":"2026-09-10T01:40:20.826Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}}],"prev":{"number":"815-958","title":"Not-for-Profit Entities","topic_title":"Derivatives and Hedging","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c52cc4b273172c04b067b7929702ad7288cda51a6b3bd5221f1afb248588d01e","downloaded_from":"2026-09-10T01:41:09.248Z","last_downloaded_at":"2026-09-10T01:41:21.202Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}},"next":{"number":"818-10","title":"Overall","topic_title":"Environmental Credits and Environmental Credit Obligations","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ac1fd20a57025065cbbb949071ce09751a328cafcb006fad9218703194343241","downloaded_from":"2026-09-10T01:41:37.561Z","last_downloaded_at":"2026-09-10T01:41:59.282Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not 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The Overall Subtopic (815-10) defines a derivative by three characteristics — an underlying plus a notional or payment provision, little or no initial net investment, and net settlement (815-10-15-83) — lists the scope exceptions (notably normal purchases and normal sales and certain contracts in an entity's own equity), and requires all derivatives to be recognized on the balance sheet at fair value; 815-15 extends that reach by requiring bifurcation of embedded derivatives that are not clearly and closely related to their host (815-15-25-1), and 815-40 supplies the indexation and equity-classification tests for contracts in an entity's own stock. Hedge accounting is elective and gated by the designation and documentation rules of 815-20, with the mechanics differing by hedge type: fair value hedges adjust the hedged item's carrying amount with both sides in earnings (815-25-35-1), cash flow hedges park the change in fair value in OCI until the forecasted transaction affects earnings (815-30-35-3), and net investment hedges report effective amounts in the cumulative translation adjustment (815-35-35-1). Industry Subtopics (815-45 weather derivatives, 815-924 casinos, 815-932 gas balancing, 815-944 insurance, 815-954 NFP health care, 815-958 not-for-profit, 815-980 power sales) apply or carve out this framework for particular contracts and entities.","concepts":["definition of a derivative (underlying, notional, net settlement)","scope exceptions and normal purchases and normal sales","embedded derivatives and bifurcation (clearly and closely related)","hedge designation and contemporaneous documentation","fair value hedges and basis adjustments","cash flow hedges and reclassification from aoci","net investment hedges and cumulative translation adjustment","contracts indexed to an entity's own stock and equity classification"],"categories":["Derivatives and hedging","Fair value","Financial instruments","Foreign currency"],"level":"advanced","provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4f4fcf58ad47809d5e996d4e01955068c1c1003986547482f2a8ae1e61de6473","downloaded_from":"2026-09-10T01:34:51.547Z","last_downloaded_at":"2026-09-10T01:41:34.252Z","date_scope":"source_page_range","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps"}}