FASB Approves EITF Proposals on Hedge Accounting, Employee Benefit Plans as Final Amendments to U.S. GAAP

FASB Approves EITF Proposals on Hedge Accounting, Employee Benefit Plans as Final Amendments to U.S. GAAP

The FASB on July 9 approved two proposals from its Emerging Issues Task Force (EITF) and agreed to issue them as final updates to U.S. GAAP.

Under Proposed Accounting Standards Update (ASU) No. EITF-15A, Derivatives and Hedging (Topic 815): Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts Within Nodal Energy Markets—a Consensus of the FASB Emerging Issues Task Force, certain specialized contracts for the physical delivery of electricity qualify for an exception to hedge accounting. Specifically, if the contracts meet the “normal purchases and normal sales” exception to Topic 815, Derivatives and Hedging, they will not be considered derivatives and recognized at fair value.

The exception applies to forward contracts to purchase a stated volume of electricity from a power-generating company at a fixed price for delivery to a hub location within an interconnected electricity grid called a nodal energy market. Nodal markets are run by independent operators with established prices on each node or hub location, according to the FASB's research staff.

The FASB also agreed to a task force amendment to simplify the method for measuring employee benefit plans and scale back some disclosure requirements. The proposal contained a plan to allow the measurement of retirement plan assets and liabilities as of the last day of the month closest to the end of the plan's fiscal year.

Ajit S. Chawla, CPA, CA, CGMA

Partner

Affluent Financial Services LLC, CPA's

http://affluentcpa.com