Is ASC 815 the road to hedge accounting simplicity?

The new ASC 815

The Financial Accounting Standards Board (FASB) made a number of changes to the types of hedging allowed under the new guidelines. The amendment greenlights the use of the Security Industry and Financial Markets Association (SIFMA) Municipal Swap Rate and contractually specified rates in hedges against interest rate changes.

Benefits of urgent adoption

Although, as reported by Accounting Today, public companies that use hedging must come into compliance by January 2019 (private companies have until January 2020), they can begin adopting the new practices now. Companies that previously steered clear of this strategy because the compliance standards were too complex or labor-intensive for their organizations may benefit from revisiting this risk management approach before the deadline.

There are several potential benefits for doing so, including expanding foreign exchange hedge programs to interest rate volatility and commodities. Meanwhile, companies that struggled under the weight of the old rules, or that received investor pushback on hedge accounting in the past, can take advantage of the new standards and further develop their hedging activities.

How tech can help

As investments and risk strategies expand, businesses need agile software to manage their processes effectively.

Integrated software programs enable users to manage the full spectrum of their treasury functions while capturing insights into performance and exposure risks. Companies should consider an all-in-one accounting solution that affords them flexibility and full visibility of their front- to back-office processes without sacrificing speed and compliance.

As organizations move toward adopting the new hedge accounting standards, technology will help them expand their capacities and streamline their treasury functions. Centralized platforms enable businesses to stay current with changing regulations and respond to market fluctuations that could impact their risk profiles. As these changes occur, digital platforms can be updated quickly to produce compliant reports and track important market signals.

Users can also customize these platforms according to the products and asset classes their companies’ use, giving them focused control of all of their accounting and treasury functions.

The updated hedging guidelines are designed to manage risk and volatility, enabling organizations to better respond to shifts in the market. To maximize these changes, companies need to use the tech tools that will allow them to react more effectively.